Friday, May 30, 2014

Whack-a-Mole Tim and the Fixed Amount of Cheese-Eating Work Fallacio

Tim Taylor writes:
Here's one snapshot of how the U.S. economy evolved in the last 15 years: an identical number of total hours worked in 1998 and 2013, even though the population rose by over 40 million people, but a 42% gain in output.
What is the difference between"an identical number of total hours worked" and "a fixed amount of work"? The former is an empirical fact. The latter is an alleged fallacy. Here is what Mr. Taylor wrote ten years ago:
If the quantity of work were fixed, as the lump-of-labor fallacy holds, one way to reduce unemployment would be to limit the hours individuals can work, or to encourage early retirement. But fighting unemployment with these policies have [sic] not succeeded. 
France passed laws in the last decade requiring a 35-hour workweek. Much of the impetus was that the unemployment rate in France had exceeded 11 percent for most of the 1990s. But international comparisons yield no evidence of a statistical link between lower average hours worked and the unemployment rate. Back in 1998, workers in France already averaged a relatively low 1,600 hours of work a year, compared with roughly 1,850 hours per worker in the United States and Japan – countries with much lower rates of unemployment. 
France and other European countries have also encouraged early retirement, partly on the grounds that it “creates jobs” for other workers. (Among the promises of early retirement for some and more jobs for others, the question of who will pay for early retirees to enjoy the living standard they’ve come to expect was rarely discussed.) Today roughly 37 percent of French and Germans 55-64 years of age hold jobs, compared to 58 percent of the same age group in the United States and 52 percent in Britain. Despite the success of France and Germany in encouraging early retirement, they face chronic unemployment far in excess of the rates in America and Britain. Attempts to honor the lump-of-labor fallacy by spreading out a supposedly fixed quantity of work over more workers have thus proven unsuccessful.
And here is what Paul Krugman wrote about a week and a half ago:
Well, I hadn't looked at this data for a while; and where we are now is quite stunning:
"Since the late 1990s we have completely traded places: prime-age French adults are now much more likely than their US counterparts to have jobs. 
"Strange how amid the incessant bad-mouthing of French performance this fact never gets mentioned."
Yes, strange, isn't it?

Why economists dislike a lump of laborTom Walker, Review of Social Economy, 2007, vol. 65, issue 3, pages 279-291
Abstract: The lump-of-labor fallacy has been called one of the “best known fallacies in economics.” It is widely cited in disparagement of policies for reducing the standard hours of work, yet the authenticity of the fallacy claim is questionable, and explanations of it are inconsistent and contradictory. This article discusses recent occurrences of the fallacy claim and investigates anomalies in the claim and its history. S.J. Chapman's coherent and formerly highly regarded theory of the hours of labor is reviewed, and it is shown how that theory could lend credence to the job-creating potentiality of shorter working time policies. It concludes that substituting a dubious fallacy claim for an authentic economic theory may have obstructed fruitful dialogue about working time and the appropriate policies for regulating it.

1 comment:

John Haskell said...

The most insightful concept I have read of yours is decoupling the ability of workers to shift sectors, and the demand for workers to shift sectors. In other words, yes, we know that people can go from the farms to the factories to the officers, but what gets assumed is that there is a demand for those workers to go from the farms to the factories to the offices.

People espousing education for all are falling victim to a trap of their own; supply creates its own demand. State and local policymakers in my area are overreacting to our state's aging population and the perceived skills gap, and pushing education for all (with studies provided for by heads of business and academia in the state) assuming this increased supply will increase demand. There is scant mention of demand during these discussions. Why? I have no idea, but the flawed methodology of the likes of Carnevale (whose work is taken for gospel by the aforementioned policymakers) is never brought up in discussions--flawed may be too strong a word, but the fact that his methodology states unequivocally that supply of and demand for labor are always in equilibrium demands (no pun) some attention.