Hi All. This came up in conversation the other day and I have been trying to find the original. I was hoping someone here might remember.
A while back I was reading something in the popular press that referenced an old economists’ joke (or perhaps just allegory) about an italian town where the only job anyone has is to do their neighbor’s laundry, and so no wealth is created, nor moves in/out. I got the sense that this wasn’t the author’s invention, but rather something well known within economists’ circles, like “Spherical Cow” is to physicists.
Does anyone know what I am talking about? Have a source or origin? Am I mad?
I believe this would be an example of a closed economy our Autarky. An example might be a close knit community like the Amish or Islanders who tend to be self sufficient and make most of the things they need in the home and grow their own food. The laundry job is typical of service jobs that would be one of the types of needs that cannot be produced by your own labor.
To elaborate, there was a very popular story in the mid-1800s about a town (in Sicily or the UK, or anywhere far away) where everyone in the town makes a living by taking in each other’s laundry (or washing). This was so well-known a reference that lots of people, including economists frequently refer to it (this book of quotations from 1908 include a reference to it - not the original, but someone who is mentioning it as if it’s already a well-known old reference QUOTATION, &C. - Collection at Bartleby.com). Heinlein makes an allusion to the old saw in The Moon as A Harsh Mistress, as I recall.
The original story is often attributed to Twain, but I don’t know if it’s actually him.
At any way, the reason it’s funny is that while one person can make a living by being paid to do laundry for someone else, this won’t work if everybody tries it.
The idea is of a totally closed economy - everyone lives by working for their neighbour. In reality, there would inevitably be one who made a better go of it by either doing it cheaper or better or preferably both. That person would soon have so much trade that they would have to employ some of the others; the problem then would be; where to find the means to reward them.
In truth, it’s like a perpetual motion machine - unsustainable without some outside influence.
The point isn’t that it’s a closed economy: That’s possible, even if it’s so difficult that there’s only one known example. The point is that they’re all doing the same thing, which doesn’t directly cover their needs. One person can get money to buy food by taking in others’ washing, but an entire community cannot.
“Taking in one another’s washing” is an expression I have known all my life. I’m happy to see a history for it. Where I see it used, and have used it, is often in reference to a failing economy, where jobs start to dry up, and the expression is used derisively to describe the only way people will find work once the jobs go. One suspects the expression began life as economists’ code and leaked out into a wider community.
With respect, no, you are wrong. The point of the story (to simplify it) is that, if I am paid by you to do your laundry, and I pay you to do my laundry, neither of us makes any money. It’s a closed loop, with no creation of any wealth.
Reminds me of something that happened in, of all things, Beavis and Butt-Head. They had to sell candy bars for school or something, for $1 a piece. One of them got out a dollar then bought a candy bar from the other. From that point on they just kept buying candy from each other over and over with the same dollar bill until it was all gone.
This is actually quite close to the truth in some aspects of the American economy. It is reflected i n the working mom who barely makes enough money to pay for child care. Without impacting her economics, she could just stay home and take of her own child. Filer that to the mom whose job is working at a child care center, and you have people who are taking in each other’s children.
I once went to a state park on a weekday, and there was an attendant at the gate charging me the daily use fee, and I was the only person in the park. I imagined that the state charged me to pay the attendant to charge me. Aside from the fact that as a citizen, I own the park.
But closed loops can create wealth, as long as people are doing different things. If I pay you for food, and you pay someone else for clothes, and they pay me for tools, then we’re all better off (though of course there are a few more steps in there, in any real economy). And on the largest scale, the economy not only is, but must be, a closed loop.
You probably own about a square centimeter of the park, if that.
Not all businesses make money every hour of every day during the week.
When the attendant takes in way more than his salary on a Saturday/Sunday, it makes up for the dead days.
The evidence I’ve found so far is that it started as a funny “tall tale” to tell about foreigners, and was adopted by economists since it provides a valuable bit of insight about division of labor, but you could be right.
I thought the joke was “Put three antiques dealers on a desert island with nothing but a chest of drawers and a hundred dollars, and they’ll all make a living.”
It seems like it should be possible for more complex closed systems still to be viable though - this one isn’t viable because there is only one job to do, and everyone is equal in capability to do it, and requirement for it.
But lets say there are 100 different jobs to do, and not everyone needs all of them all of the time, and not everyone can do them, but everyone can do *something", and everything that anyone needs done is adequately represented in the skills of the community.
It seems like that could be viable, if it happened to be properly balanced - nobody gets richer, but nobody starves - everyone is busy and all needs are met.
I concede this is pretty unlikely outside of hypothetical example, but it does seem to me that creation of wealth is not exactly an absolute requirement for viability, in theory.
I’ve seen the candy bar example play out in real life. Of course, at the end of the sale, both students still need to turn in a total of $50 for their 50 candy bars.