tag:blogger.com,1999:blog-2277215496195926573.post8001761292875104823..comments2024-01-01T07:41:51.347-08:00Comments on RALPHONOMICS: Economics Prof falls for Lump of Labour fallacy!Ralph Musgravehttp://www.blogger.com/profile/09443857766263185665noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-2277215496195926573.post-6873696846109200892011-05-20T09:54:22.360-07:002011-05-20T09:54:22.360-07:00"The 'productivity growth helps jobs'..."The 'productivity growth helps jobs' story, if that's what it is, is just the flip side of the lump-of-labor fallacy."<br /><br />One of the favorite unintended-consequences stories in economics is the idea that "technology creates more jobs than it destroys." This was a standard rebuke to Luddites in the early 19th century, who were portrayed as fearing that machines would create chronic unemployment. It closely resembles the case argued against the mercantilism of the early 18th century by Henri Martyn in Considerations on the East India Trade. The lump-of-labor fallacy appears as the negative version of this story. In fact, the fallacy is sometimes called the Mercantalist or Luddite fallacy.<br /><br />There is a crucial difference between the two sides of the story, though. The technology creates jobs story is openly embraced by economists and triumphantly played as the trump card in debates over employment policy. The fixed-amount-of-work story, though, is only attributed by economists to Luddites, shorter work time advocates and other "naive populists" they wish to discredit. In both cases it is the economist (not infrequently, The Economist) speaking, telling the uninitiated to sit down and shut up.<br /><br />In 1865, William Stanley Jevons introduced a paradoxical joker into the unintended consequences deck. In Chapter 7 of The Coal Question, "Of the Economy of Fuel," Jevons explicitly cited the argument that increased labor productivity expands employment as his model for analyzing the effects of fuel efficiency on fuel consumption: "…the same principles apply, with even greater force and distinctness, to the use of such a general agent as coal. It is the very economy of its use which leads to its extensive consumption."<br /><br />The Jevons paradox presents economists with a dilemma that they have not squarely faced. If, as economists so often insist, technology creates more jobs than it destroys, fuel consumption operates on the same principle and the alternative job strategy of work time reduction is based on a fixed-amount-of-work fallacy; then job creation can only occur through increased fuel consumption. Or, conversely, fuel conservation can only occur at the expense of job destruction.<br /><br />Unemployment exists and so does environmental crisis – so simply dismissing the three associated claims as fallacies is not enough. But one of these fallacies is not like the others. It applies to an attributed view, not a self-expressed one. On the contrary, advocates of work time reduction have often pointedly disavowed any assumption of a fixed amount of work, to no avail.Sandwichmanhttps://www.blogger.com/profile/11159060882083015637noreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-66414144897691463442011-05-20T09:53:12.407-07:002011-05-20T09:53:12.407-07:00Walking back Tufnell's claim about the union&#...Walking back Tufnell's claim about the union's motive to the testimony before the Royal Commission, it is clear that Tufnell derived his conclusions from the supposition of a cotton manufacturer, Peter Ewart. Tufnell's question to Ewart was: "What do you suppose to be the chief motive for the operatives here advocating the Ten-Hour Bill?"<br /><br />Besides being clearly labeled as supposition, Ewart's reply was more rambling, tentative and imprecise than Tufnell's sharply provocative allegations about the union's "secret motives" and "clumsy tricks." Ewart's testimony, in turn, can revealingly be interpreted as a rendition of the principles of popularized political economy – the wages-fund doctrine – such as was elaborated by Harriet Martineau in her 1832 story, "A Manchester Strike." In other words, what in Ewart's opinion made the supposed ideas of the union members fallacious was their non-compliance with the wages-fund doctrine. Moreover, the suspicion that they indeed held such views may have been suggested to Ewart not by their own words or actions but by a work of fiction.<br /><br />Incidentally, the U.S. Commissioner of Labor investigated the ubiquitous claims of union restrictions on output and issued a 921-page special report in 1904, prepared and edited by pioneer labor economist John R. Commons, which found little substance to the claims, concluding, "the question of restriction of output… is not as simple as it has been supposed to be..." The report found that union regulations were aimed at ensuring that changes in work methods or organization were by mutual consent. To the extent such regulations were perceived by management as limiting output, it was in comparison to some hypothetical level of output that might presumably be attained if employers could impose their efficiency plans at will. Moreover, with respect to the reduction working time:<br /><br /> Considered solely with reference to speed or intensity of exertion, a moderate reduction in the number of hours of labor each day usually tends to increase the speed rather than to restrict it. From the standpoint of exertion, a reduction of hours is exactly the opposite from a restriction of output.Sandwichmanhttps://www.blogger.com/profile/11159060882083015637noreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-91903200194136216602011-05-20T09:52:45.317-07:002011-05-20T09:52:45.317-07:00"Any increase in the amount each worker can p..."Any increase in the amount each worker can produce reduces the number of available jobs."<br /><br />F.H.J.'s dispatch included a significant bridge to an earlier tradition of fallacy mongering. This is the theme of the "ulterior design" of unions. According to the Times correspondent, the Nine-Hour League was "only an offshoot of the Unions, and the great object of the Unions is to surround production with all manner of restraints and restrictions, so that it shall not be accomplished too fast or by a small number of workmen." That is, of course, the flip side of stating that "any increase in the amount each worker can produce reduces the number of available jobs."<br /><br />F.H.J. was explicit about the conspiratorial nature of this object of restriction, as were John Wilson in "Economic Fallacies and Labour Utopias" (1871), James Ward in his egregiously plagiarized Workmen and Wages (1868), the anonymous author of a Quarterly Review article, "Trades Unions" (1867), Harriet Martineau in "The Secret Organization of Trades" (1859), Archibald Alison in "Trade Unions and Strikes" (1838) and Edward Carleton Tufnell in The Character, Object and Effects of Trades Unions (1834).<br /><br />Tufnell's pamphlet contains the most complete prototype of what was to become the lump-of-labor fallacy claim. The credibility of that claim needs to be evaluated in the context of the author's disposition toward trade unions. "Were we asked to give a definition of a Trades' Union," the author stated at the book's conclusion, "we should say that it was a Society whose constitution is the worst of democracies — whose power is based on outrage — whose practice is tyranny — and whose end is self destruction." <br /><br />Tufnell was an Assistant Poor Law Commissioner who served on the Whig government's Royal Commission aimed at deflecting agitation for the Ten-hour factory legislation. According to Sidney and Beatrice Webb's History of Trade Unionism, Tufnell's anonymously-published pamphlet was said to have been commissioned and paid for by the Whig government. The key text concerns the alleged motive of the Manchester Cotton Spinners' Union in supporting the Ten-hour Bill:<br /><br /> The Union calculated, that had the Ten-hour Bill passed, and all the present factories worked one-sixth less time, one-sixth more mills would have been built to supply the deficient production. The effect of this, as they fancied, would have been to cause a fresh demand for workmen; and hence, those out of employ would have been prevented from draining the pockets of those now in work, which would render their wages really as well as nominally high. Here we have the secret source of nine-tenths of the clamour for the Ten-hour Factory Bill, and we assert, with the most unlimited confidence in the accuracy of our statement, that the advocacy of that Bill amongst the workmen, was neither more nor less than a trick to raise wages—a trick, too, of the clumsiest description; since it is quite plain, that no legislative enactment, whether of ten or any other number of hours could possibly save it from signal failure.Sandwichmanhttps://www.blogger.com/profile/11159060882083015637noreply@blogger.comtag:blogger.com,1999:blog-2277215496195926573.post-71001885842381761592011-05-20T09:47:01.452-07:002011-05-20T09:47:01.452-07:00Lump of labor "fallacy", eh, Ralph? Let&...Lump of labor "fallacy", eh, Ralph? Let's go through the ALLEGATION step by step. Below I have pasted a copy of my open letter to Paul Krugman discussing the lump. I will post it is segments to comply with the character limit.<br /><br />Dear Professor Krugman,<br /><br />I am writing to you because three times over the last 14 months your authority has been invoked to me on behalf of the assertion that people who advocate shorter working time as a remedy for unemployment are guilty of a "lump-of-labor fallacy" assumption that there is only a fixed quantity of work in the world. As did John Maynard Keynes, I believe that working less is one of "three ingredients of a cure" for unemployment. I find it odd to learn that I (and presumably Keynes) am thereby assuming a palpable absurdity: that the amount of work to be done is invariant.<br />I have researched the history of the fallacy claim and published two scholarly articles on it and I have documented rather glaring discrepancies in the often-repeated claim. Because your authority on the alleged fallacy is so frequently cited, I would be extremely grateful if you would consider the evidence I outline below and respond to it. I believe the history is curious enough to be entertaining and thought provoking, whether or not you are persuaded by my presentation.<br /><br />A column by you that has been held up to me as authoritative appeared in The New York Times on October 7, 2003. It was titled "Lumps of Labor." The first paragraph states as follows:<br /><br /> Economists call it the "lump of labor fallacy." It's the idea that there is a fixed amount of work to be done in the world, so any increase in the amount each worker can produce reduces the number of available jobs. (A famous example: those dire warnings in the 1950's that automation would lead to mass unemployment.) As the derisive name suggests, it's an idea economists view with contempt, yet the fallacy makes a comeback whenever the economy is sluggish.<br /><br />I would like to organize my presentation of the historical evidence by parsing your first two sentences into three parts: "Economists call it the 'lump of labor fallacy'"; "It's the idea that there is a fixed amount of work to be done in the world"; and "Any increase in the amount each worker can produce reduces the number of available jobs." I will conclude with a look at a insightful remark you made in 2002, "the 'productivity growth helps jobs' story, if that's what it is, is just the flip side of the lump-of-labor fallacy," in response to a Financial Times article by Glenn Hubbard.Sandwichmanhttps://www.blogger.com/profile/11159060882083015637noreply@blogger.com