One might say that in the short run consumption time is and working time is not discretionary, because the latter is partially subject to the authoritarian control of employers. (Even this distinction would vanish if households gave certain firms authoritarian control over their consumption time; see the discussion in Section II.) In the long run this definition of discretionary time is suspect too because the availability of alternative sources of employment would make working time also discretionary. This content downloaded from 22.214.171.124 on Mon, 31 Aug 2015 14:19:37 UTCAll use subject to JSTOR Terms and Conditions
1965] A THEORY OF THE ALLOCATION OF TIME 505 theory might be briefly mentioned. Just as a (compensated) rise in earnings would increase the prices of commodities with relatively large forgone earn- ings, induce a substitution away from them and increase the hours worked, so a (compensated) fall in market prices would also induce a substitution away from them and increase the hours worked: the effects of changes in direct and indirect costs are symmetrical. Indeed, Owen presents some evidence indicating that hours of work in the United States fell somewhat more in the first thirty years of this century than in the second thirty years, not because wages rose more during the first period, but because the market prices of recreation commodities fell more then.' A well-known result of the traditional labour-leisure approach is that a rise in the income tax induces at least a substitution effect away from work and towards " leisure." Our approach reaches the same result only via a substitution towards time-intensive consumption rather than leisure. A simple additional implication of our approach, however, is that if a rise in the income tax were combined with an appropriate excise on the goods used in time-intensive commodities or subsidy to the goods used in other commo- dities there need be no change in full relative prices, and thus no substitution away from work. The traditional approach has recently reached the same conclusion, although in a much more involved way.2 There is no exception in the traditional approach to the rule that a pure rise in earnings would not induce a decrease in hours worked. An exception does occur in ours, for if the time and earnings intensities (i.e., litt and ti) were negatively correlated a pure rise in earningswould induce a substitution towards time-intensive commodities, and thus away from work.3 Although this exception does illustrate the greater power of our approach, there is no reason to believe that it is any more important empirically than the exception to the rule on income effects. (b) TheProductivity of Time Most of the large secular increase in earnings, which stimulated the development of the labour-leisure analysis, resulted from an increase in the productivity of working time due to the growth in human and physical capital, technological progress and other factors.