Macroeconomics and Individual Decisionmaking.

• Position: National Bureau of Economic Research conference papers - Industry Trend or Event - Brief Article - Critical Essay

George A. Akerlof, University of California, Berkeley, and Robert J. Shiller, NBER and Yale University, organized a meeting on "Macroeconomics and Individual Decisionmaking," which was held at the NBER's Cambridge office on November 13. The following papers were discussed:

Christopher L. Foote, NBER and Harvard University; Warren. C. Whatley, University of Michigan; and Gavin Wright, Stanford University, "Arbitraging a Discriminatory Labor Market: Black Workers at the Ford Motor Company, 1918-47"

Discussant: Truman Bewley, Yale University

Ernst Fehr and Lorenz Goette, University of Zurich, "How Robust Are Nominal Wage Rigidities?"

Discussant: Beth Anne Wilson, Federal Reserve System

Michael Kremer, NBER and Harvard University, "An Epidemiological Model of Unions"

Discussant: Michael Piore, MIT

Roland Benabou, NBER and Princeton University, and Jean Tirole, MIT, "Self-confidence: Intrapersonal Strategies"

Discussant: David Laibson, NBER and Harvard University

George A. Akerlof, and Rachel E. Kranton, University of Maryland, "Economics and Identity"

Discussant: Andrei Shleifer, NBER and Harvard University

Laurence M. Ball, NBER and Johns Hopkins University, "Near-Rationality and Inflation in Two Monetary Regimes"

Discussant: John Shea, NBER and University of Maryland

Discrimination against black workers provides an opportunity for a firm to "arbitrage" the labor market, by hiring blacks at low wages in order to increase profits. Foote, Whatley, and Wright use the personnel records of the Ford Motor Co. before World War II to examine one important historical example of this. Ford was unique in the prewar auto industry both in the number of blacks it hired and in the types of jobs that many of these workers performed. Yet company records show that blacks earned virtually the same amount as whites. Ford's main arbitrage margin appears to have been working conditions, since black workers were disproportionately represented in the most disagreeable jobs at the firm. Blacks who held less disagreeable jobs, though, still made the same amount as whites, and these workers seem to have valued their jobs very highly. The implication is that equity in observed wages among blacks and whites was an important component of Ford's arbitrage strategy.

Several studies have indicated that firms are reluctant to cut nominal wages during periods of relatively high nominal growth in per capita GDP; however, in an environment with low nominal growth in per capita...