Thursday, December 15, 2011

What's Wrong with the Case AGAINST Shorter Working Time? IV

4. Why the fallacy claim is false

The case for work time reduction does not rest on the assumption that there is "a fixed amount of work to be done." Whether the demand for labour increases, decreases or stays the same, the work can be divided up differently. Whether it would be advantageous to do so under some particular circumstances is an empirical question, not an a priori certainty or fallacy.

Furthermore, the division of labour has been a key tenet of economic thought since Adam Smith and his analysis of a pin factory. Exactly how easily work may be divided and how appropriate any given substitution is are design issues, which are, as Keynes would put it, "a matter of taste and experience…" This is true for any economic policy – not only work-sharing – and for individuals and firms no less than governments.

Even if some proponents of work time reduction did wrongly believe in a fixed demand for work, that still wouldn't invalidate their proposals. "If it were a good ground for rejecting an opinion that many persons entertain it for bad reasons," wrote A.C. Pigou (1913 pp. 39-40), after restating the standard criticisms of the supposed belief in a fixed amount of work, "there would, alas, be few current beliefs left standing!"

Self-adjusting economy and unlimited natural resources

The general idea of a self-adjusting economy can be found as early as 1701 in the pioneering anti-mercantilist treatise, Considerations upon the East-India Trade. It is also present in the 1780 pamphlet, Thoughts on the Use of Machines in the Cotton Manufacture, by the Lancashire magistrate, Dorning Rasbotham, whose prototype formulation of the fallacy claim was as follows:
There is, say they, a certain quantity of labour to be performed…. The principle itself is false. There is not a precise limited quantity of labour, beyond which there is no demand.

Rasbotham's rationale was that by bringing goods cheaper to market, the use of machines opens up new markets and creates new customers. "A cheap market will always be full of customers." People will indeed buy more at a lower price. But the devil is in the price elasticity of the demand, as Charles Davenant argued in 1699. A larger supply of goods sold at a lower price may fetch less total revenue than a smaller supply at a higher price.

This wouldn't matter, though, if all produced goods were exchanged for other produced goods. The lower aggregate income for one good would result in higher aggregates for some others. The difficulty comes about when one of the goods is money and when people, for whatever reason, choose to hoard money or speculate in non-productive assets rather than spend or invest it. This problem was popularized by Keynes as "the paradox of thrift." In a radio address from 1934, Keynes summarized the flaw in the idea of self-adjustment:
Now the school that believes in self-adjustment is, in fact, assuming that the rate of interest adjusts itself more or less automatically, so as to encourage, just the right amount of production of capital goods to keep our incomes at the maximum level... This is, however, pure assumption. There is no theoretical reason for believing it to be true. A very moderate amount of observation of the facts, unclouded by preconceptions, is sufficient to show that they do not bear it out [emphasis added].

But what if Keynes was wrong about the facts? In that case, it would be prudent to refer to W. Stanley Jevons, who in The Coal Question relied on the self-adjustment argument to explain his famous paradox concerning the consumption of energy resources:
The economy of labour effected by the introduction of new machinery, for the moment, throws labourers out of employment. But such is the increased demand for the cheapened products, that eventually the sphere of employment is greatly widened....

Now 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 (pp. 123-124).

The first paragraph is virtually a paraphrase of Rasbotham's argument. But the second directly challenges, on the exact same grounds, the idea that employment growth can be "uncoupled" from increasing energy consumption. In a world of finite resources, perpetual growth based on the expanding consumption of resources is unsustainable.

The attentive reader may notice that I have just painted not only the fallacy polemists but both sides into a corner! If Keynes was right about the empirical upset of the self-adjustment assumption, then maybe we don't have to worry about the implications of the Jevons paradox for a technological fix to energy resource, climate change and other environmental threats. If Jevons was right then there's not much we can do but sit back and enjoy the roller-coaster ride to the apocalypse. What to do? What to do?

Fortunately, I previously installed a ladder in this corner. The solution is not as simple as the paradox of thrift might suggest nor as intractable as the Jevons paradox implies. The untangling of both paradoxes requires an analysis of "external economies" or "social cost," which ranges well beyond the scope of refuting the lump-of-labour fallacy myth. I have sketched out an introduction to that analysis in "The problem with 'the problem of social cost,'"

Choice vs. coercion

The theme of 'choice versus coercion' implicit in the "Paternalism" in the title of Niemietz's article returns in his conclusion, where he states:
The trade-off people choose to make between leisure and consumption is an entirely private matter. It is nobody else’s business and there is no economic justification for government interference.
The income-leisure trade-off model Niemietz relies on as fact rather than hypothesis has been widely discredited as having been scientifically "refuted by the evidence" (Pencavel 1986 p. 95). So is it a question, then, of data reliability and validity, rather than one of choice versus coercion? The early history of the lump-of-labour fallacy myth offers further 'data points' that speak eloquently to the latter issue.

The charge most frequently brought before magistrates in Lancashire during Dorning Rasbotham's tenure was for the offence of workers leaving the service of their masters, punishable by from one to three months imprisonment. Meanwhile conditions in the earliest factories, documented in a report to Rasbotham and his fellow justices, were such as to foster:
...the ready communication of contagion [of a virulent fever] to numbers crowded together; by the accession to its virulence from putrid effluvia; and by the injury done to young persons through confinement and too-long-continued labour: to which several evils the cotton mills have given occasion.

Fifty years later, conditions for the Manchester cotton workers were not appreciably better, judging from the account given by James Kay-Shuttleworth in The Moral and Physical Condition of the Working Classes Employed in the Cotton Manufacture in Manchester. Kay-Shuttleworth's friend and long time colleague, Edward Carleton Tufnell, was the author of the rabidly anti-union propaganda pamphlet, Character, Object and Effects of Trades Unions, which contained the earliest prototype of the fallacy polemic directed specifically against the agitation for the Ten-Hour Day.

After giving his account of the "innutritious qualities of the articles of diet [i.e., potatoes, oatmeal and 'bad' tea]" of the cotton workers, Kay-Shuttleworth summarized their living and working conditions:
…the population nourished on this aliment is crowded into one dense mass, in cottages separated by narrow, unpaved, and almost pestilential streets, in an atmosphere loaded with the smoke and exhalations of a large manufacturing city. The operatives are congregated in rooms and workshops during twelve hours in the day, in an enervating, heated atmosphere, which is frequently loaded with dust or filaments of cotton, or impure from constant respiration, or from other causes… They are drudges who watch the movements, and assist the operations, of a mighty material force, which toils with an energy ever unconscious of fatigue.

These are the conditions that spawned the trade unions whose aims and very existence Mr. Tufnell strived diligently to thwart and suppress. The form of that suppression extended to the sentencing of seven years transportation to Australia imposed in 1834 by Tufnell's political confederates on six union leaders – the Tolpuddle Martyrs – for the 'crime' of swearing an oath of union solidarity.

So the "classical liberal" choice for factory workers in the 1780s was not so much between income or leisure as between prison or disease (and possibly death) resulting from appalling working conditions. Fifty years later they had the additional option of transportation to the ends of the earth for joining a union. That is the context in which the lump-of-labour fallacy polemic emerged. The polemicists were not at all opposed to government interference when it was aimed firmly at keeping workers in their place.

The originators of the fallacy claim, Rasbotham and Tufnell, were not outliers. Their utterances and activities were typical of the anti-union, anti-Factory Acts, anti-Eight Hour day, fixed-amount-of work fallacy polemicists of the Nineteenth Century and early 1900s.

Part V

No comments:

Post a Comment