Do the Economies of Specialization Justify the Work Ethics? An Examination of Buchanan’s Hypothesis

Buchanan (1991, 1994) proposes an interesting hypothesis explaining the prevalence of an ethic encouraging more work. Economies of specialization mean that more division of labour may increase productivity. If everyone works more, it increases the extent of the market which enables higher degree of division of labour and hence higher productivity. Individual choice between leisure and work thus results in a sub-optimal level of work. One way to counteract this is to maintain a work ethic. This chapter examines the validity and significance of this hypothesis in the Yang–Ng framework of inframarginal analysis. A simultaneous artificial decrease in preference for leisure by all individuals decreases intrinsic utility evaluated at the original preference. However, using a more realistic model allowing for both home and firm/market production developed by Ng and Zhang (2005), and discussed in Chapter 9, a strong support is provided for Buchanan’s hypothesis as a shift in preference by everyone from leisure to market goods produced under increasing returns; average-cost pricing increases utility even if evaluated in accordance with the original preference. Buchanan’s thesis probably has more relevance in ancient times when the work ethics originated but is less significant in the current world of global trade where the billions of individuals involved is sufficient to sustain specialization without artificial encouragement of additional work effort. On the contrary, the competition for relative standing, the materialistic bias caused by our accumulation instinct and advertising, and the environmental disruption of material production and consumption suggest that the discouragement of long working week may be more conducive to welfare.