[p2p-research] Is the "lump of labor fallacy" itself a fallacy? (was re: article by Hazel Henderson)

[Paul D. Fernhout]

Michel Bauwens wrote:
 > ---------- Forwarded message ----------
 > From: Uta Jehnich <uta at worldforum.org>
 > Date: Thu, Nov 26, 2009 at 3:10 AM
 > Subject: article by Hazel Henderson
 >
 > INVESTING IN CLIMATE PROSPERITY
 >
 > By Hazel Henderson
 > [snip]
> The Climate Prosperity Alliance uses the *Climate Solution 2* computer
> model prepared by Climate Risk Pty of Australia and Britain
> (www.climaterisk.net) which provides the roadmap on investing $1 trillion
> every year from 2010 until 2020 in energy efficiency (the earliest,
> biggest payoff), wind, solar, geothermal, ocean and hydropower. As
> economies of scale are reached in each of these sectors, they will become
> cheaper than coal and oil and are already cheaper than nuclear power (all
> create uncounted social costs and are heavily subsidized by taxpayers in
> most countries).

Lets think of the implications. If these green technologies are cheaper 
(because green technologies ultimately cost less directly, and green 
technologies require less defense, and they cause less pollution and 
disease), then ultimately, if there is limited demand, then that will mean 
less jobs. What are the implications to our economy already struggling with 
unemployment?

I still think it's a good thing to switch to green technology, but we need 
to do something about unemployment in the long term (a basic income or gift 
economy or whatever).

The "lump of labor fallacy" is why mainstream economists will say 
unemployment from green energy being more efficient is not a problem:
   http://en.wikipedia.org/wiki/Lump_of_labor_fallacy

But, I feel that "fallacy" is itself a fallacy, because of limited demand by 
healthy people, or at least, demand growing slower than increasing capacity. :-)

Even from that Wikipedia page: "This common argument against the use of 
restricted working hours to reduce unemployment has recently been 
questioned, with one scholar arguing that "substituting a dubious fallacy 
claim for an authentic economic theory may have obstructed fruitful dialogue 
about working time and the appropriate policies for regulating it".[3] 
Walker argues that the idea that the lump of labour is a fallacy often goes 
unsubstantiated, and that the reduction of working hours can have similar 
labour-saving impacts as the introduction of technology into the production 
process.[4]"

This one "lump of labor" issue is really at the heart of so much of what 
future economics will hold.

But this is what someone like Paul Krugman says on it:
  "Lumps of Labor"
  http://www.pkarchive.org/column/100703.html
"Economists call it the "lump of labor fallacy." It's the idea that there is 
a fixed amount of work to be done in the world, so any increase in the 
amount each worker can produce reduces the number of available jobs. (A 
famous example: those dire warnings in the 1950's that automation would lead 
to mass unemployment.) As the derisive name suggests, it's an idea 
economists view with contempt, yet the fallacy makes a comeback whenever the 
economy is sluggish."

If mainstream economics is ready for an earthquake, that supposed "fallacy" 
is one of the fault lines IMHO, relying on assumptions about human nature as 
well as future technology that most economists are not qualified to make or 
to evaluate.

And here it is first: :-)
"Roberto Verzola: Finite demand makes relative abundance possible"
http://blog.p2pfoundation.net/roberto-verzola-finite-demand-makes-relative-abundance-possible/2009/01/31

My first post directly on the topic I can find, three months later:
"On rationing and unlimited demand"
http://groups.google.com/group/openmanufacturing/msg/889b1b3f8b188d8b?hl=en
"This note was sparked by a discussion recently with someone about
post-scarcity issues, specifically about how the economic interpretation of
what it means if production cost drop to zero depends on you assumptions
about "demand" (which is a psychological idea, not a mathematical one). In 
the long run, I feel our industrial base will be able to produce far in
excess of the capacity of any current human to consume on a personal basis,
so rationing the basics like water, food, shelter, information, manufactured
personal goods and health-care will be meaningless. (I'd expect big projects
like diverting the output of the energy of entire stars might still require
"discussion". :-) "

But the Triple Revolution discusses aspects of that to, from 1964. As does 
Marshall Sahlin's "Original Affluent Society".

In any case, this issue of demand relative to labor needs is a major crack 
in mainstream economics IHMO. And here is what someone did once when they 
found such a crack:
  http://www.aaronsw.com/weblog/generaltheory
"Keynes has found a crack in the classical theory. The first half of this 
book will be dedicated to prying it open. The second half is filling it in."

Limited demand for goods and services is not a problem for a p2p society if 
people do what they want and enjoy their "free time" and take from an 
abundant commons as they need to. But it is a big problem for an economic 
system based around eternal growth, where the only right to consume comes 
from renting out your personal labor; in such a system, most people would 
soon be considered surplus if demand does not grow to match supply.

China's "one child" policy was built in part on the idea of a "lump of 
labor" in relation to mainstream economics, and it is estimated that policy 
has prevented or terminated about 250 million pregnancies. That is just 
about the entire population of the USA, wiped out over some economic 
ideology about whether there are enough jobs or resources to go around.

It seems that the Chinese government decided to believe in the deadly 
combination -- believing in the lump of labor fallacy (limited demand) but 
also believing in mainstream scarcity-based economics.

One might think of this as a box with four quadrants:

lump of labor (limited demand) and lump of labor fallacy (unlimited demand)
versus:

mainstream macroeconomics (scarcity) vs. alternative economics (abundance)

I would put Marxism in the mainstream scarcity economics category. :-) 
Anything that does not include Julian Simon's idea of "people being the 
ultimate resource" might go in there. :-)

It seems there are only three safe areas:

* belief in "a lump of labor" (limited work and demand) but also believing 
in alternative abundance economics (and so a post-scarcity society)

* belief in "a lump of labor fallacy" (unlimited work and demand) but also 
believing in unlimited economic growth (so, capitalism works for everyone -- 
although I question this in practice).

* belief in the lump of labor fallacy (unlimited work and demand) but also 
believing in alternative abundance economics of equitable redistribution of 
what you have -- which would give you rationing but under the assumption 
there is always enough to go around produced by imaginative people.

But apparently, the fourth quadrant, believing in "a lump of labor" (limited 
work and demand) and some form of scarcity-based mainstream economics is 
very deadly.

An example from here:
http://en.wikipedia.org/wiki/One-child_policy#Non-population-related_benefits
"The Chinese government introduced the policy in 1979 to alleviate social, 
economic, and environmental problems in China,[4] and authorities claim that 
the policy has prevented more than 250 million births from its 
implementation to 2000.[2]  ... The original intent of the one-child policy 
was economic, to reduce the demand of natural resources, maintaining a 
steady labor rate, reducing unemployment caused from surplus labor, and 
reducing the rate of exploitation.[29][30] The CPC's justification for this 
policy was based on their support of Mao Zedong's and the Marxist theory of 
population growth, an idea which Marx took from Thomas Malthus.[29][30][31]"

Anyway, Michel, I hope you see why people uch as William Catton who don't 
know Malthus recanted his original idea can be deadly. A quarter of a 
billion human lives were snuffed out in China (or just never born) over a 
gloomy economic world view. Deadly stuff.

Now where are we going to get the billions and eventually trillions of 
people we need to fill up the self-replicating space habitats and seasteads, 
things made possible with all the abundance we get from the cost savings of 
moving to green energy? :-)

--Paul Fernhout
http://www.pdfernhout.net/