Taken from: EconoSpeak: From Lumps of Labor to Common Pool Resources
From Lumps of Labor to Common Pool Resources
The lump of labor charge has a long and complicated history, surviving several explanatory twists and turns and passing effortlessly from the propaganda mills of employer associations, to newspaper columns to introductory economics textbooks. If, on the one hand, claimants were remiss in providing textual evidence to support their claims of fallacy, their insistence that shorter work time advocates invariably committed the fallacy creates a double bind for the concept of economic man.
If workers are notoriously irrational about the question of selling their labor, how can they be generally assumed to be rational economic actors?
One possible answer would be to say that it would be rational for workers individually or in small units to act as though there is a lump of labor even though in the aggregate, it does no good. That argument would resemble the paradox of thrift, with the difference that economists down through the ages have not devoted so much energy chastising and ridiculing savers.
Less charitably, it would appear that the economists' perennial attachment to the fallacy claim discloses a profound and hypocritical ambivalence – that is to say, a lack of rigorous commitment – toward their supposedly rational economic actor. They don't really mean it. Rational economic man is only rational when it suits the economists' argument.
Leaving aside the ridiculous notion of a lump of labor of fixed quantity, viewing the labor supply as a collective or common pool resource may not be all that far-fetched. In "Foundations for Environmental Political Economy," John Dryzek explored the prospects of an alternative to economic man -- a Homo ecologicus. Dryzek dismissed previous efforts at posing an ethical, environmentalist economic subject as flawed by wishful thinking and reductionism. "The ecophilosophical house is an attractive dwelling but nobody has any idea how to build it." On the contrary, "we know how to build the microeconomic house, but it is an ugly and incommodious dwelling?"
The alternative Dryzek proposed was based on his interpretation (or over-interpretation, as Dryzek confesses) of Nobel laureate Elinor Ostrom's work on Common Pool Resources. That new political economy would be one that can account for instrumental rationality – and even deploy it in its proper place – but that also can point to alternatives grounded in something firmer than wishful thinking. Those alternatives can't be entirely specified in advance because they evolve over time in response to changed circumstances. However, their general characteristics can be deduced from past experience.
Those alternatives rely not only on subjectivity but also on inter-subjectivity; that is, on communicative rationality. What distinguishes the successful case studies Ostrom documented is that "individuals repeatedly communicate and interact with one another… they can learn whom to trust, what effects their actions will have on each other and on the common pool resource, and how to organize themselves to gain benefit and avoid harm. These practices and learning constitute a kind of social capital upon which they can build institutional arrangements for resolving difficulties." People learn to act differently. They begin to behave more "straightforwardly" toward each other and less strategically.
Successful institutions of this sort rarely come into being through explicit contracts.
More often they evolve through long periods of informal, collective learning about what works and what doesn't. Another approach to these institutions would involve more deliberate experimentation with institutional innovations. For such institutional reconstruction to take place, however, it is essential that participation "move beyond the narrow community of political economists and political theorists and into society at large."
One such deliberate experiment would be to retrieve a lump of labor counter-narrative, modifying the conventional myth "just a bit" – but in a way that makes "all the difference in the world." Instead of a fallacious assumption, this re-functioned lump could stand for an ethic of collective and cooperative working behavior. In this ethic, people "hold up their own end," but they also do not run out too far ahead of everybody else. They "share and share alike" the burdens, the rewards, the pain, and the joy of work.
The traditional craft workers' ethic involved treating employment as something very similar to a common resource. That is to say, it included the proposition of a "lump of labor" to be divided up between the available hands. That is, not an abstractly 'fixed' amount of work, but a concretely given quantity. It follows from such an ethic that if there aren't jobs enough to go around, those who have one should share by giving up some of their hours. Whether or not that idea makes sense in terms of industrial efficiency, as an ethical proposition it is no more or less fallacious than the golden rule or the Ten Commandments. It is simply the inevitable reciprocal movement to co-operation.
Although economists have traditionally insisted that the lump-of-labour idea is a fallacy, one economist, Sir Sydney Chapman, suggested that even if it was a fallacy, it might have prevented workers from competing ruthlessly for jobs and thus undermining their standard of living. If so, it led them to do the right thing even if it was for the wrong reason. Chapman may have almost hit upon something rather profound.
What if we view the so-called lump-of-labor as an ethical proposition rather than as an economic assumption – fallacious or otherwise?
Collectively, working people would be better off if they joined in refusing to compete in a race to the bottom. Of course, some individuals might have to forgo receiving more than their share of the "economic progress" that would result from competition between workers and the resulting low wages. But where does it say that it is ethical for a few people to benefit at the expense of the many? Furthermore, by collectively conserving work effort, the workers acting co-operatively could achieve higher levels of productivity than otherwise as well as build greater social solidarity and security.
What I'm getting at here is not only that labor can be regarded as another common pool resource among many but that it is the common pool resource par excellance – a case that can provide the most far-reaching and democratically vital instance of a CPR. Donald Stabile alluded to something similar when he noted, in "Accountants and the Price System: The Problem of Social Costs," that "Human labor is also the primary constituent of the society whose values must be part of any criterion of social evaluation. The appropriate starting point in any policy directed at social costs is with those imposed on labor."
In his article, Stabile focused on the perspectives introduced by John Maurice Clark in his Studies in the Economics of Overhead Costs. Clark argued that labor should be treated, socially, as an overhead cost of doing business rather than as a variable cost of the employing firm because the cost of maintaining the worker and his or her family "in good stead" has to be borne by someone whether or not that worker is employed. "If all industry were integrated and owned by workers, what would be the relation of constant to variable expense? ...it would be clear to worker-owners that the real cost of labor could not be materially reduced by unemployment."
Commenting on the movement of accountants during the 1970s that sought changes in the way social costs were accounted for on the corporate account books, Stabile concluded that the movement had not developed useful concepts for examining social costs. To explain why it had failed, Stabile placed the ideas of social cost accounting in an institutionalist context, using the perspective on social costs set forth by Clark and by K. William Kapp. In their work, Clark and Kapp introduced a framework that included a process of social evaluation, a process in which analysis of the social costs of labor is central. Such an outlook is missing from the works of social cost accountants, "Market values are a weak thread from which to hang a whole system of value," Stabile argued, "but accountants cling to it doggedly. Without an alteration of this basic tenet of accounting, social cost accounting cannot develop into a criterion of social value."
Returning once again to the thought experiment of the hypothetical state where all industry is integrated and owned by workers, here is an instance of a non-market process of social evaluation whose results can readily be readily be worked out with little hesitation, unemployment would be regard as waste rather than as a regrettable but necessary measure for containing the cost of labor.
This is another way of saying that a social accounting for unemployment would come to a very different assessment of economic "efficiency" than would a narrowly financial one. The "fallacy" of the lump of labor thus results from the refusal of workers to arbitrarily limit their perspective to the narrow, self-interested terms favored by business propagandists and economists. "In any highly developed discipline," wrote Eugene McCarthy and William McGaughey, in Nonfinancial Economics: The Case for Shorter Hours of Work:…there is a tendency for thought processes to become so specialized and refined that its respected practitioners appear to lose common sense. If medieval philosophers counted the number of angels that could dance on the head of a pin, some contemporary economists deal in equally strange and fictitious concepts. To many of them, it would seem, money is reality, while leisure is an empty spot in time devoid of wealth-producing activities.
