Gibberish
by Sandwichman
Gibberish
Repeat after me: The world is not a zero-sum game. Technology often creates more jobs than it destroys. The number of jobs in the economy depends on how much people are spending and investing. High-skilled tech workers grow the economic pie by boosting productivity, encouraging more investment and increasing entrepreneurship. Economists call this “the lump of labor” fallacy.
Jennifer Rubin, WaPo
Trump and right-wingers who have never heard of the lump-of-labor fallacy seek to construct a false narrative to explain real hardship caused by a whole variety of issues, including automation, a skills mismatch and education inadequacy. We would hope the poll is a positive sign that Americans grasp that “the world is not a zero-sum game where natives must lose out in order for immigrants to gain — or vice versa.”
Isabel Sawhill, Brookings Institute
One problem is that when people look at the labor market, they often come to the wrong conclusion. They see well-paid jobs in manufacturing or elsewhere disappearing. They conclude that there are simply not enough jobs to employ everyone who wants to work. Their implicit view of the world is that there are a fixed number of jobs and that it will be impossible to supply everyone with a reasonable livelihood. Economists call this “the lump of labor” fallacy. This way of thinking is a fallacy because the number of jobs in the economy depends on how much people are spending and investing, that is on the total demand for goods and services.
Chris Yapp, Open Democracy
Technology advances both destroy and create work. In the long run, technology often creates more jobs than it destroys. In the short term, while we cannot see what those new roles may be the “lump of labour fallacy” often becomes a central concern. The argument is that there is a fixed amount of work, so if some is automated the amount of available work must reduce.
Stuart Anderson, Reason.com
The central flaw in arguments alleging a negative impact on native employment due to the presence of foreign scientists and engineers is that they are based on the “lump of labor fallacy” – or the notion that there is a fixed number of jobs in the economy. Hence, the argument goes, if you increase the number of workers, you get lower wages and rising unemployment. But high-skilled tech workers grow the economic pie by boosting productivity, encouraging more investment and increasing entrepreneurship. Overall, they create jobs.
Economists call this “the lump of labor” fallacy. Trump and right-wingers who have never heard of the lump-of-labor fallacy seek to construct a false narrative to explain real hardship caused by a whole variety of issues, including automation, a skills mismatch and education inadequacy. The central flaw in arguments alleging a negative impact on native employment due to the presence of foreign scientists and engineers is that they are based on the “lump of labor fallacy” – or the notion that there is a fixed number of jobs in the economy. In the short term, while we cannot see what those new roles may be the “lump of labour fallacy” often becomes a central concern. Economists call this “the lump of labor” fallacy.
One problem is that when people look at the labor market, they often come to the wrong conclusion. Economists call this “the lump of labor” fallacy. Their implicit view of the world is that there are a fixed number of jobs and that it will be impossible to supply everyone with a reasonable livelihood. They conclude that there are simply not enough jobs to employ everyone who wants to work.
The argument is that there is a fixed amount of work, so if some is automated the amount of available work must reduce. Economists call this “the lump of labor” fallacy. Hence, the argument goes, if you increase the number of workers, you get lower wages and rising unemployment. They see well-paid jobs in manufacturing or elsewhere disappearing.This way of thinking is a fallacy because the number of jobs in the economy depends on how much people are spending and investing, that is on the total demand for goods and services.
In the long run, technology often creates more jobs than it destroys. But high-skilled tech workers grow the economic pie by boosting productivity, encouraging more investment and increasing entrepreneurship. Overall, they create jobs. Technology advances both destroy and create work. We would hope the poll is a positive sign that Americans grasp that “the world is not a zero-sum game where natives must lose out in order for immigrants to gain — or vice versa.
See also LUMPO
Hi Sandwichman:
I believe you advocate against the Lump of Labor Fallacy? It has been my experience that when I put in one 5 axis CNC, I am probably taking out 4 other jobs instead of creating more jobs. Creating more product does not necessarily mean more demand. To me, this post “almost, almost” goes both ways hence my confusion. Enlighten me sir. Thank you.
Some reading for others: “The ‘Lump-of-Labor’ Case Against Work-Sharing: Populist Fallacy or Marginalist Throwback?” Tom Walker aka Sandwichman.
“But high-skilled tech workers grow the economic pie by boosting productivity, encouraging more investment and increasing entrepreneurship.”
That just seems a bit cart before the horse. The way I would see high-skilled workers growing the economy is by the increase in wages they would or should be able to command thus more purchasing.
As this statement sits, its like the “job creators” phrase. Show me where a person is simply saying: Oh, I have extra money here, I’ll just go put people to work. Show me where a person with extra money is saying: Oh, I see some high skilled workers here, I think I just go put them to work.
Higher skill, the application of technology to production all reduce cost which generates either more profit for the company or lower price to the consumer. One of these will generate more demand for the product thus a need for more output. The other just funnels money to an ever smaller portion of the citizenry. (Of course it could be a balance of both profit and lower consumer price.)
None of this argument addresses what has been going on in our economy since 1980 which is the arbitrage game that is part of financializing the economy.
There appears to be 2 parts to technology application. One, reduces production costs, the other results in new products that society has a need for. “Need” being natural vs contrived. Either way, the citizens start buying it and life changes. I do not think this difference in the use of the word “technology” is being clarified in the discussion regarding lump of labor.
Becker
i think i’d add to your objection (understanding the the Sandwichman needs to keep hammering the “lump of labor fallacy” fallacy… as it is used to get people to ignore the real hardships faced by people who become unemployed for technological or “economic” reasons)
i’d add that technological advances do not lead to a demand for high skill workers… often much the opposite. nor do high skilled workers lead to higher productivity.
there is a synergy (hate that word) between investment, technology, skills, and employment that does not lend itself to simple minded X causes Y analysis.
in any case if all of the “economic growth” goes to “high skilled” workers or “investors,” and “low skill” workers are allowed to starve or get by on welfare, we will have a very sick society that looks more like the Ancien Regime than most of us will like.
So much of the effect of automation on job growth depends on whether increased productivity shows up as increased spending. For the past 30 years, wages have not tracked rising productivity, so consumer spending has lagged our productive capacity. This has made for a low return investment climate, so there has been less spent on investment than there might have been.
Automation has cost us jobs, but the apparent impact has been limited by the lower quality of available work. If you are paid hourly, you struggle to get 35-40 hours a week, and there are entire industries based on employing only part time workers. So, the number of jobs hasn’t fallen all that much, but the middle class is vanishing as people are either able to leverage education or other assets into high paying work, for now, or are pushed into the marginal class.
Individuals operate in the short term. When a man has to train the immigrants who will replace him for less pay, economic theory is cold comfort.
While the “lump sum of labor” theory is fallacious, refuting it becomes a straw-man and an exercise in reducto ad absurdum. No-one thinks the number of jobs is fixed. However, there is also no evidence that adding a given number of people to the labor force will create more than that number of jobs.
Even if that were the case, that adding people to the labor force increased demand to the point that it created more jobs than new workers, there would still be a delay, during which time someone is out of work who would not be if the other people had not joined the labor force.
Sandwichman is right… the lump of labor belief is a fallacy. Labor is indeed a function of demand for it which grows at least in proportion to population growth so labor demand is always increasing if populations are increasing , thus there cannot be a limit to demand for labor unless or until population sizes stop growing…. something we’ll need to begin considering in another century… on a global basis.
But issue with the ‘lump of labor’ belief is that at any given moment in time (ti) there’s a limit to demand in real terms. At a later moment n time (ti+1) there’s another increment or decrement to demand (dL) due to if nothing else a change in population or any number of other economic factors.
So labor demand is always subject to dL/dt .. and since dt is an invariate then the only variant is dL in relation to dT. So to deal with the issue one must first deal with the independent variables upon whrich dL is dependent.
What the controversy in the lump of labor issues are about therefore comes down to:
a) the change in time (dt) is being referred to, and
b) the independent variable changes over time dt that determine dL
dL/dt is thus a measure of acceleration (deceleration) depending on sign of dL of demand for labor
Until this is dealt with in concrete terms of dL/dt the lump of labor issue will remain unresolvable.
Then there’s the issue of the nature of dL…. is it irrespective of the nature of labor or is the type of labor a material aspect of dL? If dL is changing but the distribution the type of labor is changing with each change in dL then is this a consideration or not?
In that context we can say dL has three components: Component (i) which is the time rate of change, the component (j) which is the quantity of dL, and component (k) which is the type of labor.
Until dL(i,j,k) / dt(i) are dealt with the “Lump of Labor” issue will remain unresolvable… i.e. a purely subjective argument
And in any event, dL is a a strong function of political economy, thus subject to all kinds of political effects, from (for example) a huge increase in dL due to tax policy and trade negotiation deals, but on a global basis and not necessarily within a given political boundary. So we can add a fourth component to dL…. call it (n) for “nation”.
Then dL(i,j,k,n) has to be dealt with before “Lump of Labor” has any relevant meaning..
t.
Longtooth
I think I agree with you.
but I also think that Sandwichman is talking about the “lump of labor fallacy” fallacy.
and in general i don’t find abstract arguments about economics helpful to the people who actually suffer.
which may mean that i agree with you.
coberly:
Go into the link I provided.