Work supply and constitutional order

James Buchanan has suggested resolving the issue of labor supply and increasing returns by introducing the concept of a work ethic. This paper offers some additional thoughts to the solution that Buchanan has developed by taking a historical perspective. It was the choice between labor supply to the market and self-employment rather than a choice between work and leisure that the early worker in the transitional period to industrialized labor was confronted with. Starting with this point of view, I argue that the critical motivation for increasing labor supply to the market was the prospect of reaping more benefits under the newly organized firms compared to the benefits that the system of simple labor-ownership rule generated. The paper concludes that entrepreneurship, which promotes the division of labor both within firms as well as among firms, performs a decisive role in increasing labor supply. This in turn made possible the transformation of the constitutional order from the pre-industrialized society to the more advanced civil society of today.