Saturday, June 27, 2015

Tragedy of the Wages-Rut System

In a 2013 article, "Generalizing the core design principles for the efficacy of groups," David Wilson, Elinor Ostrom and Michael Cox recount Garrett Hardin's classic parable of the pasture overgrazed by farmers, each pursuing their own private interest by adding more cattle to their herd. Hardin's grim conclusion of a "tragedy of the commons" was shown to be avoidable  by Ostrom's Nobel Prize winning research, in that, "when certain conditions are met groups of people are capable of sustainably managing their common resources [emphasis in original]."

Wilson, Ostrom and Cox go on to discuss the evolutionary salience of those eight core design principles. Incidentally, Barkley Rosser was co-editor with Wilson and John Gowdy of the supplementary issue of Journal of Economic Behavior and Organization in which the article appeared and was co-author the editorial introduction to the issue, "Rethinking economics from an evolutionary perspective." I would welcome any thoughts Barkley might have on this post.

In generalizing Ostrom's core design principles from common-pool management groups to other kinds of groups, the article makes a puzzling omission: labor unions. They specify "governments, businesses, schools, neighborhoods, and volunteer organizations," but no mention  of organized labor. What makes this omission even more intriguing is that Garrett Hardin borrowed his analogy of the commons from the 19th century Oxford don, William Forster Lloyd who was using it to illustrate an argument about over-supply of the labor market and consequent unemployment and impoverishment of workers. Some Lloyd scholars have described his analysis as "proto-Marxist".

In 2010, when I was first drafting the Labor Commons Union idea, I sent a draft to Elinor Ostrom, who replied, "thanks -- had not thought about labor as a common pool that could be exhausted but now I see the similarity with resources." Paul Burkett had also seen the similarity and argued, in Marx and Nature: A Red Green Perspective, that Marx had treated labor power as a common-pool resource although he hadn't used that terminology.

So, if labor power is indeed a common-pool resource as Burkett and I argue and as Ostrom briefly acknowledged, it would seem that a common-pool resource management strategy would be more appropriate than a wages-rut system for establishing equitable compensation of labor. By the same token, the design principles identified by Ostrom and discussed in the paper by Wilson, Ostrom and Cox would be especially compelling.

3 comments: said...

Interesting point, Sandwichman. I had not thought of it either. Did not know about the Lloyd link with Garret Hardin.

Sandwichman said...

Garrett Hardin:

"The rebuttal to the invisible hand in population control can be found in
a scenario first sketched in a little known pamphlet in 1833 by a mathematical amateur named William Forster Lloyd (1794-1852). We may well call it 'the tragedy of the commons,' using the word 'tragedy' as the philosopher Whitehead used it: 'The essence of dramatic tragedy is not unhappiness. It resides in the solemnity of the remorseless working of things.'"

William Forster Lloyd:

"Now, the field for the employment of labour is in fact a common, the pasture of which is free to all, to the born and to the unborn, to the present tenants of the earth and to all who are waiting for admission. In the common for cattle, the young animal begins an independent participation in the produce, by the possession of a set of teeth and the ability to graze. In the common for man, the child begins a similar participation, by the possession of a pair of hands competent to labour. The tickets for admission being so readily procurable, it cannot happen otherwise, than that the commons, in both cases, must be constantly stocked to the extreme point of saturation."

Sandwichman said...


"IN a justly celebrated paper published in The Economic Journal some sixty years ago, E. R. A. Seligman restored from the shadows the figure of William Forster Lloyd. Seligman, in an enthusiastic treatment of Lloyd's A Lecture on the Notion of Value as Distinguishable not only from Utility, but Also from Value in Exchange Delivered before the University of Oxford in Michaelmas Term, 1833, hails the author as occupying '. . . the proud position of having been the first thinker in any country to advance what is known today as the marginal theory of value, and to explain the dependence of value on marginal utility'. Although such an assessment requires some qualification, there is no denying the subjective originality and brilliance of Lloyd's achievement. One can agree with Joseph Schumpeter that this work is one of '. . . the number of important performances, the powerful originality of which was recognized later but which the profession, completely, or almost completely failed to recognize at the time'."

"The purpose of this paper is to draw attention to Lloyd's last published work, Two Lectures on the Justice of Poor-Laws, and One Lecture on Rent. These Lectures seem to have been continually overlooked, but they too are remarkable efforts which embody analysis of a high calibre, together with insights that anticipate later significant developments in economic thought. The author of this work emerges not merely as a pioneer of the utility approach to value, but also, and rather paradoxically, as a forerunner of the Marxian critique of the operations of a system of laissez-faire capitalism."

I have (and have read) a pdf copy of Lloyd's Two Lectures on the Justice of the Poor Laws. His arguments have profound relevance to contemporary debates.