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> It’s a nice story, but of course it means, even in this best case, that the people around her who had previously done what she now does have been pushed out o

by pieno 6y ago

> It’s a nice story, but of course it means, even in this best case, that the people around her who had previously done what she now does have been pushed out of business. They need to find a new job. This is the lump of labour fallacy[0]. There’s a whole body of economic theory but generally arguments against the fallacy are that lowering prices is likely to increase demand (so competitors could make the same investment and compete for the increased demand and be better off as a whole; productivity increases may lead to new ancillary or similar products that were previously not cost effective to produce, again increasing the pie; those increasing their income have to invest or spend it, so those put out of business could start a new business taking investment or spending from their previous competitor. Reality is obviously much more complex and definitely in the short term it can lead to real misery for those losing the competition and not having the time or savings to wait for a new job or for an investment to start paying off. But that doesn’t mean that we should just stop innovation and stop trying to become more productive. The rest of the arguments in the article against micro finance seem to be issues with underperforming legal and governmental institutions that fail to prevent and remedy fraud and abuse of people in precarious situations. In these systems/countries, there will always be fraud and abuse no matter how you try to help people (including charity, starting real companies and trying to give people real jobs with reasonable pay). That doesn’t mean you should stop these initiatives. Hopefully, improving conditions for individual people will help improve systemic conditions and vice versa. [0] https://en.wikipedia.org/wiki/Lump_of_labour_fallacy https://en.wikipedia.org/wiki/Lump_of_labour_fallacy

luckylion 6y ago
> But that doesn’t mean that we should just stop innovation and stop trying to become more productive. But that's also not what he's saying, is it? It absolutely makes sense to innovate and automate anything if labor is costly because it's in short supply. But when it's not? Isn't that then similar to the Softbank Ventures that seem to follow "spend an insane amount of money, hope that nobody else tries to match it, get to monopoly status, extract insane amounts of profit"? Invest a lot, massively undercut the competition, drive competition out of the market, turn on the profits. But, unless that labor is needed, or at least can be used, somewhere else: what is won?
glenstein 6y ago
You have to be making some awfully specific assumptions about what the article is claiming in a throwaway sentence to conclude that it's a lump of labor fallacy. I don't see the article committing itself to a broad argument about the theoretical fungibility (or lack thereof) of labor just because it was noting that the workers need to find new jobs. There's a huge personal cost to the workers. >and definitely in the short term it can lead to real misery for those losing the competition and not having the time or savings to wait for a new job or for an investment to start paying off Yes, exactly. That's a reasonable interpretation of what's being said. >But that doesn’t mean that we should just stop innovation and stop trying to become more productive. But I don't think this is.
imtringued 6y ago
The lump of labour fallacy is a result of human nature and how we organize work. Because each person can only work at a single job the loss of the job is devastating. If you were to model a country as a single person but with the productivity of 1000000 people working 20000 different jobs then that person would complain about spending way too much time on a handful of jobs. e.g. "Too much time is spent on farming! I don't have enough time to work on my boat!" Decreasing the time spent on farming will free up time and that time can be spent on building a boat. It's clear that increasing productivity will always benefit the entire society. The real problem is that inequality keeps growing. Especially since modern productivity improvements are often not tied to the experience or skill of the worker but rather they are dependent on investments in tools and machinery. Those tools are not owned by the worker, they are owned by the company. However, competition eventually reaches a point where the industry loses its profit margins and most of the revenue is passed onto workers or at least the workers that built the machinery and tools. But the reality remains that first mover companies make a killing with automation and acquire lots of capital. Another factor is full employment. As we get closer to full employment the consumer inflation index will rise and capital will lose its value compared to income. There are mechanisms that slowly erode the negative effects of inequality but right now things are happening so quickly they have trouble catching up.
thingsgoup 6y ago
I was also put off by the casual assertion that if business A is successful it necessarily means some other business B is less successful. It’s a false premise.

by pieno 6y ago

luckylion 6y ago

> But that doesn’t mean that we should just stop innovation and stop trying to become more productive. But that's also not what he's saying, is it? It absolutely makes sense to innovate and automate anything if labor is costly because it's in short supply. But when it's not? Isn't that then similar to the Softbank Ventures that seem to follow "spend an insane amount of money, hope that nobody else tries to match it, get to monopoly status, extract insane amounts of profit"? Invest a lot, massively undercut the competition, drive competition out of the market, turn on the profits. But, unless that labor is needed, or at least can be used, somewhere else: what is won?

glenstein 6y ago

You have to be making some awfully specific assumptions about what the article is claiming in a throwaway sentence to conclude that it's a lump of labor fallacy. I don't see the article committing itself to a broad argument about the theoretical fungibility (or lack thereof) of labor just because it was noting that the workers need to find new jobs. There's a huge personal cost to the workers. >and definitely in the short term it can lead to real misery for those losing the competition and not having the time or savings to wait for a new job or for an investment to start paying off Yes, exactly. That's a reasonable interpretation of what's being said. >But that doesn’t mean that we should just stop innovation and stop trying to become more productive. But I don't think this is.

imtringued 6y ago

The lump of labour fallacy is a result of human nature and how we organize work. Because each person can only work at a single job the loss of the job is devastating. If you were to model a country as a single person but with the productivity of 1000000 people working 20000 different jobs then that person would complain about spending way too much time on a handful of jobs. e.g. "Too much time is spent on farming! I don't have enough time to work on my boat!" Decreasing the time spent on farming will free up time and that time can be spent on building a boat. It's clear that increasing productivity will always benefit the entire society. The real problem is that inequality keeps growing. Especially since modern productivity improvements are often not tied to the experience or skill of the worker but rather they are dependent on investments in tools and machinery. Those tools are not owned by the worker, they are owned by the company. However, competition eventually reaches a point where the industry loses its profit margins and most of the revenue is passed onto workers or at least the workers that built the machinery and tools. But the reality remains that first mover companies make a killing with automation and acquire lots of capital. Another factor is full employment. As we get closer to full employment the consumer inflation index will rise and capital will lose its value compared to income. There are mechanisms that slowly erode the negative effects of inequality but right now things are happening so quickly they have trouble catching up.

thingsgoup 6y ago

I was also put off by the casual assertion that if business A is successful it necessarily means some other business B is less successful. It’s a false premise.