The Disutility of Labor
Abstract: Some Austrian economists have argued that the disutility of labor is a necessary auxiliary empirical assumption to complement otherwise a priori economic theory in order for it to apply to the real world. Without this assumption, it is claimed that individuals will supply the full quantity of labor of which they are physically capable. We argue that the disutility of labor assumption is unnecessary to derive this conclusion, which can instead be derived through standard marginal analysis. Leisure (the state of not engaging in labor) is a necessary complementary good for consuming other goods. As such, leisure’s status as a consumer good is a priori true, not an empirical assumption. Furthermore, the concept of disutility of labor is not only unnecessary but also leads to confusion due to its being used in two different ways, and therefore ought to be discarded.
JEL Classification: D01, J01, J20, J22
Tate Fegley ([email protected]) is a postdoctoral associate at the Center for Governance and Markets at the University of Pittsburgh. Karl-Friedrich Israel ([email protected]) is senior researcher at the Institute for Economic Policy at Leipzig University, Germany. The authors would like to thank Ash Navabi, Kristoffer Mousten Hansen, Łukasz Dominiak, and an anonymous referee for their helpful comments.
1. INTRODUCTION
Prominent economists in the Austrian tradition, including Ludwig von Mises and Murray Rothbard, consider the empirical assumption that labor involves disutility to be necessary to supplement the otherwise a priori analysis of praxeology in order to develop a theory that is relevant to our world. Without such an assumption, Mises argues, individuals would supply as much labor as they are physically capable of providing:
In a world in which labor is economized only on account of its being available in a quantity insufficient to attain all ends for which it can be used as a means, the supply of labor available would be equal to the whole quantity of labor which all men together are able to expend. In such a world everybody would be eager to work until he had completely exhausted his momentary capacity to work. The time which is not required for recreation and restoration of the capacity to work, used up by previous working, would be entirely devoted to work. (1998, 131)
However, in our world, as Mises would argue, labor is usually also economized on account of its involving disutility, and therefore individuals will cease to engage in labor even if they are physically capable of providing more. In contrast to Mises’s fundamental concept of action, the assumption of disutility of labor is not a necessary prerequisite of praxeological analysis. He explains:
The disutility of labor is not of a categorial and aprioristic character. We can without contradiction think of a world in which labor does not cause uneasiness, and we can depict the state of affairs prevailing in such a world. But the real world is conditioned by the disutility of labor. Only theorems based on the assumption that labor is a source of uneasiness are applicable for the comprehension of what is going on in this world. (Mises 1998, 65)
Similarly, Rothbard (1957, 316) states that praxeology contains one fundamental, a priori axiom—the action axiom—and a few subsidiary empirical postulates, including the assumption that leisure is a consumer good.1 This could be interpreted as being equivalent to the assumption that labor carries disutility. If leisure were not a consumer good, then labor would not involve disutility, and individuals would not consider forgone leisure a cost. In such a world, they would provide as much labor as physically possible. But is that really true?
We argue that the empirical assumption that labor involves disutility is not necessary in order to derive the implication that individuals will not choose to supply as much labor as they are physically able, but that such an implication can be derived through standard marginal analysis. Moreover, we will argue that equating the existence of opportunity costs to disutility is inconsistent. In addition to the benefit of making economic theory more parsimonious, we believe our paper clarifies this otherwise confusing concept.
2. DISUTILITY OF LABOR DEFINED
Before defining disutility of labor, it is helpful to define what labor is. According to Mises, labor is “the employment of the physiological functions and manifestations of human life as a means” (1998, 131), whereas leisure is the absence of labor. Alternatively, we could define leisure as the employment of the physiological functions and manifestations of human life as an end. This means that leisure is not only the act of “doing nothing,” but the use of one’s body for consumption, rather than production. This distinction involves a subjective element. The same physical activity could be labor or leisure depending on whether it directly serves the ends of the individual engaged in the activity, or does so only indirectly. To be clear, labor as such is a means. The physical activity undertaken cannot be solely an independent end itself, otherwise it would be considered leisure.
The disutility of labor is the forgone utility of forgone leisure. Leisure, as any other consumer good, is subject to the law of diminishing marginal utility: if only one unit of leisure is available, it is used to satisfy the highest ranked end
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