WORK LESS Institute of Technology

LAZY EUROPEANS ALERT!

Cato wonk Will Wilkinson at The Fly Bottle reads Edward Prescott's paper (pdf file) "Why Do Americans Work So Much More than Europeans?" Wilkinson concludes that if Europeans lowered their taxes they could work more and better pay for their generous social programs. Chris Bertram at Crooked Timber responds with a quote from Marx about the delightful cries of outrage from plantation owners that freed former slaves, "content themselves with producing only what is strictly necessary for their own consumption."

Can the Sandwichman resist jumping into this conversation? In the first place, let's put the whine about high taxes into perspective. Benjamin Franklin addressed this perennial complaint in "The Way to Wealth" and nobody has done better since. "Won't these heavy taxes quite ruin the country? How shall we be ever able to pay them? What would you advise us to do?" Were the questions the townsfolk asked of a respected elder, Father Abraham, who replied with liberal quotations from Poor Richard's Almanac:

"'Friends,' says he, 'and neighbors, the taxes are indeed very heavy, and if those laid on by the government were the only ones we had to pay, we might more easily discharge them; but we have many others, and much more grievous to some of us. We are taxed twice as much by our idleness, three times as much by our pride, and four times as much by our folly, and from these taxes the commissioners cannot ease or deliver us by allowing an abatement. However let us hearken to good advice, and something may be done for us; God helps them that help themselves, as Poor Richard says, in his almanac of 1733.'"

Skeptical readers may note that Franklin's Father Abraham criticizes idleness in the quoted passage. True, but then he distinguishes between idleness and leisure. "Leisure is time for doing something useful." So the first question one must put to the Hard Working Americans/Lazy Europeans stereotype is whether, with all their leisure, Europeans don't put it to better use than do the Americans their paucity of free time.

Second, Father Abraham counts pride and folly as proportionately larger taxes even than idleness. Now by pride and folly, Father Abraham is referring to fineries and knick-knacks. "You call them goods, but if you do not take care, they will prove evils to some of you." And, citing Poor Richard, "buy what thou hast no need of, and ere long thou shalt sell thy necessaries." So the question for Europe is not whether their GDP is larger or smaller than the Americans but whether it is spent wisely or foolishly.

So much for classic American wisdom, though. I have it on good authority that the real reason Europeans work fewer hours than Americans do is that Europeans foolishly believe that the amount of work to be done is fixed!

Michel Camdessus: "La logique de partage repose sur l'hypothèse qu'il existe, dans l'économie, une quantité d'emplois déterminée et fixe."

Gilles Saint-Paul: "The 'lump-of-labor' fallacy, which states that the total amount of work is fixed and can only be shared among those who want to work, has led to many misguided policies, such as pre-retirement to 'make room' for the young, or working time reduction.

Olivier Blanchard: "Throughout the 1990s, faced with high unemployment and low employment growth, many European governments endorsed the idea of 'job rich growth'. The idea, a direct descendant of the lump-of-labor fallacy, was based on the idea that output growth was given, and so low productivity growth would allow for more employment growth.

Of course, I don't accept this view that Europeans believe in a fixed amount of work, which is why I wrote the following long and detailed rebuttal...

Why (some) Economists Dislike Shorter Working Time

By Tom Walker

A spectre is haunting Europe. No, it’s not the spectre of communism. This time it’s merely the dim apparition of a lump-of-labour fallacy.

Nevertheless, a holier-than-thou alliance has sprung up to exorcise the phantom fallacy: finance ministries and bosses’ federations, eminent labour economists and financial page pontificators, the employment directorate of the OECD and the former managing director of the IMF.

It’s high time somebody enlightened these luminaries that their dreaded lump is a chimera – an imaginary beast with the head of a lion, the body of a goat and the tail of a serpent.

For the benefit of the uninitiated in the mysteries of Econ 100, I should explain that the lump-of-labour fallacy is a supposed belief – disdainfully attributed by generations of textbook authors to advocates of various share-the-work schemes – that there is “only a fixed amount of work to be done.". It needs to be kept in mind that the said belief is only an attributed one and not documented. Documentation to the contrary is customarily ignored by those reciting the fixed-amount-of-work mantra. Demonstration is devoted to showing that the belief is wrong, not that anybody necessarily has the belief. Thus the logical structure of the fallacy claim consists of bald assertion (the lion’s head), rote repetition (the goat’s body) and “proof” of something that few would dispute anyway (the serpent’s tail).

Belabouring a lump

The most recent recital of the ersatz fallacy appeared in the report, Le sursaut: Vers une nouvelle croissance pour la France, presented in October, 2004 by Michel Camdessus, former managing director of the International Monetary Fund, to the French Finance Minister, Nicolas Sarkozy. “La logique de partage,” the report instructed, “repose sur l’hypothèse qu’il existe, dans l’économie, une quantité d’emplois déterminée et fixe.”

Also in 2004, the warning against a lump-of-labour illusion played a leading role in Policies for Full Employment, a report graced with a forward from the Prime Minister of Great Britain, Tony Blair. “So it is quite wrong to think of the number of jobs as given, independent of the supply of labour.…” scolded the authors without saying exactly who was guilty of the incorrect thoughts, “That is the lump-of-labour fallacy.”

The OECD Employment Outlook for 2004 featured a box highlighting the “so-called” fallacy and quixotically explaining how an observed negative correlation between employment and hours of work per worker, “probably does not reflect a demand-side trade-off, in which a more or less fixed volume of work must be shared across the adult population.”

Rounding out the fallacy’s 2004 European itinerary were cameos in articles by Gilles Saint-Paul, “Why are European countries diverging in their unemployment experience?” and Olivier Blanchard, “The Economic Future of Europe.”

Saint-Paul claimed that the lump-of-labour fallacy, “has led to many misguided policies,” such as early retirement and working time reduction. While claiming that the fallacy “was repeatedly put forward” in policy debates, Saint-Paul curiously neglected to cite who had put it forward or what exactly they had said, other than to remark that these fallacious views were based on casual observation of employment trends since 1975.

One might conclude that this use of casual observation of employment trends to promote the fallacious belief must have been especially objectionable considering that casual observation of employment trends is the standard proof that the amount of work is not fixed. “If you think of the changes in employment and labour supply over the centuries,” according to de Koning et. al., “it is quite obvious how wrong it [the notion of a fixed amount of work] is.”

In his article, Blanchard proclaimed that the idea of “job rich growth” was a “direct descendant of the lump-of-labor fallacy” and was based on the idea that “output growth was a given, and so low productivity growth would allow for more employment growth.” Blanchard’s article was said to be forthcoming in the Journal of Economic Perspectives. Co-incidentally, that journal’s managing editor, Timothy Taylor, wrote a feature for the Milken Institute Review, “Dept. of Misunderstandings,” which expressly profiled the seemingly ubiquitous fallacy. “The lump-of-labor fallacy,” explained Taylor, “is the Whack-a-Mole of arguments about jobs. As often as you slam it, it reappears somewhere else."

Taylor’s imagery was uncannily apposite but his aim was off by 180 degrees. It is not the fallacy itself that keeps popping up but the spurious claim of a fallacy. The economists’ intellectual echo chamber is alive with the sound of fallacy but that fallacy is a contrivance. A hoax. A fraud. A sham. A straw man. A bugaboo.

The spectacle of all those knowledgeable gentlemen regurgitating superstitious nonsense would be comical were it not for the unpleasant consequences. The most immediate consequence is the expulsion from reasoned consideration of perfectly feasible and progressive policy options and the imposition instead of a rigid, neo-liberal policy straitjacket. The ultimate consequences are likely to be waste and human suffering resulting from the adoption of public policies that are less reasonable, less fair and less democratically legitimate than they need be.

Rather than speculate about what unspoken illusions revolve in the minds of unnamed trade unionists, wouldn’t it be more sensible to examine what one actual trade union economist has to say? Gerhard Bosch maintains that working time reductions are "not just a question of 'whether' but also of 'how'." Surveying the empirical research, Bosch notes that, "...most studies conclude that working-time reductions have positive employment effects of between 25 and 70% of the arithmetically possible effect. Only a few studies find zero or even negative effects. Thus the employment effects of working-time reductions are better than their reputation would suggest." Now if Bosch believed in a fixed amount of work, wouldn’t he expect working time reduction to would produce 100% of the arithmetically possible effect? And wouldn’t he be unconcerned about the “how” of working time reduction?

A Fallacy is Born

The Oxford dictionary credits Henry Mayhew’s classic 1849-50 series of newspaper articles on London Labour and the London Poor with the first literary reference to “lump work”, a form of labour-only sub-contracting common on the London docks in the mid-19th century. Although somewhat archaic, the term still appears with that meaning as, for example, in union regulations against “lumping”. The rules of Carpenters Union Local 157 read, in part, “It will be a violation of the Trade Rules for a member to lump work, or to sub-contract or work on a job where a lumping condition exists…”

In an 1891 article titled “Why working-men dislike piece work,” David F. Schloss mocked a whimsical “Theory of the Lump of Labour,” disparaging what he characterized as the working-man’s naïve concept of economics. The connection between lump work and the lump-of-labour is easy to decipher. Lump work was indeed a “fixed amount of work to be done.” That fixed amount of work was subcontracted to a middleman who then arranged with a greater or lesser number of workers to complete the task over a lesser or greater period of time.

Schloss’s novelty was to draw an unsuitable analogy between the actual arrangements for parceling out casual labour and the hypothetical workings of the economy as a whole. He then projected that rustic, failed analogy onto the thoughts of an ordinary working man. Strictly speaking, this mode of argumentation is known as caricature. It seeks to persuade by exaggeration and ridicule rather than by conscientious demonstration.

Nevertheless, Schloss’s topic was piece-work and decidedly not the hours of labour. “With the question of the length of the working-day,” cautioned Schloss in his concluding remarks, “we have nothing here to do.” He then went on to affirm his support for the reduction of the hours of labour as both socially and economically desirable, so long as that adjustment was not attended by any arbitrary restriction of work effort.

In 1894, John Rae also disparaged a belief in a fixed amount of work supposedly held by some advocates of the eight-hour day. Like Schloss, Rae was a supporter of the eight-hour day. He just didn’t agree that relieving unemployment should count as one of the prospective benefits of the shorter day.

Rae’s position that dividing up the hours of work was “not a simple sum in arithmetic” would have had merit had he confined himself to dispelling any misplaced conviction that shortening the hours of work must automatically reduce unemployment under any and all circumstances. But Rae was intent to show that under no circumstances could shorter working time reduce unemployment. The only way he could do that was to resort to self-contradictory dogma, which Charles Beardsley astutely pointed out in 1895.

Not a Fallacy but a Strawman

Notwithstanding Beardsley’s timely refutation, Rae’s dogma – decorated with Schloss’s colourful terminology – has been handed down from generation to generation of echoing economists. In 2004, there was heard a bumper crop of echoes.

I take this situation as a personal slight because four year ago I published a critique and historical review of the lump-of-labour fallacy claim. And I’ve been harping on it ever since. It leaves me with the impression that influential economists don’t read my stuff. If it’s any consolation, I suppose they also haven’t read Sir Sydney Chapman’s authoritative theory of the “Hours of Labour." Perhaps they’ve never heard of Chapman’s, in which case one can only marvel at their presumption in sneering at other people’s supposed lack of erudition.

When I talk about the “spurious lump-of-labour fallacy claim,” confusion arises from the use of the double-negative. Isn’t a fallacy already spurious? Well, yes, but in this case it’s the claim that’s spurious, too. So then if it’s the claim that’s spurious, does that mean I think the amount of work really is fixed? No. Etc., etc., etc. To try to combat the confusion, I would like to introduce a counterterm: “the lump-of-labour strawman.” The lump-of-labour strawman is the argument critics of shorter work time use when they arbitrarily accuse advocates of foolishly believing there is only a fixed amount of work.

Economists use the lump-of-labour strawman to pre-empt reasoned discussion of employment strategies that may be popular and, frankly, advantageous to the working population. Why economists would want to pre-empt discussion is somewhat of a mystery. However, history records that, with some notable exceptions, employers have been notoriously hostile to shorter working time. Too often, economists uncritically adopt the employers’ perspective. But it’s also worth mentioning that acknowledging the legitimacy of work time reduction as a policy option would awkwardly complicate deliberation about economic growth.

More than any other single issue, the variation of the length of working time confronts economists with difficulties about how to account for a very real and present possibility: that a given increase in the value of exchange transactions could entail a disproportionate diminishment of unmeasured but no less vital activity occurring outside the scope of exchange. As an anonymous pamphleteer – presumably the critic and editor, Charles Wentworth Dilke – protested in 1821, with regard to the political economy of his day, it is presumptuous to think that, “the richest nations in the world are those where the greatest revenue is or can be raised; as if the power of compelling or inducing men to labour twice as much at the mills of Gaza for the enjoyment of the Philistines, were proof of any thing but a tyranny or an ignorance twice as powerful.”

John Rae was right when he pointed out that redistributing the hours of work was “not a simple sum in arithmetic.” Nor, however, is it merely a more complex equation in algebra. It is also a moral and political challenge that cannot readily be reduced to quantification.

Posted by sandwichman at November 9, 2004 02:12 PM