Wednesday, November 19, 2008

Missing: the strange disappearance of S. J. Chapman’s theory of the hours of labour (13)

In his article on the canonical labour-supply model Derobert (2001) mentioned Chapman's theory in connection with Hicks's description of it as "the classical statement of the theory of 'hours' in a free market." Derobert dismissed Chapman's theory as "excessively complicated" and as "more of an amalgam than a synthesis" (p. 204). He also described it as lying "somewhere between Jevons's analysis and the canonical model" (p. 204). Chapman's theory lies between Jevons and the current canonical model only in a narrow chronological sense. Although Chapman's analysis did indeed develop Jevons's earlier discussion of the hours of labour, it bears little resemblance to the income-leisure choice model. Instead, it incorporates the opportunity-cost concept without at the same time abandoning the idea that work provides intrinsic satisfactions and dissatisfactions.

Perhaps Chapman's theory could indeed be considered "excessively complicated" in the non-pejorative sense that life itself is too complicated to describe in a mathematical model. The income-leisure choice model simply ignores Chapman's theory, it doesn't refute, refine, simplify, adapt or transcend it. In its ignorance of Chapman's theory, it tacitly assumes proportionality between hours worked and output produced. In the bargain, mainstream analysis implies an identity between market goods purchased and economic welfare. Leisure time disappears – even as a commodity. The hypothetical purchase of leisure time leaves behind no receipts to be reckoned in the calculation of national income. Thus Barone's book-keeping artifice involves writing entries in disappearing ink – a practice that might elsewhere be reckoned as fraudulent.

Sydney Chapman's theory of the hours of labour was both insightful and authoritative. It was widely accepted by eminent English economists of its day. It buttressed the novel conclusions that the ideal hours of work for maximizing social welfare would be shorter than those for maximizing profits and that the hours of work set in a competitive market may be too long even from the standpoint of maximizing output. Yet that acknowledged authoritative theory was displaced by what? A simplifying assumption? A semantic device? A book-keeping artifice? An absent-minded lapse of theory? In place of an established theory has sprung up a mathematical model of income-leisure choice in which the face of actual work is unrecognizable. With the centennial of its original presentation fast approaching, it is fitting that economists should re-examine what opportunities have been sacrificed and what – if anything – has been gained by this remarkable instance of theoretical substitution.

Abstract: Sidney Chapman's theory of the hours of labour, published in 1909 in The Economic Journal, was acknowledged as authoritative by the leading economists of the day. It provided important insights into the prospects for market rationality with respect to work time arrangements and hinted at a profound immanent critique of economists' excessive concern with external wealth. Chapman's theory was consigned to obscurity by mathematical analyses that reverted heedlessly to outdated and naïve assumptions about the connection between hours and output. The Sandwichman is serializing "Missing: the strange disappearance of S. J. Chapman's theory of the hours of labour" on EconoSpeak in celebration of the centenary of publication of Chapman's theory. (To download the entire article in a pdf file, click on the article title.)

2 comments: said...


This has all been quite interesting from a theoretical perspective. But why is it that in the one country that has mandated that people cannot work more than 35 hours per week, unemployment remains pretty high and the movement has been back towards puncturing the policy with loopholes?

Sandwichman said...


First, I need to point out that Chapman's theory is not about the relationship between shorter work time and unemployment. It is about the relationship between working time, technological progress, fatigue and output. "Improvement" doesn't necessarily require an effect on employment (although it may).

Your question assumes that it all boils down to short-term employment effects. But there's also a whole bundle of side assumptions packed into it. The short answer is that we don't know that unemployment is relatively higher in France than in the US. The official unemployment rates are simply not comparable.

It's also hard to separate employment effects of the 35-hour work week from cyclical effects. Unemployment in France fell after the policy was put into effect. But what part of that was due to unrelated economic growth?

Further complications, in the short-term, can come from political resistance by employers -- in effect a strike by capital. Is such a strike to be considered an exogenous or endogenous response to the policy?

The above points speak to an implicit assumption in economics that there is something autonomous about economic policies and statistics that makes them exempt from the politics and culture they are embedded in. Call it the technocratic fallacy. In this view the economy is some big black box machine that churns out results that vary mechanically in accordance with variations in inputs.

It comes down to the question of what is a "model" good for? Is a theoretical model really supposed to replicate a discrete, real world economy in the short run? If so, the question shouldn't just be about France, shorter work time and unemployment but about the fact that MOST economic "prediction" from models is dubious.

But to get back to Chapman, his theory really opens up the matter of the relationship between working time and other factors. It shows how misleading it is to assume a proportional relationship between hours of work and output or to assume optimization of hours of work through choice and competition. In other words, the value of Chapman's model is that it demonstrates the fundamental inappropriateness of the standard model regarding labor inputs.