Threnody, Op. 66, for Flute and Piano

Pure Neoclassical Exploitation and the Level of Wages

“…PP,,*dpo/dL] -[w + L*dw/dL] = 0 -MFCL = 0, [2] where, on the second line of [2], the first bracketed term is the marginal revenue product of labor, MRPL, and the second bracketed term is the marginal factor cost of labor, MFCL • Assuming a concavity of [1], the profit maximizing employer of labor chooses a rate of use of labor so that MRPL -MFCL, providing W< RPL/ L = ARPL, where ARPL is the average revenue product of labor. Now, the value of the marginal product of labor is defined independently in the following way: VMPL = Po*d(PPL)/dL = PO*MPPL, [3] where d(PPL)/dL = MPPL is the marginal physical product of labor. If the firm is a competitive seller of its product and a competitive buyer of labor, then MRPL = po*d(PPL)/dL = PO*MPPL and MFCL = w, since the firm cannot influence either the price at which it sells its product or the price at which it buys labor by varying the rate at which it uses labor, i.e., since dpo/dL = (dpo/dPPL){dPPL/dL) = 0 and dw/dL = 0 in [2).…”