ABSTRACT
The idea that in a given society at a given stage in its historical development, wage rates are established as much by the influence of social, cultural and institutional factors as by ‘market forces’ is as old as the study of economics itself. It featured prominently in the work of the classical economists and, particularly, Marx; and it was only barely submerged even after the rise to dominance of the more individualistic, contractarian approach to economic transactions associated with the marginal revolution. Thus, for example, it was very much to the fore in Marshall’s treatment of wages, especially in his celebrated discussion of the so-called ‘evil paradox’. The same idea was also present in Keynes’s General Theory and, in the last decade or so, New Keynesian economics has returned to this old theme in its attempts to model the social dimension of wage contracts as being essentially the result of individual rational choices.
