Business Ideology and Textbook Lore: from Muddle to Model

by the Sandwichman

Thanks to Google Books, the Sandwichman is boolean-mining a century of textbook lore. Nearly a decade ago I did a similar thing with JSTOR, the full-text journal database. What I'm looking at is how and when my selected piece of economics textbook lore -- the lump-of-labor fallacy -- got introduced and transformed.

The remarkable thing to note, so far, is the resurgence of the phrase in Economics discourse in the first decade of the 21st century. There has been a sharp increase in the number of books published since 2000 that cite the lump-of-labor fallacy, most of them tacitly assuming its legitimacy and authenticity.

To begin, I would like to review a few key benchmarks that are being confirmed as I dredge several hundred books indexed in Google Books. After that, I will to mention some important associations -- and dissociations -- of the expression with restriction of output, shorter working time and make-work.

The term "lump work" appears to have first appeared in print in Henry Mayhew's magnificent London Labour and the London Poor, which was serialized from 1849 to 1850 in the Morning Chronicle. It referred to a system of labor sub-contracting common at the time on the docks and in the building trades in England. Later, the system came to be known as "sweating", particularly in the clothing industry and is more commonly known as piece-work. Nothing comes up in Google Books to challenge the source of the term with Mayhew and, presumably, his documentation of a slang term.

The "Theory of the Lump of Labour" was probably coined by D.F. Schloss in the early 1890s. Schloss was an investigator on Charles Booth's survey of working conditions and poverty in London, essentially a replay of Mayhew's study. In Schloss's usage, the term is anecdotal and refers to workers' objections to the piece-rate system. His usage also alludes to complaints from employers and economists against restriction of output by workers and their contention that it is explicit aim of union rules to enforce such restriction. Again, there are several additional pieces of textbook evidence confirming Schloss as originator of the "theory" and none contradicting it.

Schloss's use of the phrase clearly connects it with the notion of restriction of output and particularly union regulations resulting in such restriction. But it is notable that Schloss seeks to present a balanced view of the question. In other words, workers have legitimate grievances against work speed-up and employer "sweating". On the other hand, they take their objections too far in the other direction if they suppose that they will be better off collectively by withholding effort.

Schloss's textbook, Methods of Industrial Remuneration was published in England in 1894. The chapter in question appeared in 1891 as a journal article. The next earliest textbooks I could find mentioning the lump-of-labor theory or fallacy were published in 1903 and 1904 and were American. The timing may be significant. There had been a controversial and failed Engineers' strike for the eight-hour day in Britain in the late 1890s followed by a feature series in the London Times attacking unions. Both of those events seem to have influenced an aggressive anti-union campaign in the U.S. led by the National Association of Manufacturers.

At this point, I don't think it is useful to argue that economics textbook authors were voicing support for the employers' political views. It's just that restriction of output and the lump of labor were topical. What is of more interest is that initially the anti lump-of-labor claims were directed at objections to the introduction of new machinery, not demands for shorter working time. So far, the earliest textbook I've found that fuses the lump-of-labor objection to demands for shorter hours is Frank Fetter's 1916 Economics. A 1904 textbook by Fetter discussed the lump of labor in connection with machinery, but not hours.

Although Fetter's 1916 textbook connected demands for shorter hours with the lump-of-labor notion, he did also discuss several good reasons for reducing the hours of work and concluded that doing so may be welfare-enhancing even in circumstances where it reduced output to some degree. Fetter didn't identify welfare with income or consumption of commodity. This brings me to the evolution of the fallacy claim first from an anecdote largely incidental to the issue of working time to a claim fused with that issue and finally to its status as the "decisive rebuttal" of the job-creating potential of reduced working time.

Xenophobia: the One on the Right is on the Left?

An ad for Ted Cruz shows actors in suits running through fields and wading across a river, presumably representing the Rio Grande. The voiceover features the candidate from a November 2015 Republican presidential candidates' debate:

"I can tell you, for millions of Americans at home watching this, it is a very personal economic issue. And, I will say the politics of it will be very, very different if a bunch of lawyers or bankers were crossing the Rio Grande. Or if a bunch of people with journalism degrees were coming over and driving down the wages in the press.

"Then, we would see stories about the economic calamity that is befalling our nation. And, I will say -- for those of us who believe people ought to come to this country legally, and we should enforce the law -- we're tired of being told it's anti-immigrant. It's offensive."

Cruz is undoubtedly correct that if the jobs of lawyers, bankers and journalists were disappearing, we would hear much more about it. As to how many jobs of "ordinary Americans" are being stolen by immigrants -- probably not a lot in the larger scheme of things, compared to austerity policies, trade deficits and the fallout from reckless financial speculation.

But how many jobs is beside the point. People have expectations about their future prosperity. They save money to buy homes, to start a business or to retire. They put in overtime hours to try to "get ahead." If after ten, fifteen or twenty years in the work force they are "another day older and deeper in debt," they are prone to feel that something about the system is holding them back.

Maybe they are wrong. Maybe it is their own damn fault. Maybe they're right about the system holding them back but wrong in detail. In some cases, maybe they are right about the near term effects of immigration on their job security.

Economists have soothing words for these anxious people: "don't worry," they assure the common folk, "in the long run everything will be fine. The number of jobs will adjust automatically to accommodate the increase in the work force." This is, of course precisely the attitude Keynes lampooned with his remark about everyone being dead in the long run. Alan Manning, for example, explains in his lecture on the economics of migration:

"The important point is that in the... in the long run, increases in labor force -- and I'll try to explain why in a minute -- cause changes... bring about changes in employment more or less one to one."

Supply of labor, that is to "Say," creates its own demand for labor. Say's Law or the purported version of Say's Law, which reputedly sank without trace after Keynes criticized it. It comes as no surprise that people deny it when I point out that the lump-of-labor fallacy claim is the negative projection of Say's Law. But "increases in labor force... bring about changes in employment" is clearly a paraphrase of "supply creates its own demand."

Again, I'm not saying this is either what Say wrote or any kind of a law. "Say's Law" is simply the name attached to that particular idea.

So, the progressive "wonks" -- Oxford educated London School of Economics professors are combatting virulent right-wing xenophobia with... stale truisms that were discredited 80 years ago and sank without trace? ARE YOU KIDDING ME? I mean, am I kidding you? No. It's as if the quack physicians in Moliere's L'Amour Médecin had come back to life to prescribe leeches and emetics as panaceas.

See also my earlier post on Doctor Krugman and Mister Trump.

Flippity, flop -- it's done...

A customer walks into Nick's Bar and Grill and sees a sign advertising the special steak dinner $10. He orders the special and a beer. Ten minutes later, the server brings him a grilled Spam burger on a bun.  

"I ordered a steak." the customer complains. 

"I'm sorry sir," the server replies, "we're all out of steak but, don't worry, there is not a fixed amount of meat."

"I don't want Spam. I want steak." the customer protests. 

The server goes back to the kitchen and calls out the cook to explain, "Yesterday, we served 100 meat meals to 100 customers. Today, we had 150 customers and we served 150 meat meals to them. The amount of meat we serve is not fixed!" 

"But I don't like Spam. I ordered steak." the customer insists. 

The cook goes upstairs to the office and brings the manager down to explain, "We have monitored the serving sizes and the portions of Spam we served today to customers receiving Spam are exactly the same weight as the portions served yesterday. The portions of steak are even a little big bigger. There is not a fixed amount of meat to go round." 

The angry customer stands up and leaves.

Repeat this story several hundred times and you get the picture of the relentless farce of the lump-of-labor fallacy refrain. Why can't the customer understand that there is not a fixed amount of meat to be served? Why can't the worker understand that there is not a fixed amount of work to be done? Because, quite simply, that explanation has nothing to do with what the customer of working assumed.

The customer assumed that he would get a steak. The worker assumed that she would get a higher paying job with better prospects for promotion. Whether those expectations were realistic or not, the fact that the customer was served a piece of meat or the worker got a part-time, on-call position at Walmart doesn't mean that their wants were gratified.

This is not some complicated mathematical model that goes on for several pages. The is a simple matter of a stubborn refusal by economists to listen. Your lump-of-labor fallacy is bullshit, economists. The empirical evidence you present to "refute the mistaken assumption" is beside the point. YOU, the economists, are making the fallacious assumption, not the workers who are unhappy that there is not an unlimited supply of GOOD, WELL-PAYING jobs to go round.

The stock economists' prescription for that unhappiness is "more education" or, as the oracles of Davos would recommend:

• rapid adjustment!
• new reality!
• concerted effort!
• innovating!
• front and centre!
• new mindset (to optimize resilience)!

Who will stop the lump-of-spam fallacy spam? Flippity, flop -- it's done!

Sandwichman's Lump-of-Labor Odyssey Part III

In Part I of my lump of labor tale, Sandwichman told about how he had first encountered the fallacy claim back in 1997 and then delved way back in history to the earliest inklings of the idea of a fixed amount of work in the mid-17th century and the first known repudiation of that idea toward the end of the 18th century.

In Part II, I riffed off of Larry Summer's newly found scorn for the Luddite fallacy -- one of the several alias for the lump of labor -- talked about an answer to my query I had received from Paul Samuelson in which he was remarkably vague about the origins of the fallacy claim that appeared for half  a century in his textbooks and concluded with a transcript of an exchange from 1999 with Brad DeLong.

I haven't yet mentioned publications of my research on the lump and the acknowledgement (or lack of one) that scholarship has received from economists who have continued to invoke the lump of labor fallacy as if there was utterly no question of its authority.

About a week ago, Alan Manning, professor of economics at the London School of Economics gave a talk there on "The Economics of Migration" in which he evoked the so-called lump of labor fallacy as a way of interpreting people's anxieties about the effect of immigration on unemployment.

Most of the presentation is informative and well argued. At about 38 minutes and 50 seconds into his lecture, though, Professor Manning appears eager to persuade his audience of a matter than he thinks is an "important point" -- that the amount of work to be done is not fixed. Who would have thought otherwise? Is water dry? Is up down? But for some reason, Professor Manning expresses doubt that he can convince people of this rather unremarkable fact. Could the problem possibly be that it is difficult to persuade people to stop doing something that they are not actually doing? Maybe he didn't think of that.

I have edited a 3 minute and 44 second segment of Professor Manning's lecture in which he mentions the lump of labor fallacy and virtually begs his audience not to believe that the amount of work is fixed. "It's completely wrong to think/ of the number of jobs as being fixed." At about 2:09 of this excerpt, Manning mentions that "labor economists have a word for the view that the number of jobs is fixed. They call it --  the sort of -- the lump of labor fallacy. And it really is exactly that. The number of jobs in an economy is not fixed." Again at 3:34 he exhorts his audience, "but please do not believe in the lump of labor fallacy that's just one thing I would say." (And while you're at it folks, please, please stop believing in unicorns.)

So here is the text of the email I dispatched to Professor Manning:

Dear Professor Manning,

When economists invoke the "lump-of-labour fallacy" I have to wonder how much research they have done on the history of the fallacy claim and how much documentation they have looked at on opinions of people who are alleged to believe there is a fixed number of jobs in the economy. I have done extensive research on these matters and the answer seems to be 0 and 0. This doesn't seem to matter, though, because they are economists repeating what other economists have said repeating what other economists have said, etc., in other words, an appeal to authority ad infinitum ad nauseam.

"Professor Manning expanded on the “lump of labour” fallacy, which assumes that the number of jobs in an economy is fixed, and therefore an influx of labour must take away jobs from some people. He refuted this by showing that countries with big increases in the labour force have proportional increases in the employment rate, and emphasising that the economy is elastic and the number of jobs in an economy is not fixed."

I don't suppose you would be interested in my research on the lump of labour fallacy but in case you would care to challenge you preconceptions rather than indulge them, here are citations of my published articles on the fallacy claim:

2000, "The 'Lump-of-Labor' Case Against Work-Sharing: Populist Fallacy or Marginalist Throwback?" in Working Time: International trends, theory and policy perspectives, Lonnie Golden and Deb Figart, eds. 

2007, "Why economists dislike a lump of labor," Review of Social Economy, Vol. 65, Iss. 3.

There is also a bit of an update and background in a couple of blog posts at EconoSpeak:

Sandwichman's Lump-of-Labor Odyssey 

Sandwichman's Lump-of-Labor Odyssey, Part II

I expect that I will take the occasion of your recent lecture on migration as an opportunity to post a third part of the odyssey, in which I may discuss the reception (of lack of any) of my research by folks who keep beating the old lump of labour drum. It would be delightful if I could get a response from you to my rebuttal of the fallacy claim.  I don't pretend to be the first to rebut this claim, among my predecessors are A. C. Pigou and Maurice Dobb who both characterized the "fixed Work-fund fallacy" claim as itself an ignoratio elenchi fallacy. Looking forward to your reply.

Sincerely,

Tom Walker

P.S [in separate emai]:

By the way, Alan, I have now watched the video of your talk and reviewed your power point and it is otherwise a fine presentation. The lump of labour interpretation of your background information is not grounded in your research, which doesn't really investigate the relationship between the empirical findings and people's alleged tacit theories about the labor market. Essentially, your interpretation, then, is speculative and extraneous to your empirical evidence.

This may seem like a trivial matter but I think not. You mention Trump's demagoguery on immigration in passing. Obviously, disparaging a hypothetical fallacy is not persuasive to Trump's audience who view it as condescending. Have you considered that their perspectives might not be driven by the assumption of a fixed amount of work but by a disappointed expectation that they should have "gotten ahead" more than in fact they did? Whether or not such expectations are realistic, it seems to me a more plausible assumption than that there is a fixed amount of work in the economy as a whole. What do you think?

Cheers,

Tom Walker

I want to emphasize again the bolded line in my postscript to Professor Manning. In his lecture, Manning envisions a scenario where somebody doesn't get a job and thinks to himself, "if it wasn't for that person over there I would have gotten that job." While true for that individual, such experience has very little to do with the level of employment in the economy as a whole. My alternative suggestion has to do, though, with an individual experience that cannot be contradicted by Manning's empirical evidence. While the total number of jobs may expand following growth in the labor supply, what evidence is there that promotions and pay increases will live up to people's expectations? None. And even if those expectations were, in fact, "unrealistic" what empirical evidence is there that they were unrealistic? None.

The above would make a worthwhile research project. Meanwhile, Paul Krugman still hasn't replied to the open letter I sent him (hard copy postally) nearly five years ago.

"Did the Great Recession Lead to the Great Vacation?" -- Yes.

Dean Baker asks, "Did the Great Recession Lead to the Great Vacation?"

Hey, don't laugh.

George Zipf (1941) "National Unity and Disunity; the nation as a bio-social organism":

Let us view the American depression of 1929 with the concept of leisure time in mind. 

b) October, 1929; the discovery of the 'raw material' of leisure time. 

With the end of 1929, the American total economy reached a point of great achievement, namely, a point when the national economy could produce its accustomed needs without using anywhere near all its available energies. Expressed differently, in 1929 the United States discovered a new 'raw material': leisure time, which in a way is just as much a 'raw material' as coal, oil, steel or anything else, because for many types of human activity, leisure time is an essential prerequisite. Of course one may be inclined to say that 1929 introduced a period of surplus production; that is true. Nevertheless in the solution of any problem much depends upon the angle of approach, and in this study we prefer to speak of the introduction of a surplus of leisure time. 

However, as we have remarked in the course of our study, any change in kind or amount of goods or of processes within a social-economy will necessitate a restriation within that social-economy itself. This was true of the discovery of steam, oil, and the like, and it will also be true of the 'discovery' of leisure time. 

Yet what are some of the implications of an increase of leisure time as far as production is concerned? Obviously, as long as a social-economy produces goods in sufficient amount to meet the minimal needs necessary for the survival of its members, then a social-economy could conceivably continue indefinitely. The only draw-back to this happy state of affairs is the phrase 'the minimal needs necessary for the survival of its members.' We do not know what those hypothetical minimal needs are, nor do we know a happy way of indefinitely forcing great masses of the population to be contented with a supply equal merely to the barest needs of survival, as long as more goods are possible. However, let us return to the consideration of leisure time as a raw material, or if one prefers, as a consumable good. 

As soon as we turn to the implications of an increase of leisure time from the viewpoint of distribution, then matters become clearer. Leisure time, like any other consumable good, is something worth organizing for; and the distribution of amounts of leisure time to the members of a population is as much subject to the laws of income-distribution as anything else. People like to eat, to sleep, to play,—and people like to 'loaf.' In short, everyone wants leisure time. To live by doing nothing is the height of economy. But how about the distribution of leisure time? Naturally, a large-scale unemployment is in and for itself a certain distribution of leisure time. But is it the most economical distribution of the nation's entire stock of leisure time within the total reservoir of a nation's complete production of consumable goods?"

Say what? Leisure time as raw material?

(Can't Stop) Endlessly Spouting Chapman

Here's a shorter summary of the Chapman model, originally published in "The 'lump-of-labor' case against work-sharing: populist fallacy or marginalist throwback." from Working Time: International trends, theory and policy perspectives and reposted on MaxSpeak in 2006.

Chapman revisited the issue of the hours of labor in his presidential address -- delivered in Winnipeg, Manitoba -- to the British Association for the Advancement of Science, Section on Economic Science and Statistics (1909). That analysis came to be considered the "classical statement of the theory of 'hours' in a free market" (Hicks 1932: 102n.; Nyland 1989). Arthur Pigou restated Chapman's argument in Economics of Welfare (Pigou 1952; 462-469). Alfred Marshall referred to Chapman's analysis as authoritative, as did Lionel Robbins (Marshall 1961: 695; Robbins 1929: 25). Concluding his footnote reference to Chapman and Pigou, Hicks declared, "There is very little that needs to be added to the conclusions of these authorities." Very little, perhaps, other than the strange occurrence that although Chapman's argument has never been challenged, economists today are oblivious to its major conclusions. Most are unaware not only of the theory's authoritative status but even of its existence.

Unlike [John] Rae, Chapman saw no particular danger in workers' views -- "fallacious or otherwise" -- about the mechanics of distribution (Chapman: 365). On the contrary, Chapman suggested that such attitudes probably had protected workers "against the injurious consequences of short-sightedness."

Chapman began his discussion of the hours of labor by reviewing the mass of evidence that reductions in the hours of work had not led to proportionate declines in output. Chapman attributed the phenomenon to the fact that as production methods become more intensive, workers require more leisure time to fully recover from the fatigue of work. He emphasized that in modern industry fatigue was increasingly psychological, resulting from the demands of modern industry for specialization and mental concentration as well as from the workers' attitude toward leisure rather than from the strictly physiological demands of the work. When the hours of labour were reduced, the better-rested workers were often able to produce as much or more in the shorter hours than they had previously in longer hours.

The total value of the output from standard working days of different lengths would thus initially increase as the day became longer but eventually the total output -- not only the output per hour -- would decline as the standard day became too long to allow the worker to recover sufficiently from fatigue. Beyond a certain point, each additional hour of work would continue to add a quantum of output to the current day's total output but only at the expense of reducing the next day's hourly pace. What that point was, Chapman maintained, depended on the intensity of the specific production methods and thus would vary in response to changes in those methods.

Having established the idea of an optimal length of standard working day that would maximize output, Chapman next turned to the questions of whether such an optimal length would likely be established by the workings of a free market and whether the optimal length of day for output coincided with the optimal length from the perspective of the workers' welfare. His conclusions in both cases were negative.

From the perspective of the employer, Chapman argued, the optimal length of day for output could only be achieved if all employers acted in enlightened accord. This is because the maintenance of the long-term optimum would always require some short-term restraint. A single employer could never be entirely certain of reaping the benefit of that restraint. Another firm could always potentially offer a small wage premium and hire away the first firm's well-rested workers. For employers, the optimal output work-time would thus be a form of investment without equity:

The reforming employer would run the risk of paying the whole cost of the labour value created by shorter hours and getting little in return; other employers might secure and exhaust the new labour value and no permanent good would be effected (1909: 361).

From the perspective of the worker, the optimal length of day could, for all practical purposes, be considered to be shorter than the optimal length of the day for output. Chapman considered three elements in assessing the optimal day for the worker:

1. the wage, which Chapman assumed for the purpose of analysis to exactly equal the worker's marginal productivity;
2. the marginal value of leisure, which Chapman assumed to vary in response to changes in the level of wages; and
3. the disutility of work, which Chapman assumed to also be a function of the length of the working day -- during some intermediate period of the working day, Chapman assumed that work could often be experienced as pleasurable.

Chapman maintained that in forming their ideal of a working day, workers' would disregard the effects of changes in work time on efficiency, and hence on wages. As a consequence they would tend to prefer a working day longer than would be prudent in the long run, even though it would not be as long as that preferred by employers acting competitively. Thus the exclusive concern of both employers and workers with immediate self-interest would bias the preferences of each toward longer than optimal hours (1909: 367).

In the two decades following Chapman's address, his demonstration of market failure in the determination of working time led to systematic empirical study of the relationship between fatigue and work intensity. According to Nyland (1989), however, attention to the question of work intensity faded during the 1930s and after, largely because "the fact that worktime had both a temporal and intensive character made it difficult to utilise marginal productivity theory to determine the return on various factors of production" (1989: 33). As a simplifying abstraction, economists assumed that the given working day was of optimal length. Eventually, the hypothetical -- and antithetical -- status of that assumption came to be overlooked. Economists negligently reverted to a pre-Chapman faith that unencumbered market forces would spontaneously lead to the establishment of an optimal length of work time.

and Can't Stop Endlessly Spouting Chapman II:

In 2001, the Government of Queensland further summarized Sandwichman's summary of Chapman's theory in its submission to the Australian Industrial Relations Commission's Reasonable Hours Test Case. At 400 words, it's the shortest comprehensive summary of Chapman's theory I know of.

5.2.1 Theoretical review
The study of the relationship between work intensity and fatigue owes much to S.J Chapman's theory of the hours of labour, where in 1909 Chapman demonstrated market failure in the determination of working time. This argument initially involves the establishment of a concept of 'optimal hours'. The main points of this argument can be summarised as follows:

• a mass of evidence indicating that reductions in hours of work had not led to proportionate declines in output;
  
• in modern industry fatigue was increasingly less physical in nature and more a combination of psychological and physiological as a result of specialization and increased need for mental concentration;
  
• the reduction of hours allowed better-rested workers to produce as much or more in the shorter hours;
  
• the total value of the output would initially rise as the working day increased but eventually the total output as well as the output per hour would decline as the working day became so long that it prevented adequate recovery from fatigue for workers;
  
• this is the case because, beyond a certain point, each additional hour of work would be contributing to the output of the current day's total output but at the expense of the following day's output capacity; and
  
• the intensity of the work involved would dictate the point at which total output begins to fall and thus the length of the 'optimal' working day.

The second half of this argument explores whether the free market can arrive at the 'optimal' length of day, and can be summarised as follows:

• the maintenance of a long-term optimum by employers would require short-term restraint;
  
• each individual employer could never be certain of reaping the benefit of their restraint as another firm could potentially entice the employer's well-rested workers away with a wage premium;
  
• therefore the optimal output work time is a form of investment without equity;
  
• simultaneously, Chapman assumed that workers would choose a longer working day than was prudent (although not as long as the working day preferred by employers), primarily because of a general short-sightedness that would mean workers would consider their immediate earning capacity more than their long term earning capacity; and
  
• the outcome in a free market situation would therefore be one where employers and employees acting in self-interest would each tend to select a working day that was longer than the 'optimal' hours.

Doctor Krugman and Mister Trump

Mark Thoma cites a Paul Krugman column on Empowering the Ugliness in which the latter concludes that ."..this ugliness has been empowered by the very establishments that now act so horrified..." Professor Krugman was referring to a contemporary ugliness that is -- to use a discrete circumlocution -- not unprecedented in American political culture, as the above pamphlet cover from the American Federation of Labor illustrates.

Of course, A.F. of L. President Samuel Gompers's advocacy of Chinese Exclusion -- like Donald Trump's proposal for Muslim  (and Mexican) Exclusion -- was "not inspired by a scintilla of prejudice of any kind, but with the best interests of our country uppermost in our mind..." Not a scintilla!

Sam Gompers also said, "So long as there is one man who seeks employment and cannot find it, the hours of work are too long." I mention this because both anxiety about immigration and advocacy of shorter working time as a remedy for unemployment have been ridiculed by economists -- including Krugman -- as products of a mistaken "lump-of-labor" belief in a fixed amount of work.

Thanks in part to decades of condescension by economists (including Paul Krugman), the shorter working time remedy is now conveniently "off the agenda." According to Krugman, he doesn’t "get too worked up about this kind of misunderstanding anymore; it doesn’t have political power behind it, the way right-wing fallacies do."

But what about unemployment? "Yes," Krugman conceded in his 1997 hot dogs and buns rebuttal to William Greider, "technological change has led to a shift in the industrial structure of employment. But there has been no net job loss; and there is no reason to expect such a loss in the future." Which could be paraphrased as yes, immigration has led to a shift in the ethnic composition of employment. But there has been no net job loss; and there is no reason to expect such a loss in the future." Here is why we shouldn't have to get worked up about unemployment anymore:

But wait--what entitles me to assume that consumer demand will rise enough to absorb all the additional production? One good answer is: Why not? If production were to double, and all that production were to be sold, then total income would double too; so why wouldn't consumption double? That is, why should there be a shortfall in consumption merely because the economy produces more?

Here again, however, there is a deeper answer. It is possible for economies to suffer from an overall inadequacy of demand -- recessions do happen. However, such slumps are essentially monetary -- they come about because people try in the aggregate to hold more cash than there actually is in circulation. (That insight is the essence of Keynesian economics.) And they can usually be cured by issuing more money -- full stop, end of story. An overall excess of production capacity (compared to what?) has nothing at all to do with it.

Full stop. End of story.

Except that's not the end of the story. That insight which Krugman called "the essence of Keynesian economics"? There was more than one application of the principle, according to the man himself:

The full employment policy by means of investment is only one particular application of an intellectual theorem. You can produce the result just as well by consuming more or working less. Personally I regard the investment policy as first aid. In U.S. it almost certainly will not do the trick. Less work is the ultimate solution.

In other words, "So long as there is one man who seeks employment and cannot find it, the hours of work are too long." So, what'll be -- meat or rice?

Sandwichman's Lump-of-Labor Odyssey, Part II

Back in July, I posted Sandwichman's Lump-of-Labor Odyssey with the intention of posting a second installment. The next day, I left for a week in California and part two fell by the wayside. Larry Summers's recent comments on the so-called Luddite fallacy have caused me to resurrect my earlier plan.

This is not the first time Summers has sung this refrain. Back in February, he told the same story to a Brookings policy forum on "The Future of Work in the Machine Age." The earlier renunciation of the fallacy claim concluded with this prudent qualification:

And I would want to leave you with that concern as there whether you think it's due to technology or whether you think it's due to globalization, or whether you think it's due to the maldistribution of political power, something very serious is happening in our society.

That is to say, regardless of what caused it, the lower demand for workers is a reality that must be faced. In his post on Summers's latest recantation, Peterson Institute president Adam S. Posen observed that the implications are scary "[u]nless we can somehow transform that sustained lower demand for workers into the widespread leisure of the sort imagined by Keynes and some science fiction writers, with the income redistribution to support it,"

Ironically, it was precisely the obstinate hostility toward transforming lower demand for workers into leisure that propelled the bogus fallacy claim in the first place. Understanding this inversion of motive and rationale is crucial. It was not because they thought there would always be plenty of jobs to reabsorb displaced workers that employers' organizations and newspaper editorialists opposed shorter hours; it is because they opposed shorter hours that they insisted there would always be plenty of jobs.

In other words, macroeeconomic thinking is not, in the words of Action from West Side Story, "depraved on account I'm deprived." It has been deprived -- of the insight of its own theoretical tradition -- because it is depraved! 

Sneering at the so-called Luddite fallacy under the conviction that productivity would inevitably create more jobs than it destroyed used to be known as the "economic law" that "supply creates its own demand" -- a faith that was once said, by John Kenneth Galbraith, to have "sank without trace" in the wake of John Maynard Keynes's refutation of it.

Until Keynes, Say's Law had ruled in economics for more than a century. And the rule was no casual thing; to a remarkable degree acceptance of Say was the test by which reputable economists were distinguished from the crackpots. Until late in the '30s no candidate for a Ph.D. at a major American university who spoke seriously of a shortage of purchasing power as a cause of depression could be passed. He was a man who saw only the surface of things, was unworthy of the company of scholars. Say's Law stands as the most distinguished example of the stability of economic ideas, including when they are wrong. 

The old nostrum didn't "sink without trace" at all. It simply slipped into a disguise. In that disguise, it performed EXACTLY the same function as had previously been performed by the vulgar version of Say's Law -- separating the "crackpots" and "stupid people" who worried about technological unemployment from the "smart people" who duly memorized and recited the mantra,

"Well the technology will remove the jobs. If there’s more productivity than people are going to have more money and if people have more money, they’re going to spend it and then everybody’s going to be employed."

Was that even "macroeconomic thinking"? Of course not. It is precisely the same old, same old classical political economy orthodoxy in an even more archaic, anti-mercantilist bottle.

Although he generously credits the teachings of Bob Solow, Summers must know that it was his own Uncle Paul Samuelson, who promulgated the lump-of-labor fallacy ruse year after year in his universally prescribed introductory textbook. As I mentioned in part one of the Odyssey, when I wrote to Samuelson in the late 1990s, asking about the source of the fallacy claim his reply was gracious but uninformative. He informed me that the fallacy "was widespread during the Great Depression 1929-1935 and is still encountered in today's France."

"A standard move in the rhetoric of reaction"

My inquiry to Samuelson followed up a listserv discussion I had earlier in 1999 with Summers acolyte Brad DeLong, in which he referred to the wages-fund doctrine of classical political economy as "a standard move in the rhetoric of reaction." DeLong correctly associated the lump-of-labor fallacy with the wages-fund doctrine. What DeLong didn't grasp at the time was that fallacy claim reinstated the old doctrine by purporting to refute a mirror image of itself. Here is the transcript of that exchange, which I previously posted to EconoSpeak in August of 2014.


Sandwichman:

But, Brad, while we're asking for examples, can you give me an example of any economist who has challenged the sources of Samuelson and Nordhaus's perennial lump-of-labor fallacy? If anthropologists were as accommodating as economists, Piltdown man would still be in our evolutionary family tree.

DeLong:

Samuelson and Nordhaus's "lump of labor" fallacy is the Classical doctrine that fiscal and monetary policy cannot affect the total amount of employment--that the number of hours worked is fixed, unchangeable, unresponsive to government policies. And that the best we can do (when confronted with a situation like Europe's 10% unemployment today, or America's 25% unemployment in the Great Depression) is to spread the (limited) amount of work around fairly. 

But what Samuelson and Nordhaus want to argue--I think correctly--is that we know very well how to get to a better outcome in which unemployment is low not because a lot of us are working part-time (when we would rather be working full-time), but because demand for labor is high...

Sandwichman:

Ah, now we're getting somewhere. Wouldn't that Classical doctrine be what is known as the wages-fund doctrine, Brad?

DeLong (ellipsis in original):

Yep. But it remains alive, a standard move in the rhetoric of reaction to use against demands that the government do something to make the economy behave better... 

Sandwichman:

You bet the wages-fund doctrine remains alive as a standard move in the rhetoric of reaction. One need only peel back the textbook onion one layer from Samuelson and Nordhaus to the Raymond Bye and William Hewett textbooks of the previous generation (1930s, 1940s, 1950s). There you find the same hoary lump-of-labor fallacy forthrightly likened to the "general overprodution fallacy". Here is Bye's explanation of why the lump-of-labor fallacy is a fallacy:

"Every laborer creates a product which is offered in exchange for the products of other laborers. The demand for labor thereby grows as fast as its supply; the one cannot be greater or less than the other, for they are the same thing." 

According to this explanation, then, any monetary or fiscal action of the government for the purpose of "creating jobs" is futile because all it can do is divert the means for employing labour from its natural course (determined by the identity of supply and demand), "at the expense of the other laborers who would have been employed, and at the expense of society, which has less wealth than might have been." 

I have another question, Brad, at what point in the history of political economy did the workers, trade unions, and social democratic politicians suddenly and inexplicably embrace the reactionary doctrine of the wages-fund? I'm puzzled because all I can ever find is attribution of this theory of the lump of labor to the workers, trade unions etc. On the other hand, I can find quite a bit of repudiation and denunciation of the wages-fund doctrine from socialists, trade unionists etc. Not the least from a certain K. Marx. 

DeLong (ellipsis in original):

that I do not know. Let me hunt around and see if I can find anything... 

Sandwichman:

I'd be much obliged. 

A year and a half later (August 2000), though, the question of the lump of labor arose again in Brad's admiration of some passages in Paul Krugman's book The Accidental Theorist.

DeLong (bracketed interpolations in original):

But my most favorite pieces of the book of all are three passages that go to the heart of Krugman's commitments--both moral and intellectual. The first is a biting denunciation of William Greider for being an "accidental" theorist: someone who does not think issues through, but who just looks at surfaces without peering into depths or thinking coherently and whose thought is thus shaped by implicit, unexamined theories of which he is not conscious:

" ...reducing the number of workers it takes to make [manufactures] reduces the number of jobs in the [manufactures] sector but creates an equal number in the [services] sector, and vice versa. Of course, you would never learn that from talking to [manufacturing] producers, no matter how many countries you visit; you might not even learn it from talking to [services] manufacturers. It is an insight that you can gain only... by engaging in [economic] thought experiments."

Sandwichman:

Ironically (and ironic is too mild a term for it), the position from which Krugman criticizes Greider is itself based on an implicit, unexamined theory of which he is not conscious. That accidental theory holds that increasing the volume of trade is the only and certain way to expand employment (and, by implication, raise wages).  

BUT WAIT! Krugman's own "accidental theory" has a name. And I'm sure he's heard of it. I know Brad has. It is the wages-fund theory of classical political economy [correction 2014: I should have said "Say's Law, which depends on the wages-fund doctrine"] -- sometimes referred to as the discredited wages-fund doctrine. So Krugman beats Greider over the head with a defunct doctrine and Brad applauds. 

This indeed reminds one of Keynes. To be exact, it reminds one of Brad's "most favorite" Keynes quotes:

 "Practical men, who believe themselves to be quite exempt from any  intellectual influences, are usually the slaves of some defunct  economist. Madmen in authority, who hear voices in the air, are  distilling their frenzy from some academic scribbler of a few  years back..."

Brad and I had a brief exchange about the wages-fund theory a while back and I quote his characterization of it: "Yep. But it remains alive, a standard move in the rhetoric of reaction to use against demands that the government do something to make the economy behave better..." Putting two and two together, then, one of Brad's most favorite pieces of Krugman is when he employs a standard move in the rhetoric of reaction. Hmmmm.  

But just to carp on this theme a few moments longer, I shudder to mention that Krugman's allegation against Greider (and it is only an allegation -- a speculation really about how his thought has been "shaped") is that he, Greider, is making a static assumption, ultimately based on what was once called (Wilson, 1871), a "Unionist reading of the wages-fund theory."

I asked Brad some time ago just when it was that workers, trade unions and social democratic politicians (not to mention populist  muckrakers) enthusiastically but implicitly embraced the reactionary doctrine of the wages-fund theory. He replied: "that I do not know. Let me hunt around and see if I can find anything. . ."  

Brad didn't get back to me on that.

"Some Big Changes in Macroeconomic Thinking from Lawrence Summers"

This post's title refers to Adam Posen's blog post about the keynote address by Larry Summers: "Is It (just) Hysteresis? Disentangling the Cyclical from the Structural," Conference: Making Sense of the Productivity Slowdown, Peterson Institute for International Economics, Washington, DC, November 16, 2015:

...basically what we were taught were that there were these smart people who were exemplified by Bob Solow and there were the stupid people who were exemplified by a bunch of sociologists. 

And the stupid people said that technology was going to remove the jobs and the smart people said, “Well the technology will remove the jobs. If there’s more productivity than people are going to have more money and if people have more money, they’re going to spend it and then everybody’s going to be employed. And so, it’s like the Luddite fallacy to think that technological progress reduces jobs and this is stupid. And that’s basically what I believed and you know, that’s basically what I went through life believing because that’s what I’ve been taught and it seemed to me to make sense. 

And then at some point, it sort of occurred to me that suppose the stupid people were right, what would it look like? Well what it would it look like would be there’ll be some large categories of labor who would see their relative wage go way down.

O.K. fine, but Sandwichman would just love it if Larry Summers would send a little credit his way for documenting FIFTEEN YEARS AGO the vacuity of the stupid people fallacy claim.

"The 'Lump-of-Labor' Case Against Work-Sharing: Populist Fallacy or Marginalist Throwback?" Tom Walker in "Working Time: International trends,'theory and policy perspectives, Lonnie Golden and Deborah Figart (eds), Routledge, 2000.

"Why economists dislike a lump of labor," Tom Walker, Review of Social Economy Volume 65, Issue 3, 2007, pp. 279-291.

Cruz Mugs Trump, Hugs Lump

According to the Wall Street Urinal:

Immigration was also a flashpoint, with Ted Cruz slip-streaming Mr. Trump as an ardent restrictionist. He even embraced the lump of labor fallacy that the supply of jobs is so fixed that immigrants “drive down the wages for millions of hardworking men and women.” 

Not so. In a 2013 analysis, the Congressional Budget Office estimated that the bill that passed the Senate that year would have raised average wages by 0.5% by 2033. CBO also found that among the poorest workers, new immigrants tend to lower the wages of other immigrants, not native-born workers. That’s because they work in industries like hospitality and agriculture that are dominated by newcomers. Mr. Cruz is positioning himself to pick up nativist voters who now support Mr. Trump if the businessman fades.

Translation: immigrants working in hospitality and agriculture are not hardworking men and women. Gee, that's news to me. Is that why they call the WSJ a "news"paper?

Is There a Lump in Your Trump?

"Whether it's China or Japan or Mexico, they are all taking our jobs." -- Donald Trump

Whatever one may think of Donald Trump, one thing he is not is naïve. So does it make sense when someone like Adam Davidson (or Jonathan Portes) claims that worry about immigrants or foreign countries (or robots or non-retiring seniors) "taking our jobs" are based on the "something called the Lump of Labor Fallacy: the erroneous notion that there is only so much work to be done and that no one can get a job without taking one from someone else"? 

Of course not. These folks are just mouthing platitudes they've heard without a thought to where the platitudes came from, whether they make sense or whether they are persuasive. (See also Sandwichman's Lump-of-Labor Odyssey)

Just because you are right doesn't mean you are not stupid

"I don't give a fuck about the white gaze, I don't. I literally don't." -- Marissa Janae Johnson

"What's true about this moment is that it's not about the tactics. If you're caught up in tactics you're missing the point." -- Alicia Garza 

"Myself and Alicia in particular are trained organizers. We are trained Marxists. We are super-versed on, sort of, ideological theories." -- Patrisse Cullors (in response to an interview question citing a "loving critique" from Jalil Muntaqim)

"When I use Assata’s powerful demand in my organizing work, I always begin by sharing where it comes from, sharing about Assata’s significance to the Black Liberation Movement, what it’s political purpose and message is, and why it’s important in our context." -- Alicia Garza, "Herstory of Black Lives Matter"

"I am not a criminal, nor have I ever been one." -- Assata Shakur

"The Black Liberation Army was formed after the repression began to come down on the Black Panther Party and people in the Party were seeing that there had to be a clear separation between military apparatus and aboveground apparatus and they were waiting on the leaders to make this decision. But by then, it seemed like the leaders had sold-out to get out of jail and for $600 apartments, such as Huey P. Newton, Eldridge Cleaver, Bobby Seale, so that they weren’t interested in making decisions to save the movement. So that people began to take it on their own since they were the ones getting killed in the process, they were getting framed up and getting arrested and driven underground all around the country." -- Sundiata Acoli, trial testimony quoted in Unearthing the Underground: A study of radical activism in the Black Panther Party and the Black Liberation Army, PhD dissertation by Gaidi Faraj

"The McGovern people were afraid that the Yippies were endorsing McGovern as a way of destroying him. We had to reassure them that no, this was really on the level, and then they said if you really want to help McGovern stay away." -- Stew Albert

"The fact that Abby [sic] Hoffman, Jerry Rubin, Angela Davis, among others, support McGovern should be widely publicized and used at every point." -- Richard Nixon to John Mitchell  

"Assata's legacy represents a mandate to broaden and deepen anti-racist struggles." -- Angela Davis

The "broadening and deepening" of incarceration.

Sandwichman is not a true believer in the emancipatory efficacy of "revolutionary armed struggle." But setting aside my own idiosyncratic old, white, male weirdo populist economic determinism objections to adrenaline and testosterone-fueled adolescent action fantasies, I'm even more skeptical of political posturing that makes dog-whistle allusions to a legacy of armed resistance while denouncing armchair critics for being "caught up in tactics" and "missing the point."

Unless I am mistaken, the "point" of armed struggle has nothing to do with the audience "getting it."

Sandwichman, for one, hasn't miss any point. On the contrary, I find the profusion of points rather fascinating. Here's a few odd ones:

Naomi Klein:

That’s my hope for 2015. That we get off defense and put forward this very clear vision, bringing all of our movements together, because they are mobilizing in incredible ways. Some of you may have read the piece I wrote trying to connect the #BlackLivesMatter movement with the climate justice movement, because so much of what we are fighting for is based on the principle that black lives matter, that all lives matter. The way our governments are behaving in the face of the climate crisis actively discounts black and brown lives over white lives. It is an actively racist response to climate change that we should expose. I think we have to not be afraid to bust down these barriers if we really mean it when we say that if we’re going to change everything, it’s going to take everyone.

Peter Linebaugh:

As concerns Black Lives Matter and the movement, that so far, I think, this year 464 people have been killed by the police, this is sending force against people without trial by jury, not in accordance with the law of the land. And so, when Black Lives Matter began, after the—last August, after the killing of Michael Brown, many of us remembered that slavery itself came to an end thanks to Frederick Douglass’ references to Magna Carta. So Magna Carta has played a major role in American history in the freedom struggle led by former slaves and the African-American population. This is why Black Lives Matter is so important, not only against the racist power structure and the forms of white supremacy that exist in so many ruling institutions, but it’s also a recovery of this long tradition of struggling against sovereignty in the name of habeas corpus, trial by jury and prohibition of torture.

Fucking monomaniacs, eh? Sandwichman eagerly awaits the happy day when Black Lives Matter joins the struggle to eradicate the menace of the bogus "lump-of-labor fallacy" claim. 

"We believe that people should fuck all the time, anytime, whomever they want. This is not a program demand but a simple recognition of the reality around us." -- Abbie Hoffman, "Revolution towards a free society:Yippie!" manifesto, Chicago, 1968.

Sandwichman's Lump-of-Labor Odyssey

The first mention of the lump-of-labor fallacy I ever encountered was in a 1997 column by Jock Finlayson, vice president for policy and analysis of the B.C. Business Council. It was a Business in Vancouver debate with Ken Georgetti, president of the B.C. Federation of Labour, on the merits of restricting overtime to combat unemployment.

At the time, I had been active in advocacy for shorter working time for a little over two years. An abiding interest in the idea had been stoked in 1995 when I wrote a research proposal to do a narrative policy analysis of the employment prospects of work time reduction. Funding for the project never materialized in the wake of a comprehensive provincial government spending freeze announced three weeks after the proposal submission deadline. Meanwhile, however, I had established a web site, the Timework Web, to compile research and commentary on shorter working time.

A little past the midway point in his column, Finlayson wrote, "Work-sharing rests on the belief that the economy can generate only a fixed amount of work. History provides little support for this gloomy view, which economists have labelled the lump-of-labour fallacy." The passage caught my attention because of its distinctive "ungrammaticality," to use Michael Riffaterre's clumsy term.

Riffaterre used that term in a generic sense to refer to "any wording unacceptable in context" rather than exclusively to overt violations of the rules of grammar.
These clumsy wordings, in Riffaterre's analysis, point to the text's intertextuality, "The text refers not to objects outside of itself, but to an intertext. The words of the text signify not by referring to things, but by presupposing other texts."

For narrative policy analysis, such peculiarities of wording are not mistakes to be indulged but "jackpots" for decoding a text. The challenge then becomes one of retrieving the corpus of texts – the "intertext" – to which the peculiar passage refers. The archival work to do so would have been inconceivable before the Internet and wide availability of full-text searching of databases of journal articles, pamphlets  and treatises.

Finlayson probably learned about the lump-of-labour fallacy from Paul Samuelson's ubiquitous introductory economics textbook. But Samuelson didn't know when or where the fallacy claim originated, explaining that the fallacy "was widespread during the Great Depression 1929-1935 and is still encountered in today's France." (correspondence with the author).

Using JSTOR, I was eventually able to trace the "lump of labour" phrase to an 1891 article on piece work by David Frederick Schloss. By then, January 1999, I was already aware that the fallacy claim -- and rebuttals of it -- had long preceded that specific label. It took me 15 more years of occasional forays back into the archives (and keeping my eyes peeled) before I finally got to what I believe is the rock bottom of the story.


The argument that there is – or, more correctly, if there is – a fixed amount of work appeared in John Graunt's 1662 Natural and Political Observations made upon the Bills of Mortality: "that if there be but a certain proportion of work to be done, and that the same be already done by the non-beggars, then to employ the beggars about it, will but transfer the want from one hand to another."

Commentators have speculated that Graunt's close friend and associate, William Petty, may have been the author of the political and literary embellishments to the actuarial observations in Graunt's book, so the discussion of beggars may well be Petty's. The section goes on to address a key proposition of mercantilist trade policy – the assumption that there is "but a certain proportion of trade in the world":

This little hint is the model of the greatest work in the world, which is the making of England as considerable for trade as Holland; for there is but a certain proportion of trade in the world, and Holland is prepossessed of the greatest part of it, and is thought to have more skill and experience to manage it. Wherefore to bring England into Holland's condition, as to this particular, is the same, as to send all the beggars about London into the West Country to spin, where they shall only spoil the clothiers wool, and beggar the present spinners at best; but, at worst, put the whole trade of the country to a stand, until the Hollander being more ready for it, have snapt that with the rest.

So the fixed amount of work is not some naïve, intuitive belief known or shown to be held by advocates of work sharing but an explicit hypothesis stated by one of the forerunners of what would become political economy and economics. The canonical refutation of this hypothesis, with regard to work, appeared in a 1780 pamplet by Lancashire magistrate Dorning Rasbotham, Thoughts on the Use of Machines in the Cotton Manufacture, written in response to anti-factory rioting near Bolton, Lancashire, the previous year:

There is, say they, a certain quantity of labour to be performed. This used to be performed by hands, without machines, or with very little help from them. But if now machines perform a larger share than before, suppose one fourth part, so many hands as are necessary to work that fourth part, will be thrown out of work, or suffer in their wages. The principle itself is false. There is not a precise limited quantity of labour, beyond which there is no demand. Trade is not hemmed in by great walls, beyond which it cannot go. By bringing our goods cheaper and better to market, we open new markets, we get new customers, we encrease the quantity of labour necessary to supply these, and thus we are encouraged to push on, in hope of still new advantages. A cheap market will always be full of customers. Men will cross land and sea to go thither.

It is likely that the refutation of the mercantilist proposition of "a certain proportion of trade" had become a rhetorical commonplace during the course of the 18th century so that it became unnecessary to identify who said there was "a certain proportion of trade in the world" or "a certain quantity of labour to be performed."

In the early 19th century, particularly in the wake of the Luddite disturbances of 1811 and after, the notion became commonplace, without any evidence, that it was the rioting workers who harbored the proverbial belief in a fixed amount of work. The prosecutor in the trial of George Melior (or Mellor), William Thorpe and Thomas Smith for the murder of William Horsfall couldn't resist adding a criminal aspect to what he described as the delusion, ascribed to the defendants without evidence, that machinery reduces the demand for labour:

Mr. Horsfall is represented to me to have been a man, who had upwards of four hundred persons at work under him, extremely beloved by his men, and they greatly attached to him. He had very large manufactories, of course, from the employment of so many men; and he employed the machinery which was the object of the abuse of these misguided people. I have not the means of making such observations as I have frequently and lately heard made, upon the delusion which has prevailed upon that subject, amongst the lower orders. It has been supposed that the increase of the machinery by which manufactures are rendered more easy, abridges the quantity of labour wanted in the country. It is a fallacious argument: it is an argument, that no man, who understands the subject at all, will seriously maintain. I mention this, not so much for the sake of you, or of these unfortunate prisoners, as for the sake of the vast number of persons who are assembled in this place.

By the end of the 19th century the viciousness of the alleged belief in a fixed amount of work – and consequently a diminishing demand for labor – had become a leitmotif of the relentless assertion that the fallacy underpinned demands for shorter hours of work. Denunciations of the fallacy are typically supplemented with this or that explanation of why reducing working time is unnecessary or not economically feasible or will happen spontaneously through worker's choices of leisure, etc. In the aggregate, these add-ons are unpersuasive, often shallow and frequently contradict one another.

In my view, the persistence of the incongruous lump-of-labor fallacy claim is symptomatic of the rift between the scientific pretensions of economics and its ideological foundations. Paul Swaim, an economist with the OECD, once suggested to me that the fallacy is a type of error that economists themselves are constantly in danger of committing, in that they "cannot escape assuming that many potentially relevant variables are fixed."

This assumption is, of course, the standard ceteris paribus clause that Terrance Hutchison criticized extensively in The Significance and Basic Postulates of Economic Theory. Hutchison complained that it is usually not made clear by economists whether a particular ceteris paribus proposition is meant as "an empirical generalisation which can conceivably be false without any contradiction" or as "an analytical-tautological proposition." "Perhaps," Hutchison speculated,"such propositions are sometimes meant in one way, sometimes in another." Hutchison concluded, "That ceteris paribus propositions are frequently hopelessly ambiguous and that the ceteris paribus assumption should be used less often and more cautiously."

In a more recent review of the history of ceteris paribus, Joseph Persky observed that, ""In too many cases one is unsure of exactly what restraints are being imposed and by what authority the exercise is legitimated." Persky credited Alfred Marshall's role in popularizing ceteris paribus, which he apparently picked up from John Cairnes:

Although he doesn't cite Cairnes in his methodological discussions of the phrase, Marshall does use the following quotation from Cairnes in a discussion of the wages-fund theory: 'the rate of wages, other things being equal, varies inversely with the supply of labour.' 

The phrase Cairnes used there was actually 'other things being the same,' which appears eleven times in Cairnes's Some Leading Principles of Political Economy: Newly Expounded ('other things being equal' appeared twice and caeteris paribus six times). Notice that Marshall cited Cairnes "in a discussion of the wages-fund theory." More specifically, Marshall was criticizing Cairnes's attempt to "resuscitate" the wages-fund theory, in which Cairnes avoided the old pitfalls "only by explaining away so much which is characteristic of the doctrine." Marshall seems not to have noticed that it was precisely the hopeless ambiguity of the ceteris paribus device that enabled Cairnes to explain away so much!

Cairnes's attempt to revive the wages-fund doctrine was a response to William Thornton's apparently decisive repudiation of it in On Labour Its Wrongful Claims and Rightful Dues; Its Actual Present and Possible Future. The wages-fund doctrine had lent pseudo-scientific legitimation to fierce partisan polemics against trade unionism. In his chapter on trades unionism, Cairnes attacked a statement by Thornton to the effect that "the quantity of industrial work to be done is… 'at any give time a fixed quantity.'" Cairnes objected to this assumption vehemently, "...I must make bold to say that, within the range of economic reasoning, no more profound fallacy finds a place than is contained in this inference; nor, I must add, is there one more pregnant with practical consequences of a pernicious kind."

A review of Thornton's book in The Edinburgh Review for July 1869 took a more good-natured and humorous view of Thornton's self-contradictory gaffe:

That the rate of wages is governed, as Adam Smith and his followers have conceived, by the proportion between the capital disposable for the payment of labour and the number of the recipients of that capital, is a notion that Mr. Thornton scouts with contempt, and he consigns the chimerical 'wages-fund' to the lowest limbo of unrealities. Yet, while attacking the name, we find him occasionally, under the pressure of facts, using language which virtually admits the thing, as when he says, 'that at any given time the whole quantity of work to be done is a fixed quantity, and the uttermost which employers can afford to pay for having it done is a fixed amount'; and in other places his language recognises the inevitable fact that employment must be limited by the amount of capital which at the time being sets it in motion, that amount being the thing to which Smith, McCulloch, Fawcett, and other writers have assigned the offensive name.

If Thornton erred by "virtually admitting" the same notion that he elsewhere "scouts with contempt," Cairnes compounded error by not noticing that the "profound, pernicious fallacy" he bitterly denounced on page 251 of his book was none other than a restatement of the wages-fund doctrine he had stoutly defended back on page 174!

How is it possible that both Thornton and Cairnes could commit copy-cat errors while taking diametrically opposite positions on the question of the wages-fund? The answer lies in the inscrutable vagueness and ambiguity of the ceteris paribus clause. In the kaleidoscopic hall of mirrors where "other things remain the same," what "other things" are included in or excluded from the ceteris paribus pound is tacit as is exactly how they are "the same."

Compounding the uncanny coincidence fun, Persky credited William Petty with introducing the term ceteris paribus into economic discourse. As mentioned above, it is possible that Petty also introduced "a certain proportion of work to be done" into the economic discourse. This is not to say that a "certain proportion" and a "fixed amount" refer to the same thing, arithmetically. No doubt part of the shape-shifting rhetorical appeal of ceteris paribus arises from its equivocation on whether it is quantities or proportions or both that are remaining the same.

Would it even be possible for economists to use ceteris paribus assumptions "less often and more cautiously," as Hutchison prescribed, yet still perform the ideological/scientific somersault? On the evidence of the persistent projection of the lump-of-labor fallacy, I would have to conclude that the "hopeless ambiguity" of the ceteris paribus assumption provides an indispensable shield for the consensus economist's aura of objectivity at the same time that it remains treacherously porous for the heretic.

Sherk 'n Burke?

at the Heritage Foundation:
Automation and Technology Increase Living Standards
by James Sherk and Lindsey Burke

Many Americans blah, blah, blah... 

Lump of Labor Fallacy 

Fears of mass technological unemployment are predicated on a “lump of labor” model of the economy—the belief the economy needs a roughly fixed amount of work performed.In this economic model, machines automating work formerly done by people reduce the total amount of work remaining for humans, reducing total employment. Keynes forecast an impending crisis of unwanted leisure. He suggested future societies would establish three-hour workdays to give everyone enough work to avoid boredom.

Almost all economists reject this model today. Economists have found that an almost unlimited amount of potential work exists in the economy because people’s material desires continue to expand. Virtually all Americans today enjoy material living standards vastly better than the wealthy of 1900. Nonetheless, most Americans today would purchase additional goods and services if they received a raise or bonus.

[Bullshit.]

Sandwichman's lump-of-labor odyssey

If you're explaining, you're losing...

Washington Post: 

HUDSON, N.H. -- Jeb Bush raised eyebrows on Wednesday by suggesting that "people need to work longer hours" in order to grow the economy. 

But he later clarified the comment, moving quickly to quell a fresh assault by Democrats eager to characterize the Republican presidential front-runner as out of touch.

Not so fast, Bush told reporters as he clarified his comments after a town hall meeting at a Veterans of Foreign Wars hall here. 

"If we’re going to grow the economy people need to stop being part-time workers, they need to be having access to greater opportunities to work," he told reporters.

"You can take it out of context all you want, but high-sustained growth means that people work 40 hours rather than 30 hours and that by our success, they have money, disposable income for their families to decide how they want to spend it rather than getting in line and being dependent on government," Bush said. [Sotto voce: note the reflex kick at people working "only" 30 hours a week as scroungers "getting in line and being dependent of government."]

Bush wasn't actually explaining his earlier statement. He was reinterpreting the statement, "people need to work longer hours," to mean something entirely different than "people need to work longer hours." "Working longer hours" and "having access to greater opportunities to work" are not equivalents.

Jeb Bush "at work"

One way to increase opportunities for involuntary part-time workers to work more hours is for those who are working 47 hours a week or over 50 hours a week to be working shorter hours. Heaven forbid! According to an August 2014 Gallup Poll, full time workers in the U.S. reported working an average of 47 hours a week, with 39% of full-time workers claiming to work over 50 hours a week -- almost as many as the 42% who say they work an FLSA standard 40-hour week.

I would take those figures with a tablespoon of salt. People lie about how hard they work. They think saying they work incredibly long hours makes them appear better than everybody else. Actually, it makes them look unproductive. Nevertheless, the Gallup results have held steady for the last 14 years at close to those numbers. If people are padding their hours for the pollsters, they are at least consistent about it.

If those superfluous seven hours per week were "lumps of labor" they could readily be redistributed to involuntary part-time workers and the unemployed eliminating both unemployment and underemployment! But of course, there is not "a fixed amount of work to be done" and the mere fact of redistributing work opportunities would increase productivity and output thus exacerbating the problem of insufficient demand unless that redistribution of hours was accompanied by a substantial redistribution of income in the form of higher wages.

Well, now you see why Jeb Bush was calling for longer hours rather than shorter hours. Longer hours means less pressure for wage increases. Wouldn't want that. Heck of a job, Jebbie!

A World Without Work and the Image of Limited Good

Derek Thompson has a feature (slathered with Shell ads) at the Atlantic Monthly this month, once again traversing the well-trodden territory of the alleged Luddite/lump-of-labor fallacy (see also Foreign Affairs "Will Humans Go the Way of Horses"):

The end-of-work argument has often been dismissed as the “Luddite fallacy,” an allusion to the 19th-century British brutes who smashed textile-making machines at the dawn of the industrial revolution, fearing the machines would put hand-weavers out of work.

Thompson's take on the "boy who cried robot" fable is that this time -- perhaps, after so many false alarms -- the wolfish robot really is at the door. Overall, aside from referring to rioting 19th century laborers as "brutes," it's not such a bad survey of views on the issue -- citing Sandwich-pals, Robert Skidelsky, Ben Hunnicutt and Peter Frase, among others.

But Thompson's excursion takes a weird detour when he asserts that Skidelsky's, Hunnicutt's and Frase's vision of a post-work society is "problematic" because "it doesn’t resemble the world as it is currently experienced by most jobless people." WTF? Proposals for change are invalidated by their lack of conformity to the status quo? Night cannot follow day because it is dark and day is light? Different is impossible because it is not the same?

Thompson then devotes several paragraphs to rounding up the usual suspects of what might be termed as post-work work: 3-D printing, maker spaces and the internet enabled "sharing" economy of Ubers and Task Rabbits. After rambling on discursively for a few thousand more words, Thompson winds up back in Youngstown, Ohio, where his essay started, with the story of Howard Jesko, a 60-year old graduate student:

If Jesko had taken a job in the steel industry, he might be preparing for retirement today. Instead, that industry collapsed and then, years later, another recession struck. The outcome of this cumulative grief is that Howard Jesko is not retiring at 60. He’s getting his master’s degree to become a teacher. It took the loss of so many jobs to force him to pursue the work he always wanted to do.

And they all lived happily ever after! I suppose that's how you sell a story to the Atlantic Monthly. 

Don't get me wrong. It's nice that Howard Jesko will get to pursue work he always wanted to do. I got to teach university at age 64 after working as a clerk in a grocery store for six years. My point though, is that Howard Jesko's happy ending is... not uh... statistically significant. I mean it is not even illustrative of any findings of any research, qualitative or quantitative. It is a weightless anecdote plucked out of thin air. Very thin air. A vacuum.

Besides, seeing all those Shell ads juxtaposed with the article kept depletion of cheap fossil fuel resources and climate change on my mind.

May I let you in on a secret? We're not hurtling inexorably toward a comedic denouement. That's fantasy. Wishful thinking. The Sandwichman offers abolition of the wages system and reduction of working time as harm reduction strategies, not as miracle cures. Got that? Harm reduction. Gonna be a world of hurt.

When the fossil interlude comes to an end, propping up the illusion of perpetual, exponentially-increasing prosperity won't be worth the bother. It will only annoy the pigs you are trying to teach to sing. It is not that there is "only so much work to go round." There are only so many cheap, readily-accessible material resources at hand to work with.  Working, it turns out is always working with.

Lionel Robbins famously defined economics as "the science which studies human behavior as a relationship between given ends and scarce means which have alternative uses." One may quarrel with Robbins's ghost about whether that is what economics ought to study but it must be admitted that the concept of scarcity plays a minor role in contemporary economics discourse. Scarcity has become a side-show that is presumably always solvable by substitution. There is even a "built-in mechanism" that makes it so! In truth, though, there is no built-in mechanism to substitute happy endings for the exhaustion scarce means. When the junk is gone, the party is over. 

Ending? Yes. Happy? Not so much.

Back in the 1960s an anthropologist named George Foster studying the peasants of Tzintzuntzan, Mexico, wrote that those peasants had the foolish notion that there was only a limited amount of good in the world. If one person got more land or water or crop yield or conjugal bliss then somebody else would have to suffer with less. A zero-sum game. Foster thought this was an outmoded idea that had to be dispelled so people could enjoy the boundless booty of modern technology.

Foster's hypothesis was popular for a while in anthropology but also controversial. Eventually its prestige faded. In "Revisiting the Image of Limited Good: On Sustainability, Thermodynamics, and the Illusion of Creating Wealth," Paul Trawick and Alf Hornborg have revived the concept of the image of limited good but with a twist. The peasants were right and Foster was wrong. 

In their essay, Trawick and Hornborg contrasted real wealth and virtual wealth, arguing that what grows are claims on real wealth generated by the expansion of credit. Meeting those claims necessarily involves the destruction of natural resources in the course of converting them into commodities with exchange value. An increase in exchange value thus always entails an increase in entropy -- that is, a decrease in available energy. The amount (or intensity) of this increase in entropy can be modified by technological efficiency improvements but its direction remains unchanged. "Real wealth, unlike its virtual counterpart, is something that human beings do not and cannot create in godlike fashion the way they create ideas and symbolic phenomena such as value."

This strikes at the heart what seems to be an unshakeable article of faith among economists. The economy can grow because value doesn't have to consist of stuff. Well, yeah, value isn't stuff. So what? The creation of value is the creation of claims that may be redeemed for stuff. 

I give you a massage so I can buy a steak with the money you give me. The value of the service is only immaterial when viewed in isolation from my motivation for performing it. No beef, no rub. This is the distinction between real wealth and virtual wealth that economists seem incapable of grasping. Virtual wealth is indeed virtually immaterial -- until the claims that arise from that virtual wealth are redeemed. If those claims are not redeemable for real wealth, they are worthless.