A Theory of the Production and Allocation of Effort

The purpose of this paper is to analyze systematically the production of effort and its allocation among different market and non-market sectors. I believe that this analysis can explain much of the variation in earnings that is not explained by human capital. The first section introduces the material. The next section develops the basic theoretical analysis of the production and allocation of effort by a free person. Section III applies this analysis to the value placed on time a1 located to the non-market sector, the effect of hours worked on fatigue and earnings, life cycle variations-in earnings and hours worked, investment in health, and the effect of marriage on the earnings and health of men and women. Section IV considers worker effort from the view point of firms, and shows how various characteristics of firms determine the wage rates offered and the effort supplied by their workers. Section V analyzes the production and allocation of effort by slaves, and derives "expropriation rates'' and other implications about the treatment of slaves .