Friday, February 9, 2018

Sandwichman — Is the "Invisible Hand" a lump of labor?

Debunking the persistent wages-fund and lump of labor fallacies.
Thirty years after Hoyt, Leopold Amery delivered a series of lectures in which he evaluated The Fallacies of Free Trade, paying particular attention to Smith's "terminological inexactitude." Smith's concept of capital viewed the capital of a nation as merely an aggregate of individual capitals. The difference, Amery explained, was that an individual's capital "is the result of saving, and grows by saving from profits or by credit based on profits" while the capital of a nation, "grows by the exercise of the qualities and energies of which it consists." In the jargon of systems dynamics, Smith mistook a stock for a flow.
Is the "Invisible Hand" a lump of labor?

1 comment:

Ralph Musgrave said...

Sandwichman is clearly never going to understand the following very simple points.

As demand rises, a point comes where employers find it increasingly difficult to find the skilled labor they want, thus they start bidding up the price of that labour, which causes or exacerbates inflation. That point is where the economy is at capacity. (I’m assuming no JG to keep things simple).

If hours per week are artificially reduced for everyone, and demand is left untouched, employers will then only be able to meet that demand by finding more labor. But if the economy is at capacity, suitable labor just ain’t there (for reasons given above).

Ergo demand has to be cut back. Net result: no rise in numbers employed. I.e. artificial restrictions on hours worked are a waste of time.