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

[Michel Bauwens]

>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.

Hi Paul,

it was a recent study by a union in California, on the county level, I saw
it about 6 weeks ago, trouble is, I spent half an hour in my tags and on
google, and can't get a hold of it again ... I think it had "Sonoma county"
in the heading ...

Michel

On Sat, Nov 28, 2009 at 3:48 AM, Paul D. Fernhout <
pdfernhout at kurtz-fernhout.com> wrote:

>
>
> 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/
>
>
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