Tuesday, November 4, 2008

Missing: the strange disappearance of S. J. Chapman’s theory of the hours of labour (2)

Now you see it: Chapman's theory of hours

It wasn't as if Chapman's theory was eccentric or Chapman himself was a radical fringe figure. Chapman's theory built on Stanley Jevons's well-established analysis of individual labour supply, supplemented by an accumulation of statistical and experimental evidence. Chapman had been Marshall's star pupil at Cambridge for three years before moving on to Manchester where he completed a prize-winning study of the Lancashire cotton industry (Tribe, 2004). He rapidly rose to a professorship of political economy at Manchester's Owens College (which in 1904 became Victoria University) and was appointed dean of the newly established faculty of commerce and administration there. In that role, from 1904 to 1917, he pioneered an exemplary teaching and research program.

At the start of the first world war, Chapman was asked by the British government to direct research into wartime production. By 1918, he had become a full-time civil servant. The following year he was appointed joint permanent secretary of the Board of Trade and subsequently served seven years as permanent secretary. In 1920, he was knighted for his contribution to the war effort. In 1927, Sir Sydney Chapman was appointed chief economic advisor to the British government, a post he held until 1932.

Before chronicling the eclipse of Chapman's theory, it would be appropriate to present a brief summary of it. Chapman argued that the importance of leisure, both to industrial productivity and to individual well-being, must rise along with technical progress. As industrial processes became more intensive and specialized, the faster pace of working and the mental concentration demanded from workers would accelerate fatigue and thus would make it less productive to continue working longer hours. The optimal length of the working day would thus decline. At the same time, increased incomes from higher output would also make leisure time more attractive and affordable to workers. Those changes in both the optimal length of the working day and the value of leisure to workers would lead to demands for corresponding reductions in the actual length of the working day: "agitation for shorter hours will be constantly breaking out anew" (Chapman, 1909, p. 358).

Chapman arrived at this conclusion after reviewing a mass of evidence from the 19th century that reductions in the hours of work had not led to proportionate declines in output. From that evidence, he inferred that workers required more leisure time to fully recover from the fatigue of work as industrial methods became progressively more intensive. Thus when the hours of labour were reduced, the better-rested workers were often able to produce as much or more in the shorter hours than they had previously in longer hours.

Most importantly, Chapman's analysis also suggested that competition between employers would make it unlikely that a working day of optimal length could be established solely through the working of a free market. The reason for this was that the long-term maintenance of a working day of optimal length for output would require employers to exercise short-term restraint. Such restraint, however, could be undermined because competing firms could always offer higher wages to poach well-rested employees from a firm that did exercise such restraint. The enlightened firm would thus be making a sort of investment without equity in the workers' well-being. For this reason, the length of working day sought by employers under competitive conditions would tend to be longer than would be optimal for output. A working day of optimal length could only be maintained if all employers acted together in enlightened accord.

The length of day that would be best for workers' welfare would be shorter than that which could produce the greatest total output. But workers, too, would tend to disregard the long-term effects of working time on fatigue, productivity and ultimately on wage levels. In forming their preferences for income and leisure, they would be predominantly influenced by current wage levels. This would result in workers seeking a working day longer than would be prudent in the long run, although still shorter than that sought by employers acting competitively. The prevailing concern of both employers and workers for immediate self-interest would bias the preferences of each toward a longer than optimal length of the working day.

Abstract: Sidney Chapman's theory of the hours of labour, published in 1909 in The Economic Journal, was acknowledged as authoritative by the leading economists of the day. It provided important insights into the prospects for market rationality with respect to work time arrangements and hinted at a profound immanent critique of economists' excessive concern with external wealth. Chapman's theory was consigned to obscurity by mathematical analyses that reverted heedlessly to outdated and naïve assumptions about the connection between hours and output. The Sandwichman is serializing "Missing: the strange disappearance of S. J. Chapman's theory of the hours of labour" on EconoSpeak in celebration of the centenary of publication of Chapman's theory. (To download the entire article in a pdf file, click on the article title.)

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