The Lesson Not Learned, Part IV

Back when I was writing at Moving Target, I would occasionally write about The Lesson, which goes like this:

Economics consists of looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequence of that policy not merely for one group but for all groups.

It's from a fine book by Henry Hazlitt called Economics in One Lesson. Though written in the 50's, the bad government policies he describes and shows the folly of will be familiar to observers today. In the Lesson Not Learned series I write about some examples of government-inspired economic folly.

Today's example comes from France, where the government has finally announced (registration required) that the 35-hour work-week is a failure:

In an interview in yesterday's Le Figaro, the finance minister, Nicolas Sarkozy, said that the 35-hour week had lumbered the state with £10 billion a year in additional social charges and that it had demoralised millions of workers.

"The Socialists made a decision which is not compatible with our responsibilities to Europe," he said. He suggested a system whereby those who wanted to stay on the 35-hour week could do so, but those who wanted to work and earn more had greater latitude.

The idea that preventing people from working more that 35 hours in a week would lower unemployment is based on the lump of work fallacy -- that there is only so much work to do, and so by limiting the amount people work, you better 'share' that fixed amount of work. But the quantity of work isn't fixed; the work available in an economy is more analagous to the amount of work available in your home. There's always something more to be done, but it's a matter of balance between the priority of the job and the cost in time and money that determines what gets completed.

Hobbling the labour force does not increase employment. Most tasks are not of the industrial-age variety where a worker is a cog in the machine and can be replaced by any other worker. Most tasks are done by people with the opportunity, skills, and availability to do them. Limit availability and you decrease productivity.

So has France learned The Lesson? Not a chance; governments never learn.

In addition to easing France's restrictive labour laws, M Sarkozy is also pursuing an economic nationalism, pressing for changes to European Union rules so that governments can support big companies at times of distress and help to give them a competitive advantage against global rivals.

It took them seven years to figure out the damage caused by restricting people's right to work. How long will it take them to realize the folly of propping up inefficient companies with taxpayers money?

Posted by Bruce Gottfred at May 18, 2004 10:25 AM | TrackBack