Thursday, December 15, 2011

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

3. How the fallacy myth inhibits movement toward a shorter working week and how it came to have such unearned credence

The movement for shorter hours of work played a pivotal role in the founding and growth of trade unionism in Europe and North America. Economic analysis related to those labour struggles also played an important role in displacing classical political economy and challenging the ideological hold of the panglossian doctrine of laissez-faire.

By the end of the 1930s, the 40-hour workweek had become a legislated standard in the United States. Labour unions and many economists welcomed the prospect of a continuing decline. So what happened? Two of the key elements in the interruption were the gradual downgrading and then abandonment by unions of the shorter work time strategy, and the adoption by economists of highly-abstract mathematical theory.

In 1887, the founding president of the American Federation of Labor, Samuel Gompers said, "The answer to all opponents to the reduction of the hours of labor could well be given in these words: 'That so long as there is one man who seeks employment and cannot obtain it, the hours of labor are too long.'" In the current period of high unemployment, shorter working time is absent from the AFL-CIO's Six-Point Agenda for Jobs. In the interim, unions were won over to the idea that full employment could be maintained by government programs to foster economic growth.

Early in the Twentieth Century, Sydney Chapman's theory of the hours of labour overturned the naïve view that output varied in direct proportion to hours worked. In the late 1920s and early 1930s, however economists noticed this insight made it difficult, if not impossible, to perform quantitative analysis on economic performance so they introduced a simplifying assumption that the given hours of work were optimal (Hicks 1932/1963, Robbins 1929). Inexplicably, the quantifiers "forgot" that this enabling assumption was contrary to economic theory and to a great deal of empirical observation. Many economists today simply assume that the given hours are optimal without acknowledging they're making a simplifying assumption.

Paul Samuelson, one of the pioneers of post-war mathematical theory in economics and of the "Keynesian-neoclassical synthesis", included a section in his iconic introductory textbook warning against the perils of committing the lump-of-labor fallacy. The demonstration of the alleged fallacy fills a pedagogical niche in introductory economics instruction because, as Paul Swaim (cited in Walker 2007) has observed, economists cannot avoid making abstract, ceteris paribus assumptions (like the simplifying assumption that the given hours of work are optimal, for instance).

The "fixed amount of work" assumption can be readily shown to be false on several grounds. Students who master the fallacy myth acquire a set piece with which they can impress audiences with their erudition and counter-intuitive cleverness. Unfortunately, instructors have failed to notice the lack of any demonstrated relationship between the fixed amount of work assumption and the policy arguments to which it is unjustly attributed. The pedagogy has backfired. Instead of becoming more aware of the pitfalls of their own orthodox abstractions, economists learn to disparage the imagined foibles of heretics.

Today, the lump-of-labor fallacy is invoked by Harvard professors and liberal Keynesians as unblinkingly as it is by 'free-market' think-tanks and Chicago School troglodytes. In a kind of Gresham's Law of economic theory, perpetual repetition of the fallacy polemic has marginalized (pun intended) genuine economic analysis of the hours of labour (see Walker 2000 and 2007).

Part IV

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