Branko’s Lumps

In a post at his blog globalinequality today, Branko Milanovic claims that “Robotics leads us to face squarely three fallacies.” He then proceeds to “debunk” technological unemployment, satiation of human needs and the environmental carrying capacity of the earth. He concludes his post with the assurance that “history teaches us” we have nothing to fear regarding limits to growth, exhaustion of natural resources and replacement of humans by machines.

A week ago, I posted Outlaws of Political Economy in which I documented the total absence of evidence for the alleged false belief in a fixed amount of work. The fallacy claim, I argued, is a negative projection that is compulsively repeated by economists.

In my post, I cited the entry on “Economic Law” from the 1893 Palgrave’s Dictionary of Political Economy. In turn, the Palgrave’s entry cited an 1892 article, in German, by J. Bonar that I was unable to locate [update: found it]. But the search for it led me to Bonar’s 1893 book, Philosophy and Political Economy, described by Warren Samuels as “one of the most remarkable works in the history of economic thought.” In that latter book, Bonar discussed Niccolo Machiavelli’s notion of a “fixed quantity of happiness” and mentioned Francis Bacon’s enunciation of the same basic idea — that one person or country’s gain is a another’s loss. The rationale, in a nutshell, of mercantilism.

Following up on the Bacon quote, I discovered much the same sentiment had been expressed by Michel de Montaigne nearly a century earlier and a millennium and a half earlier by the mime author, Publilius. In short, long before the fallacy became a “fallacy,” it was a maxim that circulated among the most distinguished literati, Montaigne, Machiavelli, Bacon…

Publilius’s maxim translates as “Profits in trade can be made only by another’s loss.” Montaigne’s is “One man’s profit is another’s loss.”

It just so happens that James Bonar also delivered a series of lectures in 1910 addressing the “subtle fallacies which are apt to invade the reasoning of trained economists in spite of learning and discipline.” One of the sources of error that Bonar discussed in his first lecture was “the existence and prevalence” of “watchwords” or “maxims” that keep alive biases inconsistent with the economist’s reasoning. A watchword is “a detached phrase that has taken the place of an argument” and may even become “a substitute for an argument.”

In his fifth lecture, Bonar specifically addressed one of those tricky watchwords, “in the long run” and replied, 106 years before the fact, to one of Milanovic’s key arguments about “the lessons of history”:

It is not easy to show that the invention of new machines will tend to increase wages. This was the tendency first supposed by Ricardo; but he changed his mind and wrote: “The same cause which may increase the net revenue of the country may at the same time render the population redundant and deteriorate the condition of the labourer.” It was this change of view that made McCulloch doubt the infallibility of Ricardo. The more orthodox position (if we allow that any position of Ricardo’s could be heretical) was that machinery tends in the long run to employ more labour than it has displaced; this was to be the consolation of the hand-loom weaver, thrown out of work by the factory system. It was to be a sufficient vindication of an economic principle, that, if it did not fit the facts now, it would fit them at some time in the future. But in the case of machinery there were more economic principles asserted than one. One seems quite to fit the facts: that there is a tendency under the regime of machinery towards a greatly increased production at less cost. It was a different proposition that the increased product tends to be equally shared. The economist has no warrant for saying that any economic tendency exists which by itself brings about good distribution. The sharing of property was matter of law and political institutions, in some countries religious prejudices; and the conditions so established might prevent any such consummation. It does not seem true that economic tendencies are all made beneficial by length of time any more than a man is necessarily made better by growing old. There is no saving virtue in the ”long run.”

An economist from the 1930s named John Maynard Keynes also took issue with the policy relevance of the legendary long run. Ironically, our old mime friend, Publilius also had something proverbial to say about the long run: “Patience is a remedy for every sorrow.”