Lest one become intoxicated with mirth imbibing from Earl Grey's archaic turn-of-the-century fountain of illogic, I append to this excerpt from The Times, a series of refrains of the same old, same old tune from the Economist magazine as we approach the twilight of the same century. The Times they are a changin' (but not the Economist)? THE CRISIS IN BRITISH INDUSTRY (from The Times, December 9, 1901, p. 11) Earl Grey opened at Bolsover on Saturday the Miners' Orphanage for Boys, which has been established to provide a home for the care and training of orphan boys from the Bolsovey, Creswell, and adjoining colliery villages by Mr. Emerson Bainbridge, on land given by the Duke of Portland. Lord Grey delivered an address in the Bolsover Lecture-hall on "The Crisis in British Industry," in the course of which he stated that The Times had performed a national service in focussing the attention of thinking men on the effect on British industry of the "Ca'canny, Go-easy" principle advocated by so many of the trade unions. In the opinion of those who believed in the "lump of labour" theory the amount of employment to be obtained was a fixed quantity and therefore it was desirable in the interests of the community to spread it over as many workers as possible. The Times rightly maintained that this principle was eating the heart out of British industry and deteriorating the characters of the working classes. These charges were admitted by the able and distinguished apologists of trade unionism, Mr. and Mrs. Sidney Webb, who admitted that the instinctive sentiment of the manual working classes paid by time prompted them to resent efficiency of labour as tending to diminish employment, and to engage in a constant conspiracy to keep down the speed and energy of their labour. They had to change this "instinctive sentiment." What was the remedy? Not the abolition of trade unionism, but the education both of workers and employers. He believed that the trade unionist who advocated restriction of output was honest in his belief that he was thereby rendering a service to his class. He was no worse than the land-owners who in times past had advocated protection, the effect of which was to enrich themselves at the expense of the community. The trade unionists were also advocating a policy of protection, unconscious that its effect would be to bring more suffering upon the working classes than upon any other section in the community. Free trade had not ruined the landowners. Freedom of effort would save the operative from ruin. What was wanted was education, conferences between the representatives of employers and employed, and a full knowledge of the cost of production both in this and other countries. That standard of wage which aimed at, not a minimum, but a maximum, beyond which a workman should not be allowed to go, killed excellence and produced dishonesty. We could not hope to establish a great nation on the basis of dishonesty, and we must apply a principle of industry which made it to the interest of every working man to do his best. . . The building trades furnished the greatest illustration of the evils which result from the restriction of output. In this business there was no international competition. The builders of New York could not compete with the builders of Bolsover, and the builders of Bolsover could not compete with the builders of London. The evil results of regulations restricting the output were consequently not apparent; but what was the effect upon the community? Owing to the restrictive regulations which doubled the cost of labour the building of houses was checked, with the result that the rents were increased and that the working classes were compelled to live in overcrowded houses. A Royal Commission had reported in 1884 that 20 days a year were lost upon the lowest average to every working man and every working woman from simple exhaustion occasioned by the vitiated air of overcrowded dwellings. The position was worse to-day. Mr. Rowntree, in the important book he had just published on the study of town life, had pointed out that in York 88 per cent of the working class population were living in houses which left much to be desired, and 50 per cent of the population were living in poverty and were ill-housed, ill-clothed, and ill-fed. The chief cause of this sad state of things was the restriction of output which increased the cost of building, raised the rents, caused overcrowding, produced debility, which in its turn drove people to drink. . . Subject: NORTH American Free Trade Agreement Title: Eat your NAFTA. (cover story) Source: Economist, 11/13/93, Vol. 329 Issue 7837, p15 Are those arguments entirely incorrect? Yes, entirely. Mr Perot and the anti-NAFTA zealots are wrong in the ways protectionists have always been wrong, as well as in new ways entirely of their own devising (see pages 21-26). Nearly all of these mistakes boil down in the end to the most ` enduring of all economic fallacies: the idea that there is only so much output to be produced, or capital to be invested. (Europe is currently preoccupied with the "lump of labour" version of this mistake, see page 18.[excerpt below]) Subject: UNEMPLOYMENT -- Europe Title: Sharing the burden. Source: Economist, 11/13/93, Vol. 329 Issue 7837, p18 It sounds fairer to share out a given amount of work evenly. But this begs two questions. Is the amount of work given? And how should it be shared out? The quantity of work is not fixed: such a notion is known to economists as the "lump-of-labour" fallacy. If European labour markets were not jammed by minimum wages and over-generous social benefits, employment would be higher. Indeed, if shorter hours and longer holidays reduced joblessness, Europe would now enjoy the world's lowest unemployment. West Europeans work, on average, 10% fewer hours each year than Americans, and 20% fewer than the Japanese. Yet the EC's unemployment rate is 11%, America's 7% and Japan's less than 3%. Subject: HUMAN capital Title: A world without jobs? Source: Economist, 2/11/95, Vol. 334 Issue 7901, p21 Next, some theory. A new machine helps you make more stuff with fewer people. But the assumption that this results in fewer jobs rather than more output (and hence more goods, and more job-stimulating demand, in a beautifully virtuous circle) is based on an economic fallacy known as the "lump of labour": the notion that there is only a fixed amount of ` output (and hence work) to go round. This is clearly wrong. Technology creates new demand, either by increasing productivity and hence real incomes, or by creating new goods. Subject: LABOR -- Study & teaching Title: One lump or two? Source: Economist, 11/25/95, Vol. 337 Issue 7942, p67 Along with these simple "explanations" comes an outpouring of simple "cures": why not cut working hours so that there are more jobs to go round, or keep out cheap imports or foreign workers? There is a common fallacy at the bottom of both explanations and cures. It is that the output of an economy, and hence the amount of work available, is fixed. Both history and common sense show that it is not. Economists call this the lump of labour (or sometimes the lump of output) fallacy. Subject: PROTEST movements Title: Cranks and proud of it. Source: Economist, 1/20/96, Vol. 338 Issue 7949, p86 So did the words ``Luddite'', already in common use in 1811, and its cognate ``Luddism'' (recorded the following year), which soon came to mean any futile resistance to mechanical progress. Luddism is also ` commonly linked to the lump-of-labour fallacy in economics, which first-year students are taught to refute and according to which, as the demand for labour is fixed in the short run, labour-saving machinery is bound to ``kill jobs''. Subject: TECHNOLOGY & civilization -- Economic aspects Title: The end of work? Source: Economist, 9/28/96, Vol. 340 Issue 7985, Supplement, p19 An orthodox economist's reply might run something like this: yes, a new machine will probably reduce the amount of labour required to produce a given volume of output. But to conclude from this that overall ` employment will decline is to succumb to the lump-of-labour fallacy: the long-disproved idea that there is only a fixed amount of output (and hence work) to go round. Technology itself boosts output and creates new demand, either by increasing productivity and hence real incomes, or by creating new products. Video-cassette recorders, mobile phones, Sony Walkmans and soft contact lenses barely existed 20 years ago. Such new industries have created new demand and new jobs. Subject: EUROPE -- Economic conditions -- 20th century Title: Europe hits a brick wall. Source: Economist, 04/05/97, Vol. 343 Issue 8011, p21 The left has said that it will create jobs in France by reducing the working week from 39 hours to 35. That way, the thinking goes, the available work will be divided between more people. This is a classic lump-of-labour fallacy (the idea that there is a fixed quantity of work and that if you take a job it is at my expense). In reality, the demand for labour changes all the time as a result of productivity and the workings of the labour market. For all sorts of reasons a cut in the ` working week would reduce productivity. Thus a policy designed to create jobs would end up destroying them. Subject: HOURS of labor Title: One lump or two? Source: Economist, 10/25/97, Vol. 345 Issue 8040, p17 It is depressing that supposedly responsible governments continue to pretend to be unaware of the old ``lump of labour'' fallacy: the illusion that the output of an economy and hence the total amount of ` work available are fixed. In fact the demand for labour depends upon productivity and wage costs. Fewer hours will create more jobs only if weekly pay is also cut-which workers tend to resist. Moreover, recruitment, training and other fixed costs can make it more expensive for a firm to employ a larger workforce for shorter hours than a smaller one for longer hours. Worse still, shorter hours may reduce a firm's productivity if it becomes more difficult to co-ordinate a bigger workforce. Shorter working hours may therefore cause output and jobs to fall. Subject: UNEMPLOYMENT -- France Title: Short measure. Source: Economist, 01/31/98, Vol. 346 Issue 8053, p79 This ``cure'' for unemployment is based on the assumption that an economy's output is fixed. If this were true, then the amount of labour required would also be fixed, so it would seem reasonable enough to share out available work more evenly. Economists call this the ``lump-of- labour'' fallacy. It is a fallacy because, in reality, the demand for labour depends upon labour costs and productivity, which are affected by the hours each employee works. Tom Walker http://www.vcn.bc.ca/timework/
