Alert Judgment: Ford’s Entrepreneurial Five Dollar Day

This paper provides evidence for the explanatory power of the theory of entrepreneurship through analysis of one of the most widely publicized acts of American entrepreneurship: Ford’s five dollar day. Economists have debated the proper classification and interpretation of the Ford Motor Company’s wage policy extensively. The majority categorize it as an efficiency wage policy, though others argue for rent sharing or the high-wage doctrine. This article argues 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 Ford 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.