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

[Paul D. Fernhout]

Kevin Carson wrote:
> On 11/25/09, Paul D. Fernhout <pdfernhout at kurtz-fernhout.com> wrote:
> 
>>  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. :-)
> 
> The LL fallacy has been tirelessly combated by Tom Walker:
> http://www.lump-of-labor.org/
> http://www.worklessparty.org/wlitblog/

Thanks for the links. I especially liked this at the first one:
"I should point out that the preceding cannot be done and I will elaborate 
on just one reason why it cannot. If the existing hours of work are 
excessive from the standpoint of physiological or psychological fatigue, 
reducing the hours of work is a "technological improvement" that can, 
ceteris paribus, result in an increase in total output. "Ah-ha!" You may 
say. "If total output is increased by shorter hours that means that the same 
output could be produced with fewer workers and therefore shorter hours 
would destroy rather than create jobs!" But if you do say that you have 
fallen into a trap, because of the conviction that "technology creates more 
jobs than it destroys," which is, of course, the basis (or, at least, one of 
the bases) of the observation that there is NOT a fixed amount of work."

And also: "This brings me back to my argument, that leisure is a factor of 
production and that it is simply wrong to treat leisure as a "normal good" 
such that the sum of income and leisure is a constant. In fact, when the 
current hours of work are "too long" (an empirical matter that can only be 
determined by experience) increasing the amount of leisure will increase the 
value of the total. In the extreme case, it could even increase the income 
too. Or, to put it more simply, you can have your cake and eat it, too. This 
is not to say you can always have it -- it is still an empirical question 
whether the given hours of work are "too long" but that at least is the 
implication of Chapman's theory."

Still, I find his writing a bit unclear in the rest. He seems to be arguing 
both that no one said exactly what is trotted out to then claim is a 
fallacy, and then some other points about labor and economics?

I really am arguing that there *is* essentially a fixed amount of work to be 
done by humans in a healthy society that also has exponentially increasing 
automation. It may be much larger amount of work than what we do now (given 
so many people go hungry or are without some types of technology if we 
expanded our foreign aid, and also because we might want a *real* space 
program again someday employing millions of people), but demaind is still in 
some sense definable as having limits relative to our technological capacity.

Which seems a different argument than Tom Walker is making?

Also, it seems pretty clear that over the last few hundred years (and 
ignoring our distant hunter/gatherer past and even some parts of the Middle 
Ages), that industrial labor has reduced from eighty hours days for everyone 
(even *children* in mills) to now a forty hour day only for some adults. 
That seems like a big change. Excessive schooling has mopped up a lot of 
that surplus of labor (keeping children endlessly on a treadmill, now into 
their twenties via graduate school, and making jobs for teachers) and 
television has mopped up much of the rest. Clay Shirky writes about that here:
"Gin, Television, and Social 
Surplus"http://www.shirky.com/herecomeseverybody/2008/04/looking-for-the-mouse.html

Anyway, it still seems to me like this issues is central to arguments about 
the future of our industrial society. If the only way to keep people 
employed is endless makework, then that seems a big problem with economics. 
For example, in the USA, a big argument why we can't have single payer 
health reform is people saying about five million workers would lose their 
jobs if that one third of every health care dollar was no longer spent on 
bureaucracy. There seems to be something seriously wrong there with economic 
discussions.

>>  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."
> 
> But wait--Krugman himself is a little wobbly on the issue:
> http://www.nytimes.com/2008/12/22/opinion/22krugman.html
> 
> "To be more specific: the severe housing slump we’re experiencing now
> will end eventually, but the immense Bush-era housing boom won’t be
> repeated. Consumers will eventually regain some of their confidence,
> but they won’t spend the way they did in 2005-2007, when many people
> were using their houses as ATMs, and the savings rate dropped nearly
> to zero.
> 
> "So what will support the economy if cautious consumers and humbled
> homebuilders aren’t up to the job?"

A basic income? :-)

But the administration is hoping for people taking on more debt.

Michel mentioned US$40 an hour as the inflation and productivity and equity 
adjusted figure for a minimum wage -- I'd love a reference? I'm starting to 
think raising the minimum wage back to US$40 an hour may be what it takes? 
:-) But I'd rather see a basic income and no minimum wage. It may be too 
late for a raise in minimum wage to fix things at all, given how fast 
companies can automate and redesign.


One of the biggest groups that argue against a higher minimum wage is the 
fast food industry. For example, why could we not have restaurants that are 
more automated? People used to eat in "automats" in the 1950s. One could 
imagine seeing that again, but maybe with more robots.
   http://en.wikipedia.org/wiki/Automat
I think it likely someone could build an almost fully automated restaurant 
if they tried. It might take some redesign as well as some careful product 
selections as to what is on the menu.

So, that's one reason a higher minimum wage may not work -- we'd see an even 
faster push to automate.

What surprises me is it seems like economists have their head in the sand 
about the automation of *services*. They are willing to accept farming could 
be automated. Now they are slowly accepting that manufacturing is being 
automated (and 3D printing is a big thing coming along in that direction). 
But they still seem to not be able to accept services can be automated.

One thing on mainstream economists -- by the values and logic most of them 
espouse, the single biggest thing mainstream economists will be concerned 
about in regards to talking about employment is the issue of how to keep 
their own cushy jobs. :-) If you think about things that way, then it makes 
sense that mainstream economists would say whatever it takes to hold on to 
well paying jobs, and to push whatever theories the status quo needed to 
stay the status quo. In short, there may be a huge conflict of interest in 
the field of economics based on the fact that most economists are paid by 
the status quo.

Anyone who is not so dedicated to having a cushy job as a mainstream 
economist might have different values. Including not assuming unlimited 
greed is the primary emotion that drives most people most of the time. Or, 
even if they believed that, they might not assume it was a good thing, and 
might suggest ways to reign in excessive greed.

Related, though from a different angle, here is a blog post by someone 
showing the damage the mythology of competitive mainstream economics can do 
to idealism:
"Does econ make people conservative? "
http://gregmankiw.blogspot.com/2006/12/does-econ-make-people-conservative.html
"As a Princeton grad myself, I have full confidence in your teacher. Putting 
that issue aside, let me address your central question: Does the study of 
economics tend to make people conservative? I believe the answer is, to some 
degree, yes. My experience is that many students find that their views 
become somewhat more conservative after studying economics. There are at 
least three, related reasons. ... Second, some of the striking insights of 
economics make one more respectful of the market as a mechanism for 
coordinating a society. Because market participants are motivated by 
self-interest, a person might naturally be suspect of market-based 
societies. But after learning about the gains from trade, the invisible 
hand, and the efficiency of market equilibrium, one starts to approach the 
market with a degree of admiration and, indeed, awe. ..."

Of course, even if markets work, then one has to ask how they should be 
regulated, taxed, and subsidized to meet broad social goals, given 
externalities, a concentration of wealth, feedback cycles, etc. ...

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