Hutt vs. Keynes

It's hard to know where to begin with W.H. Hutt's Full Employment and the Future of Industry. The premise is so intuitively implausible as to provoke perverse wonderment that maybe there is something to it after all.

There isn't, of course. The catch is Mr. Hutt's first "basic principle" of employment: that low enough prices will ensure full employment of all productive resources. It is hypothetically true if and only if there is no veto power over the lowering of the price of any one resource. That is a condition that doesn't exist, never has existed and couldn't exist because there is no way to bring it about. Who needs a "fixed amount of work" fallacy when you've got a "perfect competition" illusion?

Both Hutt and John Maynard Keynes proposed post-war full-employment strategies in 1945. In The Long Term Problem of Full Employment, Keynes foresaw an initial period of rationing and controls on investment to control inflation, followed by an intermediate period of government-stabilized investment and finally a period of "wise" consumption and increased leisure. Hutt envisioned only an initial government program to bring the economy to peacetime full employment.

Given that Hutt's work-more prescription was for a one-time "shock therapy" while Keynes saw working less as the ultimate outcome of a process, the two are not exactly diametrical opposites. But they're close enough. Hutt seems to have been convinced that the economy would indeed be self-adjusting -- if it weren't for those pesky unions.

Elsewhere, Hutt had some rather strange things to say about unions, political responses to them and leisure. For example, he maintained that the press and politicians were intimidated into virtual silence on unions and their abuses toward the end of the nineteenth century, an impression that is easily dispelled by reading nineteenth-century press commentary on unions. On leisure, Hutt argued, on the one hand, that workers didn't really appreciate it and want it until after they got it, incidentally, so to speak, while actually pursuing something entirely different (e.g., "The benefits derived by the workers from industrial legislation were incidental and not those which were deliberately sought").

Shorter hours have in practice been sought almost universally, not because leisure as such has been valued, not because the worker was seeking to escape from the drudgery of factory life, but because the reduced contribution from each worker has served as a means of work-sharing under restricted competition. But whatever the motive for particular collective determinations of hours of work, they have often had an important effect upon taste. They have obviously exerted considerable influences on individual preferences (as between income and leisure, for example) and social standards. (Economists and the Public: a Study of Competition and Opinion, 177)

On the other hand, Hutt also argued that the loss of value to some resources resulting from deliberate idleness can only be considered a desirable effect, from the viewpoint of "consumer sovereignty," (Hutt's term) to the extent it had been explicitly sought as a goal.

The point may be illustrated by consideration of the case of an increased demand for leisure, which is one of the causes of what has been termed a 'decreased propensity to consume'. Although, ceteris paribus, some physical resources tend to lose value in such a case, the result itself is in no sense to be regretted in the light of the consumers' sovereignty ideal. On the other hand, if there is a similar decreased willingness to co-operate through exchange, owing to a collusive (or State enforced) reduction of the hours of labour, with work-sharing intention, there will be a similar tendency for some co-operant physical resources to lose value (and perhaps to fall valueless) in a manner which does conflict with the ideal (Theory of Idle Resources, 43-44).

In short, "consumer sovereignty" means just what Hutt chooses it to mean — neither more nor less. When the consumer, as producer, chooses to do something Hutt deems irrational ("restrictionism") then that consumer ceases to be sovereign. Or maybe he is just saying that rich folks' demand for leisure is not a bad thing but workers' demands for shorter hours is bad because it's motivated by a sinister "work-sharing intention."

Hutt is adorable. What else can one say about an economist who had the audacity to proclaim the following:

The belief that unrestricted competition in the labour field must in itself lead to oppressive hours of labour, or in other words, that the individual worker as a consumer of leisure will be forced to demand less of it than is good for his health or non-material welfare, is an illusion. Where the worker has suffered in this respect, it has been the product of his own misguided will. He has been dominated by an ingrained ardour for increased earnings which are obtainable by him, in any given competitive situation, through increased output. The worker has shown, therefore, an ardour for work, the presence of which has been obscured by the early and continued existence of restrictionism.

Let's get this straight, then. The workers' misguided will led them to overwork themselves at the same time as their irrationality caused them to restrict their work effort for reasons unconnected with leisure and health!