Alert-Judgment: Ford's Entrepreneurial Five-Dollar Day

Quarterly Journal of Austrian Economics 24(4): 2021

33 Pages Posted: 1 Oct 2021 Last revised: 9 Mar 2022

Date Written: December 16, 2021

Abstract

This paper provides evidence for the explanatory power of the theory entrepreneurship through analysis of one of the most widely publicized acts of American entrepreneurship: Ford’s five-dollar day. The proper classification and interpretation of the Ford Motor Company’s wage policy has been debated extensively by economists. The majority categorize it as an efficiency wage policy, though others argue for rent-sharing or the high-wage doctrine. I argue that Ford acted as an alert, innovative entrepreneur who exercised judgment under uncertainty when he developed the 1914 labor policy and Ford Sociological Department. Viewing the events of 1913 and 1914 at the FMC through this lens reveals that Ford’s personnel innovations were not merely efficiency wages, rent-sharing, or motivated by the high-wage doctrine. Rather, Ford’s actions are best understood as those of a profit-seeking entrepreneur.

Keywords: entrepreneur, alertness, judgment, creative destruction, five-dollar day, Henry Ford

JEL Classification: J33, L26, M52

Suggested Citation

Smith, Nathaniel W., Alert-Judgment: Ford's Entrepreneurial Five-Dollar Day (December 16, 2021). Quarterly Journal of Austrian Economics 24(4): 2021 , Available at SSRN: https://ssrn.com/abstract=3933889

Nathaniel W. Smith (Contact Author)

Sweet Briar College ( email )

United States

HOME PAGE: http://nathanielwsmith.com

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