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

Yew-Kwang Ng

Ng & Ng (2003) provide a qualified support for Buchanan’s (1991, 1994) hypothesis on work ethics by showing that a decrease in preference for leisure (a higher work ethics) by an individual benefits her trading partners by improving the terms of trade of the latter. Moreover, the higher the degree of the economies of specialization, the larger is this beneficial effect. Using a similar model, the present paper shows that 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 & Zhang (2005), a stronger support is provided for Buchanan’s hypothesis as a shift in preference by everyone from leisure to market goods produced under increasing returns and average-cost pricing increases utility even if evaluated in accordance with the original preference.