Michael gets extra credit for correctly identifying J.-B. Say as the intellectual godfather of my correspondent. My c.'s point was that yes, indeed, Keynes, Pasinetti et. al. committed the lump-of-labour fallacy:
"Again, the loss of jobs is predicated on some exogenous limitation of the rate of output growth, in this case by what people 'can afford'. However, it is not clear that the assumption of a predetermined path of output growth can be reasonably justified. This vision of a '20:80 society' immediately provokes an intrinsic question: Shouldnt a society that becomes ever more productive also become wealthier and thus able to afford what it produces? This question was first raised (and answered affirmatively) by the nineteenth-century French economist Jean-Baptiste Say, who thereby entered the worlds textbooks of economic principles as the father of Says law. Every version of the 'end-of-work' story ignores Says law by assuming (in one way or another) that there is a fixed amount of work to be done and that, therefore, increased productivity means less jobs. In the labour market literature this is referred to as the 'lump of labour' fallacy." Now here's a bit of a conundrum: the learned professor states that anyone who commits the fallacy "ignores Say's law" but we know that Keynes and Pasinetti did not "ignore" Say's law but explicitly addressed it and critiqued it. I'll leave Keynes's position on this to Ted Winslow, if he wishes to elaborate. But Pasinetti is quite concise and to the point. His discussion runs from page 240 to 244 in _Structural Change and Economic Growth_ in a section titled "Says law and under-consumption theories a reappraisal." It concludes with the following statement, which could even be thought of as a *qualified* endorsement of Say's law: "It is only with a comprehensive analysis of the structural evolution of the economic system that the barren separation of the short from the long run yields to a more fruitful understanding of the inter-connections between the two. The relevant point is that the very nature of the process of long-run growth requires a structural dynamics which leads to difficulties in the short run. The one implies the other; therefore the whole process has to be accepted and tackled in its entirety. It is no use complaining about short-run difficulties, since they are the inevitable effect of long-run technical and social evolution. Nor is it useful to rely on long-run full employment growth-paths, for they will never be achieved, unless an appropriate process of structural change is continually carried out in the short run. "From this approach, the more constructive attitude emerges of singling out first the fundamental structural dynamics which must take place and then of trying to facilitate them. When this is done without prejudice, it becomes much easier to work in the direction of shaping the institutions themselves so as to enhance economic growth and progress, instead of sacrificing these aims as only too often happens for the sake of institutional arrangements which the inexorable pace of progress is from time to time rendering obsolete." The qualification is that the long run adjustment is only a potential, not automatic -- dogmatic insistence on its automaticity might even thwart that potential as it implicitly defends institutional arrangements that have become obsolete. But there is another important disclaimer lurking in Pasinetti's discussion: "...there is no reason to fear any limit to the level of consumption... It seems important to stress that this proposition does not depend on the belief that human possibilities and imagination for new types of consumption can increase indefinitely. Even if the absolute amount of consumption had a limit, the alternative would always be open of devoting the continually increasing productivity to reducing labour time (and increasing leisure time), instead of increasing production. The point is that this process is not one to be expected automatically. The learning process it entails can by no means be taken for granted, although there is no inherent impossibility in human nature of carrying it on. Difficulties do arise because periodic accelerations of this process of learning are required." Note that rather than viewing the reduction of labour time as an exogenous remedy for some gloomy absolute limitation on the level of consumption, Pasinetti defines it explicitly as a way of disavowing *fear* of any such limit! Moreover, there is good evidence historically to view the hours of work as one of the key "institutional arrangements" that technological progress continually renders obsolete. To put it bluntly, reducing the hours of labour is part of the learning process. At least it always has been. So to resist reducing the hours of work because of a conviction that such a reduction cannot itself create employment may in fact inhibit the very economic growth and technological progress that supposedly renders reducing the hours of work "unnecessary" and "fallacious" from the perspective of adherents to the automatic form of Say's Law. The Sandwichman Michael Perelman wrote: > Markets left to their own devices reach equilibria > (at least in the long > run) [assuming all sorts of unlikely conditions, > shhhh], so effective demand is not a > problem. Check out the latest work by the hot > French economist, J.B. Say. __________________________________________________ Do You Yahoo!? Tired of spam? Yahoo! Mail has the best spam protection around http://mail.yahoo.com
