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.
Cheers,
Tom Walker [Sandwichman]
With the Internet of Everything (IoT) the world is and has becoming much smaller place much faster. It has had many benefits and unintended consequences. Wealth, opportunity, job creation and labor participation rates have not been evenly distributed. The melding of the Arab nations is at the forefront of humanity and must be done somehow. China has set the economic low bar standard on the lump of labor price, practice and policy most recently. The new TPP could set a new lower or higher economic standard for new world lump of labor cost and policies. This is why to me the Balanced Trade Agenda Act of 2017 is so important…Trump will get this right the first time, Clinton will not. Our American sovereignty as a nation is on the line to get this right….
Tom:
From the article:
“In the popular imagination, there are only so many jobs to be had. There are more people who want to work than there are jobs. Unemployment consists of people waiting around for a job to be “created,” especially by a politician hungry for a moment on camera. This vision has nothing to do with reality. . . .”
This is the “lump of labor fallacy” position description. The argument:
“We can see direct evidence against the lump-of-labor fallacy in our own history. One of the greatest job invasions in all trade and immigration 115 history was the increase in women working. Women’s labor force participation rose from 32 percent to 60 percent from 1950 to 2000. But 27 percent of men are not permanently out of work now as a result. In the “great migration,” about six million African Americans moved from the rural South to Northern cities. Despite widespread fears, riots, and shameful efforts to exclude these newcomers, six million whites did not suffer permanent unemployment as a result.”
All of the later is true except as this group started to enter the Civilian Labor Force, the numbers of males in the Civilian Labor Force begin to decrease and the market itself changed from manufacturing to a growing service market. Higher paying jobs for lower paying jobs.
The economy and the traditional labor sectors became more capital intensive negating the need for Labor. Work needing Labor shifted also to places such as China, Philippines, Thailand, etc. not so much due to direct Labor cost as it is the cost of operations in various countries or Overhead. The US is costly compared to the Philippines even with the addition of Capital equipment and Process improvements reducing the need for Labor.
The need for Labor has decreased and jobs have no been created in the same numbers as needed to offset the reductions in the Civilian Labor force. There are various factors impacting this such as Capital improvements, Process changes, and Labor (job) migration to Labor intensive countries where Overhead is less costly.
I think this is the essence of the detail against Lump of Labor fallacy. Pick it apart Tom as I wanted to make sure I understood your discussion in my own mind and using my own words.
Thanks for the article.
“But 27 percent of men are not permanently out of work now as a result.”
In 1950, the civilian labor force participation rate for men was 86.4%. In 2000, it was 74.8%. It would be presumptuous to attribute this change entirely to women’s increased entry into the labor force. It would be simply false to claim that there was no change in men’s employment. What Cochrane asserts here is not even simply false. It is mathematically illiterate. Sixty percent of 110 million women in 2000 minus 32% of 57 million women in 1950 does not equal 27% of 102 million men in 2000.
Tom:
I believe you are assuming I support his points. I do not. I also did not assume the increase in women PR had an impact on males jobs. I do not sir. Perhaps it is not as clear as I thought it might be.
Bill,
Not at all. I was just taking the opportunity of your citation of Cochrane to criticize his point. I would not assume that you agreed with him.
Tom:
Ok; I was attempting to build upon his statements in disagreement and explain in the way I have practiced and observed over the years in manufacturing. Whew!
What seems most unimaginable is any attempt to explain changes in any part, or the whole sum, of labor, whether it is the need for, the cost of or the variables leading to, over such a prolonged time frame as 1950 to 2000. It is an especially long period of technological understandings and changes. The measured variables are themselves extraordinarily complex. It is a complexity of social phenomenon further complicated by the complexity of changes in technological and scientific phenomenon. So what difference is there regarding the likely operative factors leading up to the condition that exists?
Why not only focus on the present and the operative factors that impinge upon interactive variables within the phenomenon of production and the distribution of goods in a productive economy? Then move on to understanding the share of that economy that might be allocated to the various participants. Maybe its too easy to obscure the discussion when one focuses on a complex social phenomenon over a prolonged period of time, and in so obscuring the debate one can as easily obscure the validity of ones’ claims within that debate.