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- The neoclassical theory of wage determination, which I taught for 30 years and have tried to explain in my textbook ... has nothing to say about fairness.... Beginning in the mid-1970s, I began to find myself in a series of roles in which I have participated in setting or controlling wages and salaries. These included sitting on three wage stabilization bodies during the Nixon and Ford administrations, as a director of two corporations, as a provost of a private university, as a president of a foundation, and as a trustee of a liberal arts college. In one of the corporations I serve as chairman of the compensation committee.
In none of these roles did I find the theory that I taught so long to be the slightest help. The factors involved in setting wages and salaries in the real world seemed to be very different from those specified in the neoclassical theory. The one factor that seemed to be of overwhelming importance in all these situations was fairness.
- “The Role of Fairness in Wage Determination.” Journal of Labor Economics (1993)