In my recent post, The Wielders of One-Bladed Scissors, I talked about why supply-and-demand doesn’t automatically lead to the conclusion that the more workers there are, the lower wages become, and that it’s a fallacy to infer “more labor means cheaper labor.” After writing it up, a thought experiment occurred to me that helps make the point, and possibly helps shed light on some differing background assumptions that might be animating different conclusions.
So here’s the thought experiment.
Scenario one – consider a situation like the film Castaway starring Tom Hanks. In this movie, Hanks depicts a man who survives a plane crashing into the ocean. And because movies are allowed as much leeway as they want with basic probability, he just so happens to wash ashore onto an uninhabited but fertile island. He has to survive on his own, using what meager resources he can gather from the debris that washed ashore combined with what he can harvest from the island. The island has more than enough resources to support him – but he lacks the ability, working alone, to use those resources very productively. He survives, but at a very low standard of living.
Scenario two – consider a situation like the crash Uruguayan Air Force Flight 571, dramatized in the 1993 movie Alive. In this event, a plane crashes in the Andes mountain range, but a large portion of those on board initially survive the crash. The survivors are force to try to salvage what supplies they can from the plane and everything it was carrying in their desperate struggle to survive.
Now, in the first scenario, what would happen if the castaway stranded on the island, through a sheer glitch in the laws of probability, suddenly found that another person washed up, now also stranded on the island? This would be a stroke of incredible luck. Working by himself, he could harvest enough resources to survive, but just barely. But with two people working together, things could improve dramatically. They could combine efforts and divide tasks. “I’ll focus on foraging for fruit, tubers, and other food, you focus on hunting for game. I’ll focus on building better shelter, you focus on crafting a garden to make harvesting food easier going forward.” And so on. The problem facing the lone castaway isn’t a lack of resources, it’s a lack of ability to make productive use of resources working alone.
To see it from a less fictionalized angle, consider the case of the Tongan castaways, six teenage boys who washed ashore on the abandoned island of Ata in the Pacific ocean. Working together, they managed to survive and remain in good health on the island for over 15 months before they were, through a stroke of luck, found and rescued. Suppose that instead of six teenagers stranded together, it had been one teenager stranded alone. The lack of people to work and combine efforts with wouldn’t have been a benefit to that lone stranded teen – it would likely have meant doom.
But in scenario two, things are different. Suppose the survivors, huddled together amidst the wreckage of the plane, one day heard some noise outside and discovered, to their shock, that a small group of lost cross country skiers had stumbled into the crash site. (Perhaps one of those skiers insisted he “knew a shortcut” and stubbornly refused to admit he was lost.) In this scenario, things would be very different. The addition of new people would not be a fortunate opportunity to improve everyone’s standard of living by creating new wealth through cooperation. In this case, the arrival of new people would mean everyone at the crash site would be made worse off – there would be even fewer resources available for any given person. The crash survivors might reasonably feel like the arrival of the skiers was akin to a hostile invasion.
And that also brings up the difference between the two scenarios. In the castaway scenario (both the fictional and real-world cases), additional people would be beneficial, because it would allow a division of labor to form and in turn allow the castaways to harvest more resources and improve their condition. In the mountain crash scenario, resources are fixed and their distribution is a zero-sum game. The only way for one person to get more is for someone else to get less. In that case, adding in more people would necessarily lower the living conditions of those who were already in place.
The idea I criticized in my previous post tacitly assumes something like the mountain crash scenario. The idea that more labor means a lowering of living standards for existing labor would be true if we assume a situation where all transactions are zero-sum, where for one person to gain another must lose, and that the supply of wealth is both exogenous and fixed, already existing out there somehow so that more people means smaller slices for everyone.
On the other hand, if instead you don’t see things as fixed and static, but as part of an active and ongoing dynamic process, where wealth is continually and newly created from productive, mutually beneficial interaction rather than divvied up from a pre-existing, fixed supply, then the addition of new people isn’t some kind of harbinger of doom. It’s an opportunity for growth and for mutual benefit. You stop seeing new people as outsiders and threats who must be kept down for your well-being to be preserved, and you start seeing them as fellow people who can help make you better off and whom you can make better off in turn.
