But in practice, the wage fund theory was "shown to be a fallacy by the end of the 19th century," Szymanski said.
According to the economic concept, known as the wage fund theory, adding more people to the labor pool theoretically meant less money available per person (or in the NCAA's case, giving some people a raise means less scholarship money for others).
The bargaining theory is very attractive to labour organizations, for, contrary to the subsistence and wages-fund theories, it provides a very cogent reason for the existence of unions: simply put, the bargaining strength of a union is much greater than that of individuals.
"Liquidity Preference and Loanable Funds Theories, Multiplier and Velocity Analysis: A synthesis". American Economic Review 46 (1956), pp. 539 64.
The last of the classical economists, John Stuart Mill, was forced to abandon the wages-fund theory.
Despite these telling criticisms, however, the wages-fund theory remained influential until the end of the 19th century.
Statements such as these foreshadowed the wages-fund theory, which held that a predetermined "fund" of wealth existed for the payment of wages.
The wage-fund theory held that wages depended on the relative amounts of capital available for the payment of workers and the size of the labour force.
"Keynes's 'Finance' Demand for Liquidity, Robertson's Loanable Funds Theory, and Friedman's Monetarism". Quarterly Journal of Economics 94 19800), pp. 467– 91.
After 1865 the wages-fund theory was discredited by W.T. Thornton, F.D. Longe, and Francis A. Walker, all of whom argued that the demand for labour was not determined by a fund but by the consumer demand for products.
Subsequently he showed how the liquidity-preference theory could be replaced with a then more conventional loanable-funds theory, and applied it to theories of the balance of payments.
