Sunday, March 25, 2018


In a TED talk, "3 myths about the future of work and why they are not true" from December 2017, Daniel Susskind channels Sandwichman:
Now the third myth, what I call the superiority myth. It’s often said that those who forget about the helpful side of technological progress, those complementarities from before, are committing something known as the lump of labor fallacy. Now, the problem is the lump of labor fallacy is itself a fallacy, and I call this the lump of labor fallacy fallacy, or LOLFF, for short. Let me explain. The lump of labor fallacy is a very old idea. It was a British economist, David Schloss, who gave it this name in 1892. He was puzzled to come across a dock worker who had begun to use a machine to make washers, the small metal discs that fasten on the end of screws. And this dock worker felt guilty for being more productive. Now, most of the time, we expect the opposite, that people feel guilty for being unproductive, you know, a little too much time on Facebook or Twitter at work. But this worker felt guilty for being more productive, and asked why, he said, “I know I’m doing wrong. I’m taking away the work of another man.” In his mind, there was some fixed lump of work to be divided up between him and his pals, so that if he used this machine to do more, there’d be less left for his pals to do. Schloss saw the mistake. The lump of work wasn’t fixed. As this worker used the machine and became more productive, the price of washers would fall, demand for washers would rise, more washers would have to be made, and there’d be more work for his pals to do. The lump of work would get bigger. Schloss called this “the lump of labor fallacy.”
And today you hear people talk about the lump of labor fallacy to think about the future of all types of work. There’s no fixed lump of work out there to be divided up between people and machines. Yes, machines substitute for human beings, making the original lump of work smaller, but they also complement human beings, and the lump of work gets bigger and changes.
But LOLFF. Here’s the mistake: it’s right to think that technological progress makes the lump of work to be done bigger. Some tasks become more valuable. New tasks have to be done. But it’s wrong to think that necessarily, human beings will be best placed to perform those tasks. And this is the superiority myth. Yes, the lump of work might get bigger and change, but as machines become more capable, it’s likely that they’ll take on the extra lump of work themselves. Technological progress, rather than complement human beings, complements machines instead.


AXEC / E.K-H said...

End of the Lump of Labor sitcom
Comment on Sandwichman on ‘LOLFF on TED’

Economists are storytellers, they do not answer any economic questions and put them to rest but merely recycle silly narratives ad infinitum. A classical example is the Lump of Labor Fallacy.

The story starts as follows: “It was a British economist, David Schloss, who gave it this name in 1892. He was puzzled to come across a dock worker who had begun to use a machine to make washers, the small metal discs that fasten on the end of screws. And this dock worker felt guilty for being more productive. …”

This, of course, is the kindergarten version of the theory of employment, and this blather is neither worth to be discussed nor debunked. That economists are not ashamed of recycling this proto-scientific garbage tells one all about the average IQ of economists.

The elementary version of the axiomatically correct (objective, systemic, behavior-free, macrofounded#1, #2) Employment Law is shown on Wikimedia.#3

From this equation follows:
(i) An increase of the expenditure ratio rhoE leads to higher employment L (the Greek letter rho stands for ratio). An expenditure ratio rhoE greater than 1 indicates a budget deficit = credit expansion, a ratio rhoE less than 1 indicates credit contraction.
(ii) Increasing investment expenditures I exert a positive influence on employment.
(iii) An increase of the factor cost ratio rhoF=W/PR leads to higher employment.

The complete employment equation contains in addition profit distribution, the public sector, and foreign trade.

Item (i) and (ii) cover Keynes’ familiar arguments about aggregate demand. The factor cost ratio rhoF as defined in (iii) embodies the macroeconomic price mechanism. The fact of the matter is that overall employment INCREASES if the AVERAGE wage rate W INCREASES relative to average price P and productivity R. This is the OPPOSITE of what microfounded economics teaches.

With regard to an increase of average productivity then follows (under the initial condition of I given and rhoE=1) that overall employment L DECLINES. In order to prevent this and to keep employment at the given level, the factor cost ratio rhoF=W/PR has to be kept constant. So, either the average wage rate W has to rise in lockstep with productivity or the average price P has to fall.

This follows straightforwardly from the macroeconomic Employment Law. Of course, nothing at all ever follows from the recycling of the pseudo-psychological crap of the dock worker who felt guilty for being more productive.

False theory leads to false policy guidance. With their defective employment theory and their endless pseudo-psychological sitcom blather, economists bear the full responsibility for the social devastation of mass unemployment.

Egmont Kakarot-Handtke

#1 The macrofoundations approach starts with three systemic axioms: (A0) The objectively given and most elementary configuration of the economy consists of the household and the business sector which in turn consists initially of one giant fully integrated firm. (A1) Yw=WL wage income Yw is equal to wage rate W times working hours. L, (A2) O=RL output O is equal to productivity R times working hours L, (A3) C=PX consumption expenditure C is equal to price P times quantity bought/sold X. For a start it holds X=O.

#2 For details of the big picture see cross-references Employment

#3 Wikimedia, Employment Law said...

I am not certain you are actually disagreeing with the Sandwicman here, Egmont, although I know you like to be as disagreeable with pretty much everybody as much as posaible.