Hi, my question is:
In capitalism, will not the continuing innovation eventually cause massive unemployment when more and more jobs are automated(robots, machines), or will it like the history shows, be new jobs available that yet do not exist?
Im interested in finding out the answer to this question too but from my limited understanding i’d say this. Since companies will only innovate and bring in newer technologies if it decreases costs the products that they make will cost less and thus be cheaper for the end consumer anyway. For example, american farmers when they first introduced the bovine vaccine to increase milk supplies the few farmers that adopted it early brought in lots of revenue until the competition got a hold of it. Since milk was cheaper to produce farmers started to undercut each other. So if jobs are lost the product would be cheaper anyway and those workers can reskill and move onto less mundane jobs.
I’ve seen two arguments, one flawed and the other correct.
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New jobs will be created making the machines. This one is flawed, because the whole point of the machine is to have less labor input in the final product. If more labor is needed to make the machine, that means the cost of the final product will be higher than without the machines.
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Now for the argument I think is right.
People are never satisfied. As one need is met cheaply because a machine now does the work, they have more spending money. They will want to spend it. So some part of the economy , be it an old one or a new one, will have to make more product, and will need more workers.
Notice that the math works out perfectly. Money saved on old product = Money spent on different product.
Of course this is big picture. The individual worker may very well be out of luck, as his old skill becomes obsolete and he may not be able to pick up a new one. The question arises, should everyone else be forced to subsidize him? If the answer is yes, that means we should not have ccars or computers now.
If it does, that will be great. Kicking back, not having to work because everything is so cheap I can buy with it change found in my couch? Sign me up!
For more details, see http://econin1lesson.blogspot.com/2009/09/eiol-curse-of-machinery.html
The poorest have no capital, that is, they have no savings or other property so the only thing they have to sell to feed themselves is their own labor. Employment is always available… I don’t care how many robots there are, people might want to pay a person just to have someone to chat with, or have sex with or be a lawn ornament (as depicted in an Oregon Lottery commercial). The market is inherently harmonious so that as wages fall, the amount of available jobs must necessarily increase (demand varies inversely with price).
In a health private property order, we should expect the distribution of capital to rise absolutely over time. That is, we should expect more and more people to have some capitalization (savings) and fewer and fewer people to be completely devoid of capital. As broad capital ownership increases, the nature of how people spend their time will also change… less time is spent selling one’s labor to another (employment) and more time is spent speculating (buying and selling to make a profit). This is what is meant by the left’s constant reference to the “leisure class”. But since selling one’s labor is a major pain in the ass compared to speculating, we should wish for a world where no one had to sell their labor and could join the leisure class instead. The governments of the world are working overtime trying to fight gravity and prevent this shift from continuing since tax evasion in the sale of labor is much harder than in the buying and selling of goods since you must be physically present to sell your labor where you can be at any place to buy or sell goods and those goods can be hidden under a thousand shell corporations if needed (this is how the George Soroses of the world have built their fortunes).
Clayton -
I can’t remember where I read it but it has been said that, “The goal of capitalism is not more labor but more leisure.”
The point that the machines create new jobs is not flawed because you need people to make the new machines, therefore new jobs are created. What you argue is not debunking the premise that machines create new jobs… your argument is just basically stating that there might be less labor due to these machines, but that doesnt not mean that the machines don’t create new jobs.
[quote=“Isaac “Izzy” Marmolejo”]
The point that the machines create new jobs is not flawed because you need people to make the new machines, therefore new jobs are created. What you argue is not debunking the premise that machines create new jobs… your argument is just basically stating that there might be less labor due to these machines, but that doesnt not mean that the machines don’t create new jobs.
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I think he just meant to say that that answer is missing the much bigger picture, and only recognizes a TINY PIECE of the jobs that are actually created from machinery. The rest of the jobs are created by expanding the Division of Labor. Those who are put out of work in that sector, and the money which is saved by every consumer of the good, gets shifted towards previously unprofitable/impossible sectors which now become profitable/possible.
For those who want a PDF of Economics In One Lesson:
He said it. People are all-too often blinded by this notion of “jobs”. “Everyone needs a job”. That’s not true at all. Everyone needs food, water, shelter, etc. If I gave you a machine that produced all that for you, why the hell would you go looking for a job? Nobody wants a “job”…what they want is the stuff. They want leisure. They want entertainment. (And yes, there are many fortunate people who would do their “job” for free, thus making it qualify as entertainment/leisure)…
But the point is, who the hell cares if there aren’t any jobs for anyone? The moment there are no more jobs is the moment everyone has everything they could want.
I believe Mises gave an answer to this in Human Action:
Ricardo is the author of the proposition that a rise in wages will encourage capitalists to substitute machinery for labor and vice versa. Hence, conclude the union apologists, a policy of raising wage rates, irrespective of what they would have been on the unhampered labor market, is always beneficial. It generates technological improvement and raises the productivity of labor. Higher wages always pay for themselves. In forcing the reluctant employers to raise wage rates, the unions become the pioneers of progress and prosperity.
Many economists approve of the Ricardian proposition although few of them are consistent enough to endorse the inference the union apologists draw from it. The Ricardo effect is by and large a stock-in-trade [p. 774] of popular economics. Nonetheless, the theorem involved is one of the worst economic fallacies.
The confusion starts with the misinterpretation of the statement that machinery is “substituted” for labor. What happens is that labor is rendered more efficient by the aid of machinery. The same input of labor leads to a greater quantity or a better quality of products. The employment of machinery itself does not directly result in a reduction of the number of hands employed in the production of article A concerned. What brings about this secondary effect is the fact that–other things being equal–an increase in the available supply of A lowers the marginal utility of a unit of A as against that of the units of other articles and that therefore labor is withdrawn from the production of A and employed in the turning out of other articles. The technological improvement in the production of A makes it possible to realize certain projects which could not be executed before because the workers required were employed for the production of A for which consumers’ demand was more urgent. The reduction of the number of workers in the A industry is caused by the increased demand of these other branches to which the opportunity to expand is offered. Incidentally, this insight explodes all talk about “technological unemployment.”