<p>In the Arrow-Debreu model, households are endowed with some commodities, producers can use feasible production plans to transform commodities, and households ultimately consume commodities - which they choose optimally given their preferences subject to budget constraints. </p>

<p>These commodities can include (potentially time and state-contingent) labor services provided by households. In this framework, provision of labor can simply be viewed as a form of negative consumption, which decreases utility but provides earnings that can be spent elsewhere. Indeed, the <a href="http://cowles.econ.yale.edu/P/cp/p00b/p0087.pdf" rel="nofollow noreferrer">original Arrow-Debreu paper</a> mentions this interpretation several times. For instance, on page 268 when they describe households in the model (which they call "consumption units"):</p>

<p><img src="https://i.sstatic.net/BZifZ.png" alt="enter image description here"></p>

CC BY-SA 3.0
2015-01-03T16:57:11.057Z
2015-01-03T16:57:11.057Z
nominally rigid
<p>In DSGE models, utility function contains labor disutility components. But I cannot not see how labor disutility is incorporated in Arrow-Debreu-Mackenzie model. </p>

<macroeconomics><microeconomics><utility>
How is labor disutility modeled in Arrow-Debreu model?
Fropants
# How is labor disutility modeled in Arrow-Debreu model?

(Asked by: username_0 on 2015-01-02)

In DSGE models, utility function contains labor disutility components. But I cannot not see how labor disutility is incorporated in Arrow-Debreu-Mackenzie model.

**Tags:** macroeconomics, microeconomics, utility

---

## 1 answers

### Answer by username_1 on 2015-01-03. Score: 7 | Accepted answer

In the Arrow-Debreu model, households are endowed with some commodities, producers can use feasible production plans to transform commodities, and households ultimately consume commodities - which they choose optimally given their preferences subject to budget constraints.

These commodities can include (potentially time and state-contingent) labor services provided by households. In this framework, provision of labor can simply be viewed as a form of negative consumption, which decreases utility but provides earnings that can be spent elsewhere. Indeed, the [original Arrow-Debreu paper](http://cowles.econ.yale.edu/P/cp/p00b/p0087.pdf) mentions this interpretation several times. For instance, on page 268 when they describe households in the model (which they call "consumption units"):

![enter image description here](https://i.sstatic.net/BZifZ.png)


---

