VI. Irrational Preferred Idleness

CHAPTER VI

IRRATIONAL PREFERRED IDLENESS¹

(1) Consumers are apt to be more vigilant in respect of the price than the quality of a commodity

AT THIS STAGE, we must consider a very important element in those preferences whose fulfillment is found in idleness. All human tastes seem to be fashioned in part by contact with irrational influences. Wicksteed, in particular, has drawn our attention to this. If the price of a thing falls, we are apt to buy more of it simply because it is “so cheap,” irrespective of whether at its reduced value that new distribution of expenditure most effectively contributes to (what must be irrelevant in any purely economic study) the economy of our “private world.” If we have been saving to provide for the future, our strivings are apt to become embodied in habit, and we may develop miserly traits which the philosopher might have grounds for saying are contrary to our “real interests.” Moreover, we seem usually to be much more vigilant in respect of the price of a thing that we buy than we are in respect of its quality. Un-announced reduction of quality is a frequent response of producers (under imperfect competitive institutions) to a rise in their costs or a fall in their supplementary receipts.² They may recognize, rightly, that the substitution to their detriment of consumers’ demands is much less likely if there is no obvious and visible rise of price. Whether such policies are morally defensible does not concern the economist. The social philosopher might well defend them if he rejects the consumers’ sovereignty ideal. He might regard those moralists who have a fastidious objection to venial deception as trouble-makers. And if physical productivity is the philosopher’s ideal (not that we can suggest any principle of measurement for physical productivity) he may have grounds for deploring policies which cause consumers to be critical of the content of the things their money buys. For ready acquiescence on the consumers’ part will bring a greater measure of “orderliness” in the productive system in the sense that inefficient entrepreneurs will not suffer losses. Of course, if the deterioration in quality should be suddenly noticed, a difficult situation might arise. But when the goodness of consumers’ sovereignty is frankly denied, all difficulties vanish and the “rationalization” or “planning” of consumption can be advocated.

(2) Similarly, workers in general tend to be more concerned about wage-rates than about the purchasing power of wages, and in depressions may collectively prefer unemployment to employment at lower wage-rates

This apparently irrelevant excursion into the field of ethics is necessary because similar irrationalities in respect of reactions to changes in wage-rates may be a factor of some importance determining the extent of “preferred” idleness; and in so far as this is so, the same issues of policy arise. Workers in general are indignant at wage-cuts, and their indignation may become one of the determining factors in certain of their choices. In practice, their objection as wage-earners to downward wage-rate adjustments seems to be much more serious than their anger as consumers at price increases. How far their attitude is the product of teaching or propaganda may be a question which the formulators of policy should consider. But the fact may often be (and it is alleged by some that in practice this is a matter of great importance) that many workers will prefer to reject certain available employment when a wage-rate is cut, while they will accept that employment in the absence of a cut, although an equal or greater reduction in the rights conferred by the wage-rate is effected. Concerning those already in employment, for example, so long as they receive the same money wage-rate they are relatively satisfied: what are usually called their “real wages” matter less to them. Perhaps the importance of maintaining the nominal wage-rate lies principally in the fact that the dignity of the worker is thereby secured.³ He does not have to confess to reduced earning power. Moreover, all other workers are similarly burdened when the price of “wage-goods” rises. His line of employment is not singled out, so to speak, for a wage-cut, to the detriment of his status and self-respect. As some economists prefer to put it, the “disutilities of work” are greater when the nominal wage-rate is lower.⁴

(3) Mr. Keynes seems to argue that much idleness is due to irrational preferences which, he implies, orthodox economists overlooked

If we have properly understood Mr. Keynes’s arguments, one of his suggestions is that an important part of what we have called “preferred idleness” is to be attributed to this cause. He calls it “involuntary unemployment” but nevertheless conceives of the condition in terms of willingness to work. One might almost infer that he is trying to distinguish the wage-earners’ real will and their expressed will! Orthodox economists, he says, have assumed that all of “those who are now unemployed though willing to work at the current wage will withdraw the offer of their labor in the event of even a small rise in the cost of living.”⁵ It is difficult to believe that many economists could have been so stupid. They may possibly have misjudged the importance of this type of irrationality. The issue is greatly complicated by the fact that irrationality bears not only upon the determination of “preferred idleness” but also upon that due to what we call “withheld capacity.” Restrictionism is not always rational. And, at times, Mr. Keynes’s “involuntary unemployment” is obviously intended to apply to the results of irrational judgment in so far as it crystallizes in current restrictive policies. But his conception of this is never clearly differentiated from the determinants of “preferred idleness”—as we have defined it—which at other times he seems to be considering.⁶ Let us at this stage consider the effect upon “preferred idleness.” In this case, the orthodox employment theory of the past has in no way been invalidated. Common attempts to apply it may have been misconceived.

(4) Although the conception of “irrational preferences” lies outside the province of “pure theory,” this has not meant that the economists have been blind to their existence

In “pure theory,” the irrational origin of preferences may be taken as part of the data in the light of which a particular result may be explained. As soon as we bring the question of “irrationality” into discussion as a phenomenon to be deplored, we have, strictly speaking, left the field of economic controversy. In spite of Mr. Keynes’s adjective “involuntary,” the idleness that we are considering is the fulfillment, not the frustration of a preference.⁷ If, as economists, we are asked for its cause, our answer is simple: Well, they prefer idleness to work at that rate and they take it. Yet this attitude can be so easily misunderstood and so easily misrepresented that we must hasten to add that the economics which gives such a neutral answer to a fiercely debated question is by no means a useless analysis to the statesman who is asking how, as a matter of practical policy, “preferred idleness” (deplored on moral grounds) may be reduced.

(5) The orthodox economists have realistically recognized the significance of irrational preferences in relation to scarcity through the conception of “net advantageousness”

In practical studies, the economists have always been realists. Have they not always recognized and accepted as data (to which their scientific method has been applied) certain important sources of irrationality? Have they not frequently stressed the truth that diffused and unseen impositions on the individual are acquiesced in and conspicuous burdens objected to? Have they not taken into account in any practical judgments which they have been called upon to make the fact that increases of prices of consumers’ goods are often hardly noticed? Was this not, indeed, a central theme of Bastiat’s Ce qu’on voit et ce qu’ on ne voit pas, which he regarded as L’Economie Politique en une Leçon? And is this not one of the paramount issues which the serious reformer must always consider? The truth is, of course, that the orthodox economists (when venturing to point out the implications of their science) have been under no illusions as to the existence of pig-headedness, mere pique, feared loss of prestige and dignity, or resentment at “capitalist exploitation,” all of which may work to cause wage-cuts to be more indignantly viewed than equivalent or greater rises in the prices of “wage-goods.” They have certainly never built on the assumption which Mr. Keynes attributes to them that the supply of labor is “a function of real wages as its sole variable.”⁸ On the contrary, the classical and orthodox theory of wages has been dominated by the conception of “net advantageousness”; and even if the economists’ judgment of the importance of the peculiar elements of disadvantageousness which Mr. Keynes stresses has been faulty (and we do not believe that this is so), it gives no shred of justification to his sweeping assertion that, in consequence, “their argument breaks down entirely.”⁹

(6) It is the statesman rather than the economist who is concerned with the avoidance of the results of irrationality in preferences

The problems that emerge in attempts to consider the “irrational” elements in individual estimates of net advantageousness are not of the kind which economic analysis can solve. The statesman must ask questions of the following kind: Can the results of consumers’ or income receivers’ irrationality be avoided whilst the irrationality itself is allowed to persist? Is there an essentially educative aspect of recommended policies which are otherwise indefensible? Can workers in general be deceived “for their own good” in a manner which will not necessitate further deceptions later on? What sort of authority can really be trusted to deceive workers “for their own good”? Thus, suppose immediately inflationary policies are being considered. The “deception” issue may obviously be relevant, and these further questions also arise: Is an increase of wage-good prices justified because it protects the dignity of certain workers whose preference for work is thereby preserved? Can we ignore the corresponding effects upon the claims of creditors who may not be irrational in respect of their contractual income-rights? Economic theory can give no answer to these questions. It can throw light upon the nature of inflation, but that is not our present concern.

(7) Sources of irrationality unconnected with wage preferences are probably much more serious

Moreover, if we are concerned about one type of irrationality in the worker’s tastes or in his response to the economic complex, surely we ought to consider it in the light of the whole of his tastes and responses, which must be similarly evaluated according to our principles of rationality whatever they may be.¹⁰ If there is some measure of regrettable unemployment due to one cause, must we not envisage this factor in relation to similar causes which operate to the worker’s detriment, even if not expressed in “idleness”? Suppose we think (as social reformers) that his concern with nominal rather than “real” wage-rates is the result of his placing undue importance on his income status; suppose we regard it as a manifestation of an unworthy snobbishness; and suppose we see in it a contributory cause of degrading idleness; can we not pass equally or even more severe strictures on his preferences in respect of many other things? Consider the laborer’s expenditure on the cinema, wireless, holidays, sport, gambling and drink. Can we not criticize his wisdom in wrongly estimating consequences in respect of these also? And do we not find in them expressions of irrationality which most reformers would admit are of incomparably greater social urgency? Thus, it has been estimated that the average British workman with an income of £2 a week who is not a total abstainer, spends on an average 6s. 6d. on alcohol and 5s. 6d. in net gambling losses; and that a similar workman with £3 a week spend 10s. on alcohol and 8s. in net gambling losses. Hence, if we do venture into the field in which we criticize the wage-earner’s bad judgment in seeking leisure and spending his income on his own and his family’s behalf, should we not ask (in the light of our standards) whether his concern about his income status, or his pigheadedness, or his hatred of his employers and so forth, has an importance anything like the importance of his bad judgment or foolishness in the matter of many other things. In relation to the individual’s own “real welfare” and that of his family, is it not clear that his attitude towards his income-status (or whatever else happens to be the cause of his indifference to “real” wage-rates) must be a relatively negligible factor? Surely the specific “disutilities” of work discussed in this chapter do not possess the great significance which has been attributed to them. Surely it is doubtful whether “preferred idleness”(as we are regarding it) is so greatly affected by the store which the workers irrationally set on the maintenance of nominal wage-rates. Their resistance to plasticity of wage-rates seems, in fact, to have an entirely different origin to which we have referred briefly in paragraph 3, and which we shall discuss in chapter x, paragraphs 14 to 16.

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1 The term “irrational preferred idleness” needs some explanation. A taste as such can hardly be “irrational”; but that term can be applied to a choice or preference because it may be based upon a false expectation due to its consequences having been wrongly thought out.

2 The same policy may be followed in other circumstances and with other motives, of course. Thus, under tariff protection plus “rationalization,” electric lamp manufacturers may deliberately lower the life of their bulbs with a view to “stimulating consumption,” and by so doing bring greater “prosperity” to the industry.

3 A worker’s commitments, which are incurred in money, may also make it important for him that his earnings shall not fall. But this consideration will not lead to “preferred idleness,” unless consequent vindictiveness, worry or frustration makes work seem less desirable.

4 A worker might object for another reason to his line of employment being singled out for a wage-cut. It might well be that if all wage-rates above the competitive were reduced, all workers would be better off; but reductions would, nevertheless, be resisted because no single group of workers could be convinced that the process would be universal, and if it were not widespread the group consenting would be the losers. This is, however, an individually rational but collectively irrational objection to wage-cuts, and is a separate point. There is a privately beneficial withholding of capacity. This type of situation is dealt with in chap, x, paras. 7 to 12.

5 J.M. Keynes, General Theory of Employment, Interest and Money (New York: Harcourt Brace, 1935), p. 13.

6 This is one of the consequences of the inappropriate simplicity introduced by Mr. Keynes to which we have referred in chap. I, para. 8.

7 There is, however, an entirely different conception of “involuntary unemployment” in Mr. Keynes’s book, entangled with the ones we are here discussing. He seems to hold that if money wage-rates greater than the competitive are cut, even if universally, it will not lead to the increased employment which a rise in wage-good prices would stimulate. We do not here attempt to discuss the grounds on which this theory is based.

8 Keynes, General Theory, p. 8.

9 Ibid.

10 I.e., according to our judgment of the individual’s long-run real interest.