The Poverty of Fallasophy

In an interview about his new book, The Wealth of Humans, Ryan Avent recommends coordinating reductions in working hours, "maybe from 40 hours working per week to 30 hours working per week..." But, he stammers somewhat apologetically, "that, that sounds a lot like we're sort of embracing the lump of labour fallacy." There is, of course, no such thing.

He tells his interviewer that he's "very conscious throughout the book that, you know, a lot of this seems kind of sacrilegious, in a way, to people who've taken economics." There is something profoundly wrong with economic teaching when it "seems kind of sacrilegious" to transgress a bogus fallacy claim that has no standing in economic theory and absolutely no supporting evidence. Excerpt from The Wealth of Humans: Work, Power and Status in the Twenty-First Century by Ryan Avent, St. Martins Press:

To say that humanity has too many workers is to defy a basic tenet of economics. Labour is not supposed to work like that. When someone suggests that there are too many people around to do the work society needs done, he is said to be under the influence of the ‘lump of labour’ fallacy: the view that there is only so much work to go around — the lump. This view leads to policies such as those designed to lower the retirement age in order to create more work for the young. If we believe this basic theory, then we should certainly worry about the rise of machines. 

Economists, however, are generally of the opinion that the economy works quite differently. They sometimes point to ‘Say’s Law’, the work of eighteenth-century French economist Jean-Baptiste Say, which is often summarized in the phrase ‘supply creates its own demand’. Thus, when older workers stay on the job longer, they earn more money, and when they spend that money they create demand for other goods and services, leading to jobs supporting those goods and services. As far as labour-saving technological change goes, economists believe that when a person loses a job to a machine, it results in savings for someone — to the owner of a firm, or to consumers in the form of lower prices. This, in turn, leaves more money to be spent elsewhere, and that spending ought to create jobs for the displaced workers.

Say was indeed born in the eighteenth century and his so-called law originated in that century but Say didn't write about it until the early nineteenth century. According to John Kenneth Galbraith, the supposed law was supposed to have sank without trace after John Maynard Keynes -- and the Great Depression -- eviscerated it in the 1930s.

Oh, but never mind. "Economists,,, are generally of the opinion..." When Larry Summers was at M.I.T. in the 1960s,

...what I was taught as an undergraduate was that basically the people who thought it would were a bunch of idiot Luddites and that obviously there would eventually be enough demand and it would all sort of work itself out, and if people got more productive they'd be richer and they'd spend and maybe we needed some transition assistance, but that it was all basically going to be okay. That was what I was taught. 

And just a few months ago, John Cochrane and Jennifer Rubin recycled the same pack of lies as if it was gospel truth. At long last, economists, have you people no decency? As Lionel Robbins -- even Lionel Robbins! -- wrote in 1929, on the eve of the Great Depression:

Deliberately to recommend an increase of hours when the conditions of demand are not elastic is either very ignorant or very Machiavellian.

The same can be said of those who would counsel against a reduction of hours on the grounds that it would constitute a "lump-of-labour fallacy" to do so. They are either very ignorant or very Machiavellian.