This essay is constructed around an empirical relationship which it attempts to interpret in terms of concepts and propositions of economic theory. This interpretation is necessary because the conceptual variables which enter the relationship as well as the method of their empirical measurement and the hypothesis of "causal" relation between them were not originally derived from economics, theoretical or applied. The principal concepts involved are called 'time-span of discretion1 (TSD), 'felt fair pay1 (FFP) and 'capacity1 (C). They are an original discovery, in a field where concepts and theory are scarce, of Elliott Jaques and the team of researchers who subsequently formed the Glacier Institute of Management. These three concepts are the principal elements of the structure for a theory of the evolution of organisational institutions. It is inside these institutions that the reality of work and payis found in present industrial society . . .