>To conclude my discussion of the work-spreading tax, compare the following
>quotation from the book 'Unemployment' by Layard, Nickell and Jackman:
>
>"The idea here is to redistribute the available work to more people. But
>once again, the available work is not given - that is the 'lump of labour
>fallacy'. The equilibrium unemployment rate is independent of hours of
>work. Thus if hours are reduced and employment rises for a while, wage
>pressure will soon increase and the amount of work available will have to be
>reduced. Employment will revert to its former level. Thus cuts in hours
>provide a poor antidote to unemployment. But they certainly provide a lower
>standard of living." (page 73).
In case anyone missed the implication, Cameron stressed that "The labour
market is a market like any other, although unusually subject to
institutional distortions and imperfect competition. . ."
At first glance, it may not seem remarkable that an economist would both
decry work sharing as a 'pop solution' and invoke NAIRU to bolster the
authority of that argument. The following remark, by James K. Galbraith,
throws a different light on the relationship between NAIRU and the lump of
labour fallacy:
"The idea that people can readily be switched from one line of work to
another would appear to stem from the idea that labor time is a commodity
with a coherent meaning, and this notion is an extension of
nineteenth-century abstractions about labor that have lost their slight
purchase in real world conditions over the course of the present century."
It may be necessary to point out that in the above remarks, Galbraith is
talking not about the redistribution of hours of work but about the "fiction
of the labor market", which he criticizes as a "dangerous metaphor". But
Galbraith's phrase "the idea that labor time is a commodity with a coherent
meaning" sounds so apt to the lump of labour fallacy that I wonder if one
might say the NAIRU theory is itself a _species_ of lump of labour fallacy.
If asked to elaborate on this suspicion, I would cite Galbraith's article
"TIME TO DITCH THE NAIRU" in the Winter 1997 Journal of Economic
Perspectives. I would suggest that if one reads Galbraith's critique of the
NAIRU theory with the LoL in mind, one couldn't help but conclude that NAIRU
is founded on that fallacy.
I'm afraid that in their eagerness to _extend_ the lump of labour fallacy
beyond its utility as a critique of mechanical schemes to reallocate hours
of work, Layard, Nickell and Jackman unwittingly _rely_ on a species of the
very fallacy they purport to criticize. It's no longer just a question of
"one lump or two" but also a question of "your lump or mine".
Regards,
Tom Walker
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