Friday, July 15, 2016

Can John Cochrane and Jennifer Rubin handle the truth about the lump-of-labor fallacy?

An open letter to John Cochrane and Jennifer Rubin

Dear John Cochrane and Jennifer Rubin,

 I read with interest your column, Jennifer, which led me to your chapter, John, in Blueprint for America on trade and immigration. I have studied the history of the lump-of-labor fallacy claim for nearly 20 years and have have published several articles dealing with that history. I have to wonder if there is any other assertion that has endured for so long, produced so little evidence, ignored all refutation and enjoyed so much authoritative consensus as the lump-of-labor fallacy claim. 

Let me repeat, so as not to be misunderstood: I am talking about the bogus fallacy claim and not the fallacy itself. The claim consists of two parts, one of which is self-evidently true and the other of which is not proven. The self-evident part is that there is not a fixed amount of work to be done. The unproven part is that belief to the contrary -- that there is only so much work to be done -- is the driving force or the "idea behind" opposition to some policies and support for others.

Not proven is an understatement. In my research of 236 years of the fallacy claim, I have come across very few examples of claimants offering any evidence whatsoever for the existence of the belief. In a virtuoso display of circular reasoning, support for or opposition to particular policies is offered as prima facie evidence for the fallacious belief, which is then posited as the motive for support or opposition to those particular policies.

The claim has been refuted definitively by several economists, including A. C. Pigou and Maurice Dobb, but claimants have never addressed or even acknowledged those counter-arguments. Last month, Omar al-Ubaydli of George Mason University and the Mercatus Center attributed advocacy for shorter hours of work to belief in the lump-of-labor fallacy. I subsequently invited Omar to an ethical debate on the substance of the fallacy claim. I would like to extend the same invitation to John Cochrane. Here is an overview of my exchange with Omar.

A few days ago, in an interview in Foreign Affairs, Kwasi Kwarteng, a Conservative member of parliament in U.K. made some very perceptive remarks about whether people's perceptions were driven by belief in a lump-of-labor or by other perceptions, regardless of whether those perceptions are accurate:
A lot of clever people talk about the “lump of labor fallacy” and all the rest of it, but there are lots of different economic theories involved. But the perception was what drove the politics, not the economic theory. In large parts of rural England—a town like Boston, which your own town of Boston is named after—the perception was that things were changing, life wasn't getting better for quote-unquote indigenous people, and they voted against that.
The perception that "life is not getting better" is subjective and is in comparison to some retrospective expectation -- life has not improved "as much as I thought it would." Economists are saying a rather astonishing thing when they "view with contempt" the presumably rational economic actors' satisfaction and expectations. They are claiming that subjective utility is wrong. Think about that.

Tom Walker [Sandwichman]


D. Ghirlandaio said...

There's a reason we have lawyers. It's the reason Rapoport's model, in trying to transcend politics, becomes anti-political.

Let the games begin!
Remember, no biting or eye-gouging

Sandwichman said...

Thanks for commenting, D.

What Rapoport's model seeks to transcend is polemics and thereby to retrieve politics from the polemical crypt. See his 1948 article, "Dialectical Materialism and General Semantics" in ETC: A Review of General Semantics.

The distinction he later makes between Fights, Games and Debates is due to the nature of the conflicts and is not a matter for preference. That is to say that if a conflict involves a non-zero sum, multi-person game then treating it as a "fight" or as a zero-sum game WILL result in a sub-optimal, possibly catastrophic outcome.

ProGrowthLiberal said...

Even a centrist economist would find this piece objectionable on at least two counts.

First – “They saw the Great Depression and the protectionism and currency manipulation that aggravated it.” Seriously? Going off the gold standard and using monetary stimulus is what allowed some nations to finally get out of the global economic slump.

Also – “At its most fundamental level, free trade is good because both sides prosper (by getting the best products at the lowest prices).” Both sides? I guess someone has never heard of Stolper-Samuelson.