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The Alleged “Lump-of-Labor Fallacy”

If one wants to understand why shorter-workweek legislation has not been enacted in the United States, one needs look no further than the best-selling textbook of a Nobel-prizewinning economist, Paul A. Samuelson. His book is titled simply “Economics”.

Mr. Samuelson writes on pages 575 and 576 of the ninth edition of his book:

“There is a .. powerful reason why workers fight for shorter hours. They fear unemployment: they tend to think the total amount of work to be done is constant in the short run ... This attitude, that there is only a fixed amount of work to be done, is sometimes called by economists the ‘lump-of-labor fallacy.’ We must give this notion its due.

“To a particular group of workers, with special skills and stuck in one region, the introduction of technological change may represent a real threat. Viewed from their personal standpoint, the lump-of-labor notion may not be so fallacious. True enough, in a great depression, when there is mass and chronic unemployment, one can understand how workers generally may yield to a lump-of-labor philosophy. But the lump-of-labor argument implies that there is only so much useful remunerative work to be done in any economic system, and that is indeed a fallacy.”

Paul Samuelson and other such critics seem to confuse working people’s understanding of reality with analytical techniques. The idea that increased labor productivity puts pressure on employment is demonstrably true. This follows mathematically from the formula which the Bureau of Labor uses to calculate productivity: Output equals productivity times employment times average hours. If productivity increases while output and average hours stay the same, then employment necessarily drops.

This does not mean, however, that in practice output stays the same. Typically, all the other variables in the above equation change when there is a change in productivity. Proponents of the “lump-of-labor fallacy” imply that the stupid factory workers who want to reduce work time believe “there is a fixed amount of work to be done in the world.” This is a straw-man argument. I have never heard it made except by shorter-workweek critics.

Maybe some economists are confused by theoretical arguments which assume constancy in one variable to measure changes in another. That is a common technique of persons who use mathematical analysis. No one I know who supports shorter work hours, however, believes that we live in a static world or that economic output remains fixed as labor-saving technology is applied. Of course, the real-life economy develops in many and various ways.

Because economists are an authority figure whose field of study is classified as a social science, we assume that their conclusions are derived from fact-based, “scientific” research. Someone must have done a scholarly study and determined that that arguments proposing shorter hours to counteract labor displacement were fallacious. In fact, there were no studies. Even Paul Samuelson can’t produce the evidence to support his imagined “fallacy”.

Economic historians instead trace the “lump-of-labor fallacy” back to an 1892 publication by a certain D.F. Schloss who was discussing workers’ attitudes toward piece work. In the first decades of the 20th Century, the National Association of Manufacturers adapted this concept to its fight against the eight-hour day. Economists such as Samuelson unthinkingly picked up arguments from that discussion. The “lump-of-labor fallacy” was just public-relations rhetoric in service to a now discredited cause.

Yes, because a Nobel prize winning economist such as Paul Samuelson declared the shorter-workweek argument to be fallacious, others repeat his conclusions with confidence in their truth. For example, I once read a column on this topic by Paul Krugman of the New York Times which appeared in newspapers around the country. The “lump of labor fallacy, “ Krugman wrote in his column, “is 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 produced reduces the number of available jobs .. it’s an idea economists view with contempt.” If they view it with contempt, then so presumably should we.

This illustrates the debasement of public-policy discussions in our country at this time. Authority figures with certifiable credentials - the Nobel prize being one of the biggest - count for more than historical experience. If shorter work hours do economic damage and their rationale is based on a “fallacy”, then why did the U.S. economy prosper more in the period when work hours rapidly declined than now? Why did Japan become an economic powerhouse in the 1980s as its work hours began to decline? Why, after China went to a five-day week in the 1990s, has this nation begun to produce so much of what we Americans consume? Why are the short-hours and vacation-rich Scandinavians, Germans, and French relatively prosperous and sane? We’re dealing with the real world here.

In the film Wizard of Oz, an old man behind a curtain controls the land of Oz by projecting a fearsome image, suggestive of God. It is not until Dorothy’s dog Toto pulls the curtain away that people realize the magnified image was created by a machine. This mechanism came to mind when I read Paul Krugman’s article. Krugman set up an authority figure - “economists” and Paul Samuelson, in particular - like the wizard’s giant head, to proclaim a view which indisputably must be correct.

The Wizard of Oz also employed an awe-producing mechanism of image amplification to give his message extra weight. In a like manner, Krugman amplified his argument about the “lump-of-labor fallacy” by means of mass-circulation journalism. If something appears in the New York Times and other respectable newspapers, then millions of people will believe it. The contrary opinion is not believed, especially if the academic priesthood also treats it with “contempt”.

Little Toto, however, did not know any better. We need something of a dog’s fearless and honest nature to deal with dogmatic policies developed and announced at a high level.

 

Flash: Paul Krugman now has a Nobel Prize in economics as well. A Swedish committee likes his ideas and that means they should be believed.

Postscript: Evidently, the concept of the “lump-of-labor theory” predates the 1892 Schloss pamphlet. A recent narrative of the 1871 Newcastle coal miner’s strike for a nine-hour day, written by Tom Walker, suggests that it originated in an opinion expressed in an article on the strike by the London correspondent of the New York Times. In a way, this is fitting. An idea casually conceived by a New York Times correspondent in the 19th Century comes back as economic truth in a column in the same newspaper in the 21st Century after being channeled through two economists sanctified by Nobel Prize committees.

“In a dispatch filed on the day the Newcastle strike was settled, the London correspondent for the New York Times dismissed the stated motives and objectives of the Nine Hours League as devious. He alleged that the League was actually pursuing a nefarious ‘ulterior design’ of strangling production so that employers would be coerced into hiring ever more incompetent or lazy workers and paying them extortionate wages. In his article, the Times correspondent introduced a phrase that has since become a boilerplate staple of anti-union editorials and economic textbook dogma: ‘Their theory is that the amount of work to be done is a fixed quantity, and that in the interest of the operatives it is necessary to spread it thin in order to make it go far.” By the middle of the 20th century, this malicious slander (there’s no better term for it) - sanitized of its more rabid conspiratorial allegation - had become respectably enshrined in textbooks as the supposedly authoritative refutation of an alleged ‘lump of labor fallacy.’”


From “Gift of Prosperity”, by Tom Walker - “54 Hours: The Newcastle Engineers’ Strike of 1871

 


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