An Open Letter to Paul Krugman
Dear Professor Krugman,
I am writing to you because three times over the last 14 months your
authority has been invoked to me on behalf of the assertion that
people who advocate shorter working time as a remedy for unemployment
are guilty of a "lump-of-labor fallacy" assumption that there is only
a fixed quantity of work in the world. As did John Maynard Keynes, I
believe that working less is one of "three ingredients of a cure" for
unemployment. I find it odd to learn that I (and presumably Keynes) am
thereby assuming a palpable absurdity: that the amount of work to be
done is invariant.
I have researched the history of the fallacy claim and published two
scholarly articles on it and I have documented rather glaring
discrepancies in the often-repeated claim. Because your authority on
the alleged fallacy is so frequently cited, I would be extremely
grateful if you would consider the evidence I outline below and
respond to it. I believe the history is curious enough to be
entertaining and thought provoking, whether or not you are persuaded
by my presentation.
A column by you that has been held up to me as authoritative appeared
in The New York Times on October 7, 2003. It was titled "Lumps of
Labor." The first paragraph states as follows:
Economists call it the "lump of labor fallacy." It's the idea that
there is a fixed amount of work to be done in the world, so any
increase in the amount each worker can produce reduces the number of
available jobs. (A famous example: those dire warnings in the 1950's
that automation would lead to mass unemployment.) As the derisive name
suggests, it's an idea economists view with contempt, yet the fallacy
makes a comeback whenever the economy is sluggish.
I would like to organize my presentation of the historical evidence by
parsing your first two sentences into three parts: "Economists call it
the 'lump of labor fallacy'"; "It's the idea that there is a fixed
amount of work to be done in the world"; and "Any increase in the
amount each worker can produce reduces the number of available jobs."
I will conclude with a look at a insightful remark you made in 2002,
"the 'productivity growth helps jobs' story, if that's what it is, is
just the flip side of the lump-of-labor fallacy," in response to a
Financial Times article by Glenn Hubbard.
"Economists call it the 'lump of labor fallacy'."
In 1890, Alfred Marshall used the expression, "fixed Work-Fund
fallacy," in referring to what today would be called the lump of
labor. Marshall expressed sympathy, on cultural and humanitarian
grounds, for the objective of work time reduction while disputing its
potential for expanding employment, except possibly in the case of
shift work. Marshall's term was purposely evocative of the wages-fund
doctrine of classical political economy, which John Stuart Mill had
recanted twenty-one years earlier.
The facetious "Theory of the Lump of Labour" was coined by David
Frederick Schloss, a lawyer and journalist, not an economist, in an
1891 article discussing worker's objections to piece-work. Schloss
also professed sympathy for workers' demands for shorter working time
and only objected to what he described as the systematic withholding
of work effort – what Frederick Taylor was later to call "systematic
John Rae, another journalist, attacked an unnamed fallacy in his 1894
book, Eight Hours for Work. For Rae, the alleged fallacy consisted of
assuming that the relationship between hours and employment was "a
simple sum in arithmetic." Rae was an advocate of the shorter working
day, but not on the grounds that it would create jobs. He argued that
an eight-hour day would improve productivity and concluded that those
productivity gains would nullify any job creating effect.
It is illuminating to consider these three fallacy claimants from the
1890s collectively. They were expressing an idea and attitude that was
clearly "in the air" but when their arguments are examined carefully
they do not hold up well and, in crucial details, contradict one
another. The American economist, Charles Beardsley, scrutinized John
Rae's claims, concluding that they relied on the wages-fund doctrine
and its underlying assumption that the relative shares of wages,
profit and rent are immutable.
Marshall's "fixed Work-Fund fallacy" was described by A.C. Pigou,
Marshall's pupil and successor as Cambridge Chair of Political
Economy, as itself committing the fallacy of ignoratio elenchi. "If it
were a good ground for rejecting an opinion that many persons
entertain it for bad reasons," wrote Pigou, after restating the
criticisms of the supposed belief in a fixed amount of work, "there
would, alas, be few current beliefs left standing!" Pigou concluded
that the employment potential of work time reduction depended
ultimately on the effects of the increased leisure on workers'
efficiency. Maurice Dobb offered an even more trenchant rebuttal to
the fallacy claim in a 1928 Cambridge Economic Handbook, Wages:
…trade unionists in the nineteenth century were severely
castigated by economists for adhering, it was alleged, to a vicious
"Work Fund" fallacy, which held that there was a limited amount of
work to go round and that workers could benefit themselves by
restricting the amount of work they did. But the argument as it stands
is incorrect. It is not aggregate earnings which are the measure of
the benefit obtained by the worker, but his earnings in relation to
the work he does — to his output of physical energy or his bodily wear
and tear. Just as an employer is interested in his receipts compared
with his outgoings, so the worker is presumably interested in what he
gets compared with what he gives.
Other economists -- Frank Carlton and Richard Lester, for example --
took exception to the "long run" Utopianism of the fallacy claim. They
pointed out that what matters to workers are the immediate
consequences of unemployment, not some hypothetically optimal long-run
"It's the idea that there is a fixed amount of work to be done in the world."
Although the Theory of the Lump of Labour and its cohorts emerged in
the 1890s, "the idea that there is a fixed amount of work to be done"
has a longer history. Specifically, a variant of the phrase can be
traced back to commentary on the 1871 Engineers' strike for the
nine-hour day in Newcastle, England.
A letter to the editor of The Times of London from "J.C.", published
on September 21, 1871, criticized the views of an earlier writer,
James Aytoun, as being "entirely based on the exploded fallacy that
the amount of work to be done is a fixed quantity, unaffected by the
wages paid or the number of labourers employed in producing it." Two
weeks later, on October 6, the London correspondent for The New York
Times, "F.H.J." filed a dispatch on the Newcastle strike, claiming
that the strike leaders were secretly pursuing a sinister "ulterior
design." "Their theory is that the amount of work to be done is a
fixed quantity, and that in the interest of the operatives, it is
necessary to spread it thin in order to make it go far."
The egregious error of "fixedness" would appear to owe something to
William Thornton's critique of the wages-fund doctrine, John Stuart
Mill's reply to Thornton and, perhaps, even to Karl Marx's 1865
polemic against John Weston in Wages, Price and Profit. In the latter,
If our friend Weston's fixed idea of a fixed amount of wages, a
fixed amount of production, a fixed degree of the productive power of
labour, a fixed and permanent will of the capitalists, and all his
other fixedness and finality were correct, Professor Senior's woeful
forebodings would have been right, and Robert Owen, who already in
1816 proclaimed a general limitation of the working day the first
preparatory step to the emancipation of the working class and actually
in the teeth of the general prejudice inaugurated it on his own hook
in his cotton factory at New Lanark, would have been wrong.
Four years later, Thornton wrote, with regard to the wages-fund doctrine:
The believers in the wages fund, on the other hand, insist that
whether labour be cheap or dear the whole body of employers always
spend upon labour the utmost amount they can afford to spend. Very
possibly they may be unconscious of insisting on this, but,
consciously or unconsciously, this is demonstrably what they do insist
upon. For they declare that the amount destined at any given time to
the payment of wages, is a fixed amount – an amount so rigidly fixed
that by applying to it the proper divisor you arrive infallibly at the
average rate of wages. And they cannot but admit that this fixed
amount may be the utmost that employers can afford; for, clearly,
employers would pay the utmost they could afford for labour, rather
than not get the quantity of labour they required. But if the fixed
amount in question may be, it necessarily must be that utmost, for
otherwise it would be not a fixed but a variable amount.
In this strange doctrine it is, as Mr. Mill has pointed out, by
implication affirmed that the demand for labour not only increases
with the cheapness, but increases in exact proportion to it, the same
aggregate sum being paid for labour whatever its price may be.'
[compare also Thornton's phrase, "only a certain amount of work to be
done," in Over-population and its Remedy]
The phrase about a fixed amount of work to be done cunningly
commandeers the rhetoric of Marx's and Thornton's criticisms of the
wages-fund doctrine, turns it around 180 degrees and uses it to argue
against higher wages and shorter hours, exactly as the wages-fund
doctrine had previously been used to argue against higher wages and
shorter hours. Talk about snatching rhetorical victory from the jaws
of doctrinal defeat!
"Any increase in the amount each worker can produce reduces the number
of available jobs."
F.H.J.'s dispatch included a significant bridge to an earlier
tradition of fallacy mongering. This is the theme of the "ulterior
design" of unions. According to the Times correspondent, the Nine-Hour
League was "only an offshoot of the Unions, and the great object of
the Unions is to surround production with all manner of restraints and
restrictions, so that it shall not be accomplished too fast or by a
small number of workmen." That is, of course, the flip side of stating
that "any increase in the amount each worker can produce reduces the
number of available jobs."
F.H.J. was explicit about the conspiratorial nature of this object of
restriction, as were John Wilson in "Economic Fallacies and Labour
Utopias" (1871), James Ward in his egregiously plagiarized Workmen and
Wages (1868), the anonymous author of a Quarterly Review article,
"Trades Unions" (1867), Harriet Martineau in "The Secret Organization
of Trades" (1859), Archibald Alison in "Trade Unions and Strikes"
(1838) and Edward Carleton Tufnell in The Character, Object and
Effects of Trades Unions (1834).
Tufnell's pamphlet contains the most complete prototype of what was to
become the lump-of-labor fallacy claim. The credibility of that claim
needs to be evaluated in the context of the author's disposition
toward trade unions. "Were we asked to give a definition of a Trades'
Union," the author stated at the book's conclusion, "we should say
that it was a Society whose constitution is the worst of democracies —
whose power is based on outrage — whose practice is tyranny — and
whose end is self destruction."
Tufnell was an Assistant Poor Law Commissioner who served on the Whig
government's Royal Commission aimed at deflecting agitation for the
Ten-hour factory legislation. According to Sidney and Beatrice Webb's
History of Trade Unionism, Tufnell's anonymously-published pamphlet
was said to have been commissioned and paid for by the Whig
government. The key text concerns the alleged motive of the Manchester
Cotton Spinners' Union in supporting the Ten-hour Bill:
The Union calculated, that had the Ten-hour Bill passed, and all
the present factories worked one-sixth less time, one-sixth more mills
would have been built to supply the deficient production. The effect
of this, as they fancied, would have been to cause a fresh demand for
workmen; and hence, those out of employ would have been prevented from
draining the pockets of those now in work, which would render their
wages really as well as nominally high. Here we have the secret source
of nine-tenths of the clamour for the Ten-hour Factory Bill, and we
assert, with the most unlimited confidence in the accuracy of our
statement, that the advocacy of that Bill amongst the workmen, was
neither more nor less than a trick to raise wages—a trick, too, of the
clumsiest description; since it is quite plain, that no legislative
enactment, whether of ten or any other number of hours could possibly
save it from signal failure.
Walking back Tufnell's claim about the union's motive to the testimony
before the Royal Commission, it is clear that Tufnell derived his
conclusions from the supposition of a cotton manufacturer, Peter
Ewart. Tufnell's question to Ewart was: "What do you suppose to be the
chief motive for the operatives here advocating the Ten-Hour Bill?"
Besides being clearly labeled as supposition, Ewart's reply was more
rambling, tentative and imprecise than Tufnell's sharply provocative
allegations about the union's "secret motives" and "clumsy tricks."
Ewart's testimony, in turn, can revealingly be interpreted as a
rendition of the principles of popularized political economy – the
wages-fund doctrine – such as was elaborated by Harriet Martineau in
her 1832 story, "A Manchester Strike." In other words, what in Ewart's
opinion made the supposed ideas of the union members fallacious was
their non-compliance with the wages-fund doctrine. Moreover, the
suspicion that they indeed held such views may have been suggested to
Ewart not by their own words or actions but by a work of fiction.
Incidentally, the U.S. Commissioner of Labor investigated the
ubiquitous claims of union restrictions on output and issued a
921-page special report in 1904, prepared and edited by pioneer labor
economist John R. Commons, which found little substance to the claims,
concluding, "the question of restriction of output… is not as simple
as it has been supposed to be..." The report found that union
regulations were aimed at ensuring that changes in work methods or
organization were by mutual consent. To the extent such regulations
were perceived by management as limiting output, it was in comparison
to some hypothetical level of output that might presumably be attained
if employers could impose their efficiency plans at will. Moreover,
with respect to the reduction working time:
Considered solely with reference to speed or intensity of
exertion, a moderate reduction in the number of hours of labor each
day usually tends to increase the speed rather than to restrict it.
>From the standpoint of exertion, a reduction of hours is exactly the
opposite from a restriction of output.
"The 'productivity growth helps jobs' story, if that's what it is, is
just the flip side of the lump-of-labor fallacy."
One of the favorite unintended-consequences stories in economics is
the idea that "technology creates more jobs than it destroys." This
was a standard rebuke to Luddites in the early 19th century, who were
portrayed as fearing that machines would create chronic unemployment.
It closely resembles the case argued against the mercantilism of the
early 18th century by Henri Martyn in Considerations on the East India
Trade. The lump-of-labor fallacy appears as the negative version of
this story. In fact, the fallacy is sometimes called the Mercantalist
or Luddite fallacy.
There is a crucial difference between the two sides of the story,
though. The technology creates jobs story is openly embraced by
economists and triumphantly played as the trump card in debates over
employment policy. The fixed-amount-of-work story, though, is only
attributed by economists to Luddites, shorter work time advocates and
other "naive populists" they wish to discredit. In both cases it is
the economist (not infrequently, The Economist) speaking, telling the
uninitiated to sit down and shut up.
In 1865, William Stanley Jevons introduced a paradoxical joker into
the unintended consequences deck. In Chapter 7 of The Coal Question,
"Of the Economy of Fuel," Jevons explicitly cited the argument that
increased labor productivity expands employment as his model for
analyzing the effects of fuel efficiency on fuel consumption: "…the
same principles apply, with even greater force and distinctness, to
the use of such a general agent as coal. It is the very economy of its
use which leads to its extensive consumption."
The Jevons paradox presents economists with a dilemma that they have
not squarely faced. If, as economists so often insist, technology
creates more jobs than it destroys, fuel consumption operates on the
same principle and the alternative job strategy of work time reduction
is based on a fixed-amount-of-work fallacy; then job creation can only
occur through increased fuel consumption. Or, conversely, fuel
conservation can only occur at the expense of job destruction.
Unemployment exists and so does environmental crisis – so simply
dismissing the three associated claims as fallacies is not enough. But
one of these fallacies is not like the others. It applies to an
attributed view, not a self-expressed one. On the contrary, advocates
of work time reduction have often pointedly disavowed any assumption
of a fixed amount of work, to no avail.
In The Rhetoric of Reaction: Perversity, Futility, Jeopardy, Albert O.
Hirschman identified the three characteristic patterns named in the
subtitle as recurring themes in reactionary rhetoric. The perversity
claim is that a proposed reform will have results the opposite of what
were intended. For example, reducing the hours of work will increase
unemployment rather than decrease it. The futility claim argues that
the "laws" of society (or in this case economics) prevent any effect
whatsoever. It is sometimes argued that work-sharing doesn't reduce
unemployment, it merely "spreads it around."
The jeopardy argument points to some cherished achievement that would
be undermined by the reform. Legislated or collectively bargained
work-time reduction would allegedly impinge on people's freedom to
choose their own optimal combination of income and leisure. Various
instances of the fallacy claim invoke each of Hirschman's three
categories of perversity, futility and jeopardy. Some of the fallacy
claims invoke more than one.
As Hirschman pointed out, often these arguments are advanced without
substantiating evidence, purely on the strength of their seeming
cleverness and irony. Hirschman described the perversity argument as a
negative version of the "unintended consequences" story in which, for
example, private vices are "led by an invisible hand" to produce
public virtues. In the negative version, though, the unintended
consequences are undesirable. In fact they are the opposite of what is
Professor Krugman, I have presented only an outline and highlights
that document the spurious nature of the fallacy claim. There are
further twists and turns relating to the aggressive use of the fallacy
claim by employers' organizations, the uncritical incorporation of the
claim into textbooks and financial journalism, and the peculiar
displacement of Sydney J. Chapman's once highly-regarded theory of the
hours of labor from the theoretical canon of economics. I have
discussed these issues elsewhere but have here restricted myself to
material that responds directly to your own remarks.
As this is a question that bears on unemployment and the lack of an
effective policy response to it, as well as on the protection of the
environment, I hope that you will take the time to review the material
I have brought to your attention and will either withdraw your support
for the fallacy claim or, alternatively, explain why you continue to
accept its validity (by "fallacy claim," let me reiterate that I am
referring to economists' assertions that advocates of work time
reduction believe in a fixed amount of work, not to the absurd
proposition that there actually is a fixed amount of work). I would be
more than happy to provide you with citations and links to all the
articles I have mentioned in my letter.