Basil Oberholzer's Last Hour

Nassau Senior

In Chapter 9 of Capital, "The Rate of Surplus Value," Marx included a satirical section 3, ridiculing Nassau Senior's dimwitted, unmistakably partisan argument that reducing the hours of work from 12 hours a day to 10 would destroy a factory's net profit. Another half hour of reduction would eliminate even the gross profit. Marx simply pointed out that the basis of profit, surplus value, was extracted from the labour process throughout the day and not entirely in the final hour of work.

One hundred and eighty-seven years after the learned professor Senior "was summoned from Oxford to Manchester, to learn in the latter place the political economy he taught in the former" the journal Ecological Economics published an article by Basil Oberholzer titled, "Post-growth transition, working time reduction, and the question of profits."

After a few pages of simple -- one might say simplistic -- mathematical modeling, Oberholzer concluded that working time reduction would collapse profits and thereby trigger macroeconomic instability. From the perspective of working time theory, there are several things wrong with Oberholzer's model. But perhaps the most glaring and elemental flaw is the pretense of building a quantitative model to represent what is fundamentally a highly qualitative process.

Equations such as "output (Y) equals labor input (L) times labor productivity (P)" and "labor input (L) equals number of workers (N) times hours worked (H)" assume what they purport to show -- that there is direct variation between hours worked and output. This is the relationship Thomas Brassey demonstrated to be empirically untenable in his 1872 Work and Wages. In his Fortnightly review of Brassey's book, Frederic Harrison characterized "the bitter pedantry which often usurps" the name of political economy as "usually assum[ing] its facts, after it has rounded off dogmas to suit its clients." 

Based on extensive analysis of accounting records from his father's vast railroad building enterprise, Brassey had found, quite simply, "that the hours of work are no criterion of the amount of work performed." But doesn't the factor of 'labor productivity' correct for that? No. Labor productivity is an ex post derivative from given hours and given output. It simply reintroduces the assumption of direct variation between hours and output.

Building on Brassey’s and other empirical observations, Sydney J. Chapman presented his theory of the hours of labour in his presidential address to the annual meeting of the Economics and Statistics Section of the British Academy for the Advancement of Science at Winnipeg in 1909. The paper, “Hours of Labour” was subsequently published in the Economic Journal. In it Chapman argued that the hours of work determined by market competition between workmen and between employers would be longer than optimal for worker welfare and even longer than optimal for output.

Chapman’s theory became canonical, at least for Cambridge and LSE economists, until it was passed over after the second world war for conventionally “simplified” assumptions that would be more amenable to macroeconomic modelling. To put it uncharitably, a theory consistent with empirical observation was replaced with assumptions that were empirically false but mathematically expedient.

Aside from the empirically and theoretically untenable assumption of direct variation between hours and output, Oberholzer's finding ignores what should be a truism of Marx's critique of political economy and Keynes's economics -- capitalism is inherently unstable. It doesn't need a reduction of working time to trigger it. Marx's Capital could be described as an extended discourse on that instability. In volume three, Marx summarized "three cardinal facts about capitalist production." The third fact, "establishment of the world market," also establishes the inevitability of crises in that the more rapid growth of productive power and capital values, relative to population, undermines the conditions for valorization of that expanding capital on a progressively narrower base.

In a 1934 BBC radio address, John Maynard Keynes addressed "the problem of poverty in the midst of potential plenty" and observed that views among economists on this question tended to diverge around the question of whether or not the economic system was "self-adjusting" in the long run, albeit "with creaks and groans and jerks, and interrupted by time-lags, outside interference and mistakes." "The strength of the self-adjusting school." Keynes observed, "depends on its having behind it almost the whole body of organized economic thinking and doctrine of the last hundred years." Curiously, Keynes included Marxism in this body of doctrine -- presumably viewing crises as a self-adjustment mechanism.

In opposition to this orthodoxy, Keynes aligned himself with a counter-tradition of "heretics and cranks" who "propose remedies prompted by instinct, by flair, by practical good sense, by experience of the world — half-right, most of them, and half-wrong." He explained his difference with the self-adjusting school in terms of a growing gap between income and expenditure as incomes increased and the fact that interest rates do not adjust automatically to compensate for that gap. Notwithstanding Keynes's assignment of Marx to the self-adjusting camp, his own explanation of macroeconomic instability differed mainly in terminology and emphasis from Marx's.

Growth economics, as developed by Harrod, Domar, Solow, et al., has always concerned itself with proposing remedies for the settled proposition that the economic system is not self-adjusting and that government fiscal policy and/or monetary intervention is required to manage economic cycles, stimulate growth and avoid or recover from crises. The instability rabbit was always already in the macroeconomic hat before Mr. Oberholzer waved the wand of working time reduction over it. In defense of Oberholzer, though, this was a peer-reviewed article. None of his peers seemed to notice the shortcomings I have highlighted. 

More ominously, the degrowth literature Oberholzer was criticizing in his article routinely commits the same quantification fallacy* that he did. Authors typically view work time reduction as instrumental rather than transformative, assuming that an increase in labor productivity can be offset -- or more than offset -- by a decrease in labor hours leaving output constant or even declining. But not only are the hours of work "no criterion of the amount of work performed" as in Brassey's analysis, increasingly there is no clear relationship between working time and output, particularly where people are performing work whose relationship to either social wellbeing or capital accumulation is questionable. André Gorz called attention to the increasing rupture between working time and productive output over 40 years ago. David Graeber described much employment as bullshit jobs. One side benefit of working time reduction could be to pare down the economy's reliance on such systemically useful parasitism.

The real, transformational purpose of work time reduction is not about how to produce less stuff with more people working fewer hours. It is about freeing us from the work/spend cycle of planned or "progressive" obsolescence. It is about creating ample free time to develop autonomous interests, skills, knowledge, and relationships that don't have to rely on and feed back into the work, borrow, spend, buy, waste, want, work cycle. What is the mathematical equation of a different outlook on life and what really matters? What value of 'Y' or 'L' equals freedom? This is how Marx envisioned the relationship between working time and freedom:

The realm of freedom begins only where labour determined by necessity and external expediency ends; it lies by its very nature beyond the sphere of material production proper. ... Freedom, in this sphere, can consist only in this, that socialized man, the associated producers, govern the human metabolism with nature in a rational way, bringing it under their collective control instead of being dominated by it as a blind power; accomplishing it with the least expenditure of energy and in conditions most worthy and appropriate for their human nature. But this always remains a realm of necessity. The true realm of freedom, the development of human powers as an end in itself, begins beyond it, though it can only flourish with this realm of necessity as its basis. The reduction of the working day is the basic prerequisite. (emphasis added)

* quantification fallacy: I have written a book chapter and a journal article debunking the widespread claim by economists of a "lump of labour fallacy" committed by advocates of work time reduction. Economists making that claim invariably commit the fallacy themselves when they try to demonstrate the commission of the fallacy by advocates. It's a funny pot calling the kettle black cycle. But the hidden kernal of truth in the fallacy claim is that all attempts to quantify an essentially qualitative relationship are doomed. Although she didn't use the term quantification fallacy, Joan Robinson made the same point in her criticism of "the neo-neoclassical's concept of capital."