Thursday, February 17, 2011

Mr. Tufnell's Pamphlet Versus Mr. Ewart's Testimony

"What do you suppose to be the chief motive for the operatives here advocating the Ten-Hour Bill?"

The question posed by Edward Carleton Tufnell, examiner for the 1833 Royal Commission on Employment of Children in Factories; the reply to that question from Peter Ewart, master cotton-spinner and weaver of Manchester; and Tufnell's appropriation, revision and condensation of Ewart's reply constitute the fountainhead for the lump-of-labor fallacy claim. Tufnell's appropriation conveniently left out details that would enable the reader to critically assess the argument's validity, reliability and robustness. He also shifted the form of the proposition in question from supposition ("what do you suppose to be the chief motive...") to assertion ("The Union calculated...").

Ordinarily, this rhetorical move should clearly establish the burden of proof as residing with Tufnell. But through repetition the fallacy claim has evolved into a presumption in which this burden of proof has been shrugged off and shifted to the other side. Such burden shifting can result in the fallacy of petitio principii or circular reasoning. Thus the fallacy claim, as it is commonly presented, is itself a fallacy!

Ewart's supposition, however, does not carry the same burden of proof. It contains a hypothesis rather than a substantive commitment. As such, it lends itself to further consideration.
What do you suppose to be the chief motive for the operatives here advocating the Ten-Hour Bill?

Many of them expect to receive the same wages for ten hours as they now receive for twelve. The mule-spinners earning high-wages appear to be almost the only class of workpeople in this quarter who are in favour of a ten-hour bill. Many of that class have been thrown out of employment in consequence of their combinations to keep up nominal high wages. Their earnings are greatly encroached upon by the contributions they are compelled to make for the support of those who are unemployed, and they imagine that if the hours of work are to be limited to ten, new mills must be built to supply the diminished quantity of yarn, and that the unemployed hands which they now have to support will then be employed in these new-erected mills. This expectation is obviously fallacious, as the cost of yarn and cloth produced would be so much increased by the same expence of fixed capital falling on a smaller quantity that the demand cannot be expected to continue, especially as we have to meet the competition of foreigners who are working longer hours, and at much lower charges. This circumstance of unemployed hands being supported by those who are employed occurs in all cases where wages are kept up by combinations, and is especially exemplified in the case of the combination of London journeymen tailors, who have been more persevering and successful, I believe, than any other. Their nominal high wages bring numerous applicants for work, and those who have work have such heavy contributions to pay to support those who are out of work, (lest they should offer to work under the combination prices,) and the costs of their houses of call and other establishments, and of paid officers for enforcing their combinations, are so large, that they carry little of their earnings home, and it is understood that but few families in London are more miserable at their homes than those of the journeymen tailors.

Ewart's supposition can best be understood as a rendition of the popular version of the discredited wages fund doctrine, which John Stuart Mill famously recanted in 1869. In his forward to John Vint's Capital and Wages: A Lakatosian History of the Wages Fund Doctrine, Mark Blaug observed that "Of all the doctrines of English Classical Political Economy that modern readers find difficult to understand there is none so bizarre as the wages fund doctrine." James Bonar described the theory of the wages fund as "formed from the facts of a perfectly exceptional time, and on the strengths of two truths misapplied, the doctrine of Malthus (on Population) in its most unripe form, and of Ricardo (on Value) in its most abstract." Jane Marcet's fictional 1816 conversation on what determines the rate of wages remains the clearest exposition of the doctrine, as well as its progenitor:
Caroline: It is then most desirable that the rate of wages should be such as to afford the lower classes something beyond a mere subsistence; but what is it that determines the rate of wages?

Mrs. B.: It depends upon the proportion which capital bears to the labouring part of the population of the country.

Caroline: Or, in other words, to the proportion which subsistence bears to the number of people to be maintained by it?

Mrs. B.: Yes; it is this alone which regulates the rate of wages, when they are left to pursue their natural course. It is this alone which creates or destroys the demand for labour.

In Ewart's scenario, the workers' supposed expectation that shorter hours would require the construction of new cotton mills was fallacious because the increased cost -- and consequently diminished demand -- for yarn and cloth would make such expansion unprofitable. Ewart made two suppositions, both of which are plausible: 1. that the workers expected the expansion of fixed capital and 2. that such expansion would be unprofitable and thus would not occur.

However, plausibility does not establish inevitability. There are several other factors that Ewart didn't explicitly consider in his suppositions: 1. that the demand for yarn and cloth may be inelastic such that even a reduced demand at a higher price may still result in an increased total revenue; 2. that output subsequent to a reduction in hours may not decline in proportion to the decline in hours; 3. the short-term, strictly economic results may not be the chief motive of the workers; 4. that an increase in nominal wages may result in a higher level of effective demand; and finally, 5. that treating unemployment as external to the operation of the firm even from the standpoint of capital but most certainly from that of society.

The paradox that an increase in the supply of a commodity can result in a reduction of total revenue was first noticed by Gregory King in the seventeenth century and published by Charles Davenant. In his reply to Tufnell, Ewart appears to assume that an increase in the price of cotton goods will result in a drop in demand that is proportional or greater. That may be the case but Ewart gives no indication that he has considered the alternative.

In his study of "The Lancashire Cotton Industry," Sydney J. Chapman cited the reports of factory inspector Leonard Horner that total output in many factories remained unchanged following the implementation of the 1847 factory acts, which reduced the hours of work from twelve to ten. Even where there was some decline in output, it was much smaller than had been expected. The act of 1874 resulted in a similar experience, with the effect of the reduction of hours on the cost of production judged to be "trifling and insignificant." With regard to the motives of the cotton spinners, Chapman conceded that "they did not always succeed in avoiding the 'lump-of labour' fallacy." He qualified this criticism, though, with the following observation:
We must notice, however, that those who advocated shorter hours, both in this period and later, found also many sound reasons for their action in the expected effect on the health and comfort of the operatives. They perceived that high wages were of little value to those who had little time to spend them. Moreover, the mistakes made by the operatives lay not so much in their fundamental opinions
as in some of the reasons given by them for holding these opinions.
Some of Ewart's debatable assumptions have been addressed in the general critique of the wages fund doctrine. For example, Sir Edward West raised the question of the relationship between money wages and real wages, pointing out that the increase of the funds available for paying wages was "the effect, and not the cause, of increased demand for labour." That increased demand results first in an increase in the money wages of labor and only subsequently an increase in the quantity of subsistence goods that constitute the real wages (Vint 111-112). Thomas Hodgkins challenged the predetermined nature of the doctrinal wages fund, arguing that consumption articles for workers are not accumulated in advance as a stock but are constantly replenished as a flow (Vint 117-118).

From Ewart's perspective, the social cost of unemployment may seem to be a matter that doesn't concern his firm. However, from the perspective of the workers or of society as a whole, John Maurice Clark has argued, unemployment is a social cost the firm imposes on the unemployed and society. This is not to say that Ewart's perspective of his firm's utility function is wrong. Only that it is not always a good idea to base social policy on it.

To sum up, with the exception of his rhetorical flourish about workers' expectations being "obviously fallacious", Peter Ewart's arguments against the ten hour day were plausible but debatable. The validity of his assumptions would be subject to empirical test. Edward Tufnell's appropriation and reformulation of Ewart's supposition into an flat assertion, however, is neither plausible nor debatable. It is an unproven allegation of a "secret" objective or "trick" that would normally be impossible to refute. In this case, though, we have what is clearly the source document on which Tufnell based his amplification. Ewart's statement is, in effect, the "evidence" that Tufnell is withholding because it doesn't support the vehemence of his claim.
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.
Tufnell's pamphlet was, it should be recalled, alleged to have been instigated and financed by the Whig governmentment, an allegation that gains credence from the extensive puffery that followed its publication.

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