The Economist is up to its old tricks again, responding to Lucy Kellaway's Financial Times column from last week with a Buttonwood column telling "Why the old should not make way for the young."
By some strange coincidence, the Sandwichman just finished a first draft of "The 'Lump of Labor' Hoax: Evidence, Inference and the Blur of Bamboozlement," which probes far beyond the platitudes of The Economist into the plagiarism, forgery, incomprehension and evasion that has characterized the fallacy claim since its inception.
Pages
- Jobs, Liberty and the Bottom Line
- Time on the Ledger: Social Accounting for the “Goo...
- Intermediate Goods and Duplication
- The Long Term Problem of Full Employment
- The Source and Remedy of the National Difficulties...
- Grundrisse: "Capital (like property) rests on prod...
- Economic and Philosophical Manuscripts of 1844: "W...
- McCulloch on Combination Laws
- Submission to the White House Task Force on Middle...
- Thinking Along the Right Lines
- The Problem with "The Problem of Social Cost"
- State and Prospects of Manufactures
Hello Tom. As you may recognize, I have been trying to get my head around this concept of the "lump of labor fallacy." I'm often unsure of what the fallacy is said to be, but I've finally mastered (I hope) the concept that what you're describing is a fallacious claim of a fallacy. How is it that when the claim is made, the elacticity of the labor need is never explained. I read the many references to the lump of labor as a fallacy, but none offer an explanation of where all the labor need is to come from. The Buttonwood article states,
ReplyDelete"Economists will recognise the flaw in this logic. This view is based on the “lump of labour” fallacy that states there is only so much work to go around." As a refutation of the "fallacy" Buttonwood offers, "If the lump-of-labour argument were correct, you would expect to see that a high employment rate among the wrinklies would be offset by a low employment rate among the youngsters, and vice versa. Not a bit of it. High elderly employment rates are associated with high youth employment." That explanation is bogus. The comparison required to support the claim that a lump of labor is a fallacy would more likely be a time comparison demonstrating that when one age group shows an increase, the other shows no decrease. In other words one has to demonstrate
that one age group, or any two labor groups, are not taking jobs trom the other. Such a comparison requires holding total labor constant and there being a correlation between one group's loss and the other's gain. Buttonwood's comparison only shows a similar pattern of employment between older and younger age groups across OECD economies. "High elderly employment rates are associated with high youth employment." But no explanation is given, nor demonstrated, regarding what antecedents may cause the two patterns of employment.
Buttonwood then offers this explanation as to why there is no lump. "So why don’t the oldies keep the youngsters out of jobs? For the same reason that women don’t keep men out of jobs. When people work for a living, they earn money."
That's a good argument for expanding the labor force by any means possible, but it doesn't negate the fact that at any given time there is only so much work to go around. When its good, its all good, but when its bad, its awful. Buttonwood is offering an excellent rationale for government stimulus efforts, but no refutation of the lump of labor concept.
Another unsupported claim in the article, "Indeed, one reason that corporate-pension funds are in deficit is that they have been raided on so many occasions to fund early-retirement programmes." That may be so, but no supportive reference is offered. Possibly those corporations used current funds from income to support the early retirement programs in their efforts to reduce payroll and, thereby, recoup the spent funds. Buttonwood then criticises this approach with, "Companies assumed they could make good on these long-term promises because they hoped future investment returns on their pension funds would be as good as they were in the 1980s and 1990s." The question that arises is how does the demonstration of such poor management decision making support Buttonwood's fallacy claim.
It is amusing that Buttonwood's article is brought to a close by an ever more absurd conclusion. "If early retirement really improves living standards, why stop at 60? Why not 55? If governments moved the retirement age down to 40 every young person would have a job and everyone would be living in the lap of luxury. Alas, the land of the lotus-eaters remains a myth. Get back to the office." How is the latter a rational extension of the former? It's a fallacious extrapolation in reverse.
Jack,
ReplyDeleteThe observation in your third sentence is the key. Fallacy claimants avoid elasticity like the plague. In the short run, demand for labor is often inelastic in response to changes in price. To observe short-run inelasticity and want to do something about it is not to assume long-run fixedness or even to assume that the inelasticity will persist indefinitely. As Keynes said... well, you know what he said.
Buttonwood and his ilk are bullshitters, plain and simple. They don't have good arguments so they reach for the tried and true ad hominem, ignoratio elenchi, and extreme reductio ad absurdum, trusting that the sheer virtuosity of their sophistries will dazzle the distracted onlooker who has better things to do than rummage through all the befuddling bombast.