Lump-of-Labor Fallacy: The Nastiest Motives of Nasty People

By Sandwichman. Originally published at Econospeak

“Economists are active militants against the concept of the lump of labor, that is, the popular idea that the total number of jobs or of working hours is fixed (Walker, 2007).”

The quote is the first line from a 2017 paper by Tito Boeri, et al. It gives me confidence that at least some of the time my message is getting through.

The image below is from a 2018 report published by the Roosevelt Institute. It tells me there is still a huge amount of work to be done teaching people about the ideological deceptions of the so-called lump-of-labor fallacy.

At times, over the last 20 years or so – never mind how long precisely — I have felt like Captain Ahab in pursuit of the whale as I have wrestled with the so-called “lump-of-labor fallacy.” Having finally sized the beast up, I am convinced that the fallacy claim is little more than a “pasteboard mask” behind which, “some unknown but still reasoning thing puts forth the mouldings of its features.” That hitherto unknown thing is a theodicy, or, perhaps it would be more accurate to call it theo-dicey in recognition of its treachery.

A theodicy is “an attempt to reconcile the goodness and justice of God with the existence of evil,” Jonathan Cook explained in Inscrutable Malice: Theodicy, Eschatology, and the Biblical Sources of Moby-Dick. In the case of the fallacy claim, it is not the goodness and justice of God, per se, that is at stake but the rationality and benignity of the capitalist system, the “invisible hand” that supposedly impels narrowly self-interested actions to promote the general good of society and the tendency toward equilibrium by means of which prices and quantities of trade “find their own level.”

“The great merit of the capitalist system, it has been said, is that it succeeds in using the nastiest motives of nasty people for the ultimate benefit of society.” To seek to intervene wantonly in such a divinely-ordained contrivance is thus to exhibit an unseemly absence of faith. Austin Robinson’s sarcastic remark, quoted above, is usually mangled and mis-attributed to John Maynard Keynes, who, to be sure, did indeed comment (half-jokingly?) on the need to “pretend to ourselves and to everyone that fair is foul and foul is fair; for foul is useful and fair is not” and who saw avaricious money-making as a “comparatively harmless channel” for “dangerous human proclivities” that might otherwise “find their outlet in cruelty, the reckless pursuit of personal power and authority” — as if the two pursuits were mutually exclusive rather than complementary. But we haven’t even gotten to that alliterative “paradox of poverty in the midst of plenty” yet.

The lump-of-labor fallacy’s alleged — albeit unsubstantiated — assumption of a “fixed amount of work to be done” rewords a staple of 19th century classical political economy, the “certain quantity of work to be done” determined by the number of workers who could be profitably set in motion by a previously-accumulated capital consisting of subsistence goods – a “wages fund.” Who did or didn’t say “a certain quantity of work” or “a fixed amount of work” is the key evidence for or against the fallacy claim and, consequently, the theodicy claim.

The “certain quantity of work” also happens to be symptomatic of the adaptation from religious to secular theodicy. Classical political economists didn’t invent a static universe. They inherited it from the same natural law enlightenment of the old Great Chain of Being as their Panglossian optimism. Montaigne’s proposition that “one man’s gain is another’s loss,” and Machiavelli’s notion of a “fixed quantity of happiness” in the world at any one time are notable specimens, as was Francis Bacon’s observation that “the increase of any estate must be upon the foreigner (for whatsoever is somewhere gotten, is somewhere lost)…”

Originally overt and unabashed in the wages-fund doctrine of 19th century vulgar political economy, the static premise has had to go incognito in modern academic economics, masked behind simplifying assumptions, methodological conventions, ceteris paribus, dead metaphors, unexamined analogies and reams of “math.” Unlike theodicy proper, the political economy dispensation didn’t set out to make suffering bearable for the sufferers, but only to yield, all too lustfully, to a temptation whose role as “a component of the self-consciousness of European humanity” must never be underestimated.

Misattributions are commonplace. Often it is simply the assignment of a saying to a historical celebrity because, “who ever heard of Austin Robinson?” Mark Twain, Abe Lincoln, Gandhi, Stalin and Winston Churchill are said to have said many a saying they never said.

Sometimes, though, the intention is to put incriminating words in the mouth of a bogeyman or to burnish an obscure opinion by attributing it to some illustrious personage. In the case of the lump-of-labor fallacy, the false attribution of a fallacious belief to the economically-naïve workers or trade unionists is a disavowal and projection of the economists’ own unacknowledged — possibly subliminal — convictions about the inherent rationality and benevolence of the market-deity who cunningly enlists “the nastiest motives of nasty people for the ultimate benefit of society [except, of course, for that obligatory residual of ‘poverty in the midst of plenty’].”

The temptations of theodicy are formidable. Neither was Marx exempt, with his “dialectical” projection of a revolutionary proletariat, forged in abjection and class struggle. Even the truth, as Ernest Tuveson remarked in a review of Melville’s The Confidence Man, “is no guaranty of either happiness or freedom.” But what we can do is to expose and repudiate the facile satisfactions of the economic pseudo-theodicy we know and to re-evaluate those perspectives that the econo-theodicean orthodoxy has condemned or discounted.

To recap: in the manuscript, A Certain Quantity of Work to Be Done, I develop the following theses:

  1. The lump-of-labor fallacy claim is not a substantive argument but a performative one that disavows and projects the unacknowledged and now illicit founding premise of the economists’ own core commitment – sometimes fervent, sometime reluctant – to the intrinsic rationality and benevolence (or at least, “efficiency”) of private property and market exchange.
  2. This core commitment emerged, along with its accompanying storyline, in early modern natural law political thought from the same mold as rational theodicy with which it shared both its optimism and founding premise of a static universe in which there was a “fixed amount of happiness” at any given time (Machiavelli) and one man’s profit was another’s loss (Montaigne).
  3. The metaphysical “mechanisms” purportedly producing public benefits from private vices, the invisible hand that leads people to contribute to the public good although they have only their self-interest at heart, the process by which the volume of trade and prices “find their own level” – in short, the hypothesis of equilibrium, are deductions from the zero-sum “conservation principle” of a closed system.
  4. The defects and pitfalls of rational theodicy have been analyzed, criticized and satirized by philosophers from Voltaire and Kant to Sartre and Levinas, the latter two specifically in the context of the industrially-augmented atrocities of the 20th century. The large debt of economic thought to theodicy has also by discussed by Joseph Vogl, John Milbank and others. My original contribution is to trace the process of disavowal and projection that has both insulated economics from scrutiny of its hypocritical fealty to a noisily disavowed premise and stymied efforts to establish alternatives to an ethically-bankrupt, intellectually-moribund status quo.
  5. Maurice Dobb and Robert Hoxie are two economists who defended the positions that mainstream economists derided as fallacious. Ira Steward’s eight-hour theory was disparaged by the orthodox. Although Sydney J. Chapman’s theory of the hours of labor was at one time considered canonical, it too was unceremoniously substituted by a view more congenial to the mathematical modeling of mid-20th century macroeconomics.
  6. Building on the insights of these authors — and of Marx, who explicitly rejected vulgar political economy’s “so-called labour fund” – I have proposed the perspective of labor power as a common-pool resource. From this perspective, In the final chapters, I analyze how long hours of work “immiserate” workers subjected to them and how progressive reduction of the hours of work might be used as a policy to reduce greenhouse gas emissions and thus combat climate change.

According to James McCleary in 1912, there was an “oft-repeated error” behind statements from union leaders made to the congressional committee on labor, which he sat on. “It was rarely if ever put into words, but it was the unspoken major premise of many an attempted syllogism, the unstated basis of many an appeal.” A half century later, steel industry executive William Caples stated that the alleged error was “one of the most tenaciously held and generally least articulated of trade union beliefs…”

I have researched the lump-of-labour fallacy and its surrogates, and would have to concur with McCleary and Caples about the lack of articulation of a belief that is presumably so widespread. I wonder if you can help me out here? Can you cite statements from advocates of work-sharing, for example, that clearly demonstrate a belief in a “fixed amount of work”? And, no, that wouldn’t include statements advocating a certain policy that you infer “implies” such a belief.

In “A Certain Quantity of Work to Be Done” I cite half a dozen examples of orthodox political economists stating precisely that phrase or a close approximation of it as an empirical premise — and not a hypothetical one. Can you find just onefrom the labor side?

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42 comments

  1. GeorgeNYC

    I have just downloaded your paper and need to go through it. I think it is the use of the term “fallacy” that seems to make this more confusing. Am I correct in saying that your proposition is that the “lump-of-labor” fallacy is itself fallacious in that it is wrong? In other words, there is a “lump-of-labor”?

    Although on re-reading I get the sense that it is more nuanced. That no one is actually arguing that there is a “lump of labor” but that others are using this supposed argument as a straw man to attack those who are calling for regulation of labor conditions.

    I guess the question is then what is the correct economic analysis of labor regulations? It does seem obvious to me that there is some “give” in terms of labor supply in that if someone offered me enough money I would be willing to increase my labor hours so there is really no “set” supply. Conversely cheaper labor will probably mean that I might hire more labor to do a job (two massage therapists instead of one!). But that is just a static point in time. If suddenly cheap robots were available to do certain jobs it seems ludicrous to conclude that this would not create immediate unemployment and disrupt cash flows. Workers make less money, they spend less money and all of the businesses that rely on those workers get less money.

    I see the argument that “inevitably” there will be “new” jobs that come for those workers. They become poodle walkers and massage therapists for the few rich people who own the robots I guess. However, aside from “magic”, I am not entirely clear how that transformation takes place. Not to mix the metaphors but it is like an engine stopping and then needing to be restarted. The process occurring while the engine is running is different from the process that is required to get it started int eh first instance.

    Reply
    1. Sandwichman

      I’m reluctant to get into “what really happens” in the economy because much of it relies on people acting as if fiction was fact and thus making it so. Keynes’s beauty contest, for one example, or Marx’s fetishism of the commodity for another.

      I will go a little out on a limb and say that what enables the dynamic expansion of economic activity is debt creation. Supply doesn’t “create its own demand”; debt creates more demand for more supply.

      I’m reluctant to go much further than that because I’m wary of people seizing on “step one” and making a panacea out of it: “if debt expands the economy, let’s create as much debt as we need for living happily ever after…”

      Reply
      1. Adam1

        I don’t think you’re going out on a limb. You either have to spend out of current income or with debt. Yes, you can spend down savings, but savings is just the flip side of someone else’s prior debt (loans create deposits).

        Also, one problem many people have when talking philosophically about economic activity is to assume away money or to pretend to only talk about “real” economic activity. However that is a fatal mistake because the real world is massively monetized these days. In a primitive non-monetized society if the resources are available to build a house I can build a house; I can’t be unemployed involuntarily if the resources to complete my work are available. In a monetized society, if there is insufficient money or spending or income then I may be unemployed involuntarily because I lack access to sufficient money to buy the resources to do my work. In this case the creation of more money solves the problem – money creation happens when a sovereign currency issuing government creates more government liabilities (money/debt) or the banking system issues more credit (loans create deposits).

        Reply
      2. ChrisPacific

        Re: people acting as if fiction was fact and thus making it so

        From ‘The Hogfather’ by Terry Pratchett:

        “All right,” said Susan. “I’m not stupid. You’re saying humans need… fantasies to make life bearable.”

        REALLY? AS IF IT WAS SOME KIND OF PINK PILL? NO. HUMANS NEED FANTASY TO BE HUMAN. TO BE THE PLACE WHERE THE FALLING ANGEL MEETS THE RISING APE.

        “Tooth fairies? Hogfathers? Little—”

        YES. AS PRACTICE. YOU HAVE TO START OUT LEARNING TO BELIEVE THE LITTLE LIES.

        “So we can believe the big ones?”

        YES. JUSTICE. MERCY. DUTY. THAT SORT OF THING.

        Reply
      3. JLCG

        In real life, not Economics, supply creates demand. When penicillin became available all the gonorrhea sufferers wanted it

        Reply
          1. JLCG

            That is because few businesses produce actually anything useful something that generates and preserves life. Most of them are geared towards the accumulation of money.

            Reply
    2. J Sterling

      In so far as it is a fallacy, then it is a fallacy. That’s true, if tautologous. But many arguments that are not lump of labor arguments are called such, and then of course dismissed.

      For instance, “if you employ this new machine, you may fire me. If you do, I will lose income, struggle to find alternative employment, and may never regain my former wages.”
      “Oh, that’s just the lump of labor fallacy”

      No it’s not, it’s a statement of what actually often happens. It’s the converse, the belief that because there is always exactly as much employment as there are people to be employed, it follows that all wages are exactly the appropriate wages, and from that, that the previous wages must have been too high. It’s that belief that that is common and fallacious.

      Reply
      1. Procopius

        I’ve been puzzled in recent years by the frequent “warnings” that automation is going to eat all the jobs. I keep waiting for some economist to point out that this is the clear expression of the “lump of labor fallacy.” The closest I’ve seen is Dean Baker at the Beat the Press blog, but he usually just restricts himself to pointing out that it simply is not happening, that if it were happening we would see a huge increase in productivity and we are not. When, a couple of years ago, I was trying to figure out what Say’s Law was saying I ran across the origin of the “Lump of Labor Fallacy,” which is basically the assertion that there will always be plenty of remunerative employment because machines create new markets and new opportunities so do not put people out of work. Alas, I didn’t bookmark the article — the first known person to make the argument had a wonderful name, including the title Squire, and I cannot find it again. I would think that people like John Taylor, or Greg Mankiw, or Wossisname Haskell would be pushing that claim for all they are worth.

        Reply
        1. Sandwichman

          You must be thinking of Dorning Rasbotham, esquire. I rescued Squire Rasbotham from obscurity. He was a quaint old coot who concluded that poor people weren’t rich because they spent all their money on ale.

          Reply
        2. JTMcPhee

          I’m curious what new machines are “creating new markets and new employment opportunities.” iPhones and other addictive ego-devices? I guess in Apple Stores, and slave labor in China. Those farm tractors and harvesters that are secret gardens, where only the company tech slaves have the plugs and cables and computers and code to figure out what parts to remove and replace? There’s lots of “innovative’ crap out there, of course, but what ‘jobs” are coming from them, jobs that people dumped by Captains of Industry seeking bonuses have a chance of “moving to” physically or “retraining” (total fraud, from what I read) to perform? Sounds like the notion of ‘surplus population” is priced into all this theorizing, when one gets past the pastel candy coating of the sales pitches.

          And if “they” are right, and automation is going to eat all the jobs, what will the many little bits of “economic output” consist of, and who will buy them, and with what, and how much additional damage will the automated making of all those bits cause? And there are all the “troubling” end-game imponderables, like the endpoint of the Forever Everywhere War Racket with the weaponization by Really Smart People of practically everything and everywhere, and the notion of the Singularity (which begs a curious question, “What is intelligence?”), and the Grey Goo hypothesis, and of course the end of the planet’s habitability for 7 or 8 billion consuming humans, stuff like that.

          It’s likely p9ossible to sketch a vector that describes the current “arc of history,” and to my mind it’s like the airplane pilots say, “continued controlled flight into terrain impact.” Too bad the momentum and inertia of all those human drives and desires and stratagems, driven in part by instinct but vastly manipulated by giant ladles of Bernays Sauce and psychopathologies, can’t be subtly redirected toward operating on a different organizing principle.

          Reply
        3. J Sterling

          Machines don’t eat all the jobs, because an unemployed person will sooner or later truckle to an employer in return for food on the table. Machines eat all the wages. Don’t tell me you haven’t seen the evidence for that. Even journalists are seeing the evidence for that, now it’s happening to them.

          Reply
    1. beth

      I feel this was the case historically since women have been assigned work that is not paid, so is not really work.

      Reply
    1. JTMcPhee

      Re Luddites and “everybody knows:” Did you possibly mistake a verb case in your second sentence? Maybe the curt affirmative-definite “Who WERE wrong” should have been “Who WAS wrong?”, as in “the Luddites,” or the “capitalists/enclosureists”?

      I mean, it’s not like social-political-economy memes, tropes, shibboleths and myths are ever in error, as they carry pro-wealth-concentration memes forward in time. Because there’s quite a range of notions about what Luddism was and what it meant and means: “The Luddites were right,” https://medium.com/@kalensk/the-luddites-were-right-c54aa0b62e8e, and lots of other links under “The Luddites got a bad rap,” of which many are novel content, not just re-posts of the original.

      Reply
      1. Sandwichman

        The Luddites were virtually a literary phenomena. And in all their writing I’ve read they never uttered a statement that could be construed as a belief that there was a fixed amount of work. Nor has any accuser ever cited such an utterance. Another instance of a “most tenaciously held and generally least articulated” belief, indeed!

        I discuss this episode in my book draft.

        Reply
        1. Synoia

          The Luddites were opposed to the flying jenny, which improves the productivity of a weaving mill, as they believed it would reduce the amount of work available.

          They were wrong because the cut in costs increased the amount of cloth sold.

          Intrinsically the Luddites (plural) believed in a unit of work (lump of labor) and tried to protect it. They, the Luddites were (plural) wrong, because price competition drove down the price of cloth, and extra demand drove the revenues and total wages higher.

          Reply
          1. The Rev Kev

            That may have been true in the long term but not the short. Had an ancestor that was caught up in the UK Swing riots of 1830 and ended up on a government-paid trip to the Antipodes. The sort of machines that were being smashed up were those that replaced workers during the vital winter months. Without that traditional work, those workers had no way to earn money to tide themselves and their families over the winter months and were faced with the prospect of starving. There was parish relief in that era but the sort of people that owned and ran those machines also served as parish officers and their main priority was keeping as many people as possible off parish relief to lower their local taxes. Workhouses were introduced several years later but take my word for it that that was not really an improvement.

            Reply
            1. Synoia

              Precisely. You make my point.
              Short term disruption for long term gain.

              Being transported turned out to be a better life for the transportee’s.

              The male average adult height for english working class in 1830 was around 5′ 5″. Of the transportee’s children it was nearly 6ft.

              The difference was a much less polluted environment, more and better food.

              The point being discussed is lump of work. The luddites wanted to preserve a lump of work. It was impossible. The British unions tried to impose similar thinking in the 50s and 60s, and the consequent combination of labor inflexibility, bad management and the English class system caused the destruction of most of British manufacturing and the jobs.

              Reply
          2. Sandwichman

            “The Luddites were opposed to the flying jenny, which improves the productivity of a weaving mill, as they believed it would reduce the amount of work available.”

            You seem to know what the Luddites “believed.” Can you produce a citation in which a Luddite stated this is what they believed? I will pay you $100 for each verified statement from an actual Luddite that states such a belief. I can make this offer because I have read an entire volume of writings of the Luddites in which there was no such belief stated.

            The Luddites were fighting back against wage cuts, poor working conditions, oppressive master/servant laws, proliferation of shoddy goods that were spoiling the market. “The Luddite fallacy” only appears as a “belief about a belief” held by opponents of the Luddites and in some cases by self-styled “allies” who criticized their tactics.

            Reply
  2. FortyYearsInThe UniversitySystem

    The “Invisible Hand” again. Folks who use that term haven’t read the source. The Invisible Hand is what prevents merchants from colluding at every meeting to cheat the people by monopolistic practises. The Invisible Hand is thus governmental regulation of commerce for the good of all. I shudder every time I read about “the Invisible Hand” ie., of the so-called Free Market–which doesn’t in fact exist. “Economists” are so often not merely pernicious but stupidly and ignorantly so. Our own fault, I suppose, for not holding their feet (or other suitable parts) to the fire in respect of their disingenuous and evil crap. So many well meaning persons are so often like baby birds, their mouths (that is, their minds) wide open to be trustingly (and stupidly) fed by their mothers.. who turn out to be weasels in the employ of rentiers and such. Just sayin’.

    Reply
    1. Procopius

      Errr… I thought Adam Smith pointed out that merchants, in fact, DO collude at every meeting to cheat the people by monopolistic practices.

      “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

      — Adam Smith, Wealth of Nations, Book I, Chapter 10, Para. 82

      Reply
      1. witters

        He did, and he was against it. It was why “The government of an exclusive company of merchants is, perhaps, the worst of all governments for any country whatever.” Volume 2, Book 4., Ch. 7.

        Reply
  3. TG

    Um, not quite sure where there is headed. Let me try another angle.

    The world does not have to be a zero-sum game. It is certainly possible, by sustained investment, to increase the amount of wealth and jobs etc. In the long run there is no physical reason why we cannot all prosper together.

    However, the world does not have to not be a zero-sum game either. At any given time, there is only so much food, so many resources, so much industrial capital – and while these can be increased, they cannot generally be increased very quickly, nor automatically under all circumstances.

    Bottom line: if union leaders feel that flooding the labor market by either the government encouraging high native fertility rates, or importing the surplus population from the third world, will hurt the wages and working condition of labor, they are not being irrational. Supply and demand still works, even if demand is not fixed in stone for all time.

    Reply
    1. Sandwichman

      Yes, there both “is” and “is not” a “zero-sum game.” It’s a paradox and paradoxes can almost always be traced back to the limitations of language.

      With regard to game theory, a zero-sum game is not the “worst” kind. A prisoner’s dilemma or social trap is a kind of game where everyone loses by each pursuing their own self interest.

      Reply
    2. JTMcPhee

      How much control over the “supply of labor” do union leaders have, again? And is it incorrect to note that “the world” is in fact running short of resources? Like topsoil and water and trees and many, many species including ocean fish and base organisms, and that it appears that not only can they not be increased AT ALL in any sufficient way, their supply curves are trending ever more steeply down.

      A zero-sum game presumes a game space that will persist. There’s scant evidence of that, far as I can see (though certain players in the complex Game of Life will continue, in their lifetimes, to take and use up way more than the unfortunate mass of people forced to play.

      Reply
  4. James McFadden

    The issue seems to come down to the propaganda surrounding profitability. If the production and distribution of goods is to only be based on maximizing profit (i.e. capitalism), and not on promoting “the general welfare,” then the ruling class must always invent a theodicy to explain to the workers why their lives are so screwed and to justify why it is natural for the rich to enjoy the fruits of their non-labor.

    Thanks for this post. I always enjoy articles that question underlying assumptions, be they economic assumptions or the basis of some other field.

    Reply
  5. Tomonthebeach

    Interesting remarks from Yves. I had to read Mark Paul’s wordy paper several times to grasp the gist, which finally seemed reasonable. One avenue that robotization might follow seems absent from the discussion, and it is a change in the workforce creating two classes of workers: service workers, and everybody else. Are service workers (nursing aids, waiters, burger flippers, eldercare aids, etc.) at risk of becoming 21st century peasants? Incomewise, it is possible that certain classes of jobs will have a highly disparate income glass ceiling as they do today. But once the transition from industrialization is over, what will the world look like for labor?

    There is a workforce culture than is a powerful constraint on upward mobility due to its sour-grapesing of higher education or even diligent study. Might such norms create and sustain a service underclass? I have known several bright colleagues who were late bloomers, only pursuing university educations in their late 30’s because of cultural constraints. In some cases, families actually expel overachievers rather than brag on their successes. Sad, but it happens. I suspect that these cultural forces are what mages MAGA-heads so blind to political corruption that is worsening their quality of life as well as their longevity – cough cough.

    I see little evidence yet that technology can accommodate workers of limited cognitive capabilities or whose temperament limits them to gig work (often interspersed with periods of incarceration). Will robots be tolerant of humans slower than they are? Can people of limited IQ (for lack of a better metric) function at high enough productivity levels in a high tech world to justify higher wages? Will AI compensate for human IQ? Is happily everafter eventually going to depend on economic caste as it appears to be today?

    I still do not yet see a convincing answer to such questions.

    Reply
  6. Darius

    There are not enough hours in the day to do what I want to get done. The amount of work available is limitless for practical purposes. At least much more than what is getting done. It’s a matter of paying people to do it. That’s where MMT comes in.

    Reply
  7. Jeremy Grimm

    I not sure exactly what this post is arguing but I think it’s easy to agree with the conclusion from the abstract of Tom Walker’s paper cited at the beginning of this post:
    “… substituting a dubious fallacy claim for an authentic economic theory may have obstructed fruitful dialogue about working time and the appropriate policies for regulating it.”

    Reply
  8. JBird

    It’s just my observation that the business model of the past forty years is to make the cheapest, most craptastic, product or service, with as a few people as possible even if it makes the whole less efficient, and in the long term destroys the business, as long as it makes the most immediate profit possible. So of course, the human herds are not people, but tools that think, and tools do not have any rights or any purpose, but to be used and discarded once unneeded or broken.

    The end results of the commodification of everything is this. The “Free Market” ceases to be means for exchange of goods and services but the extraction and collection of money.

    Reply
  9. Darthbobber

    The lump of labor fallacy, and its 1st cousin, the “wage fund”, persist because they are useful to some interests and also fit in well with what Thurman Arnold famously referred to as “the Folklore of Capitalism”, (as Arnold said “By The Folklore of Capitalism, I mean those ideas about social organization which are not regarded as folklore but accepted as fundamental principles of law and economics.”

    Any economic historian (not quite the same animal as a theoretical economist, btw.), is aware that there have been fairly prolonged periods in capitalist economies when real wages and the rate of profit rose together, periods when real wages rose at the expense of the rate of profit, but an increasing MASS of profit made all the difference, and periods (like the last nearly half decade,) when all sorts of aggregate data rose smartly in the graphs with real wages declining and the rate of profit (as distinct from the rate of exploitation) stagnant or falling.

    Every discussion of the minimum wage is likely to raise shrieks from some about the “inevitable” decline of employment that must follow, which requires belief in both the wage fund and a Pareto optimum at which things presently sit.

    (Rereading Arnold at the moment, so must toss in this gem from the chapter on the folklore of 1927: “Temporal government consisted of business and politics. The theory was that these things ran themselves, the one being impelled by beneficent economic laws, which operated because of the inherent balance of human nature, and the other being an invention of the devil which ran automatically because of the weakness of human nature.” He describes the “thinking men” whose utterances still overwhelmingly filled the papers and journals of opinion, not those deplorable small fry who reelected Roosevelt in ’36.)

    Reply
  10. Steve Ruis

    I am very reluctant to use the ideas of economists on labor as these are the very people who based economic theory upon transactions in which buyer and seller each had perfect information regarding deals. (Has this ever happened? Once?)

    The people who claim that “the marketplace” is the best mechanism to handle labor are similarly siding with the people with more power. The marketplace might be the best mechanism to set the prices for labor, if … if both parties are equally powerful, which they are not. There is a reason that the wealthy have been waging a war on organized labor since its inception (one that they have won here in the U.S.). As long as they have the power, the call for “let the market decide” is basically equivalent to “just let us decide.” The result is the labor market we have now, in which employment is up, way up (they say), but wages are still static.

    Reply
    1. JBird

      The marketplace might be the best mechanism to set the prices for labor, if … if both parties are equally powerful, which they are not.

      It is amazing how many people refuse to see this.

      Reply
  11. Newton Finn

    “The metaphysical ‘mechanisms’ purportedly producing public benefits from private vices, the invisible hand that leads people to contribute to the public good although they have only their self-interest at heart….” Thank you for deconstructing this patently absurd “principle” upon which capitalism, especially in its most virulent neoliberal form, is based. A similar deconstruction needs to occur in the area of law, where the correlative principle is that the truth will emerge from two adversarial sides doing their utmost to twist it in opposite directions. I speak from 36 years of participation in that “truth-seeking” process, the last several years of which were substantially devoted to exonerating an innocent man thrice convicted, in three separate trials by three separate juries, of the rape and murder of a child.

    Reply
  12. paul edwards

    “Capitalism is the extraordinary belief that the nastiest of men for the nastiest of motives will somehow work for the benefit of all.”

    Keynes

    Reply

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