The ideals of life v. the GDP
The reduction of working time is an issue that affects aspects of life beyond the numbers of jobs and the price of labor. From the perspective of workers and of society as a whole, the chief prospective benefit is an increase in disposable time. The question that needs to be asked, then, is not merely how many jobs would result from a given reduction of working time but also whether more disposable time or higher incomes will better contribute to people’s well-being -- that is, to things like health, learning, family life, self-reliance and citizenship. It is a question that can’t be answered with a mathematical equation. Nor can comparing rates of change in the gross domestic product provide the answer.
Richard Layard (pdf file) has commented on the inappropriateness of that practice, arguing that even though taxation may reduce both work effort and GDP, ”we should be equally clear that this does not matter, because GDP is a faulty measure of well-being.” Yet critics of reduced working time policies – including Layard himself – do point precisely to slower growth of GDP as a defect of such policies.
That lack of correspondence between GDP and well-being may provide a clue to anxieties underlying the preemptive use of the lump-of-labor claim. If there is indeed a possibility that reduced working time could represent “an advantage to the entire community,” as the report of the US Industrial Commission argued over a century ago, then economists would have to grapple with the fact that such an advance registers as a decline in GDP. Similarly, a loss of free time registers as an increase in GDP, even if the loss demonstrably exceeds any compensating gain from market activity. Furthermore for some values of the duration of working time, an increment in the hours worked can produce a loss of both income and leisure, a condition that Chapman showed is not only possible but even likely under competition. None of this makes for convenient mathematical model-building along established neoclassical lines.
In his presidential address to the Economics and Statistics Section of the British Academy for the Advancement of Science, Chapman expressed doubt that fallacious ideas about the mechanics of distribution played any significant role in motivating workers to seek shorter hours. Instead he attributed the drive to “ideals of life, formed half instinctively.” In the conclusion to his paper, Chapman worried, "lest the growing importance of leisure generally, and of a proper use of leisure, should not be fully realised." That danger arose, Chapman suggested, because "some of us who have an economic bent of mind get into the way... of thinking too much of the quantity of external wealth produced and too little of the balance between internal and external wealth."
The theory of the hours of labor Chapman articulated came to be generally regarded as authoritative in marginalist analysis. It has never been refuted, only displaced by a simplifying assumption and a collective dose of amnesia. The simplifying assumption – that the given hours of work be assumed to be optimal – was introduced by John Hicks in 1932 with the caveat that any calculations resulting from that abstraction needed to be thought back to a more realistic form. Hicks’ caveat, like Chapman’s theory has simply been ignored. Meanwhile, the red herring of the lump-of-labor fallacy has gained unwarranted currency at the summit of the policy food chain, poisoning the prospects for dialogue between different analytical traditions in economics and for progressive policy innovations centred on the reduction of working time.
GDP is a faulty measure of just about anything. The increases in Third World GDP that globalization advocates like to point to probably reflects the monetization of a lot of previously unmonetized activity. My guess is that when the Brits evicted natives from the most fertile 20% of land in Kenya, and used the poll tax to force subsistence farmers into wage labor, the GDP probably exploded upward. But for the vast majority of people, the substance of the matter was a bootheel to the face.
Similarly, if people in the industrialized West shifted a major part of their consumption from commodities to direct production of use-value (backyard gardening and other household economy, barter with neighbors, LETS, etc.), a huge part of the GDP would just disappear. But we'd be incomparably better off.
Posted by: Kevin Carson at July 13, 2005 09:36 PM