It seems there is not an economic fallacy so basic that it will not be espoused at some elite university.
Robots Are Stealing American Jobs, According to MIT Economist
Before any MIT econ dons start invading the labs of their funding-rivals in the engineering department to smash any robots or mechanized looms they find, I hope they will take a second to read this passage from Mises:
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A lowers the marginal utility of a unit of A as against that of the units of other articles and that therefore labor is withdrawn from the production of A and employed in the turning out of other articles.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.”
Tools and machinery are primarily not labor-saving devices, but means to increase output per unit of input. They appear as labor-saving devices if looked upon exclusively from the point of view of the individual branch of business concerned. Seen from the point of view of the consumers and the whole of society, they appear as instruments that raise the productivity of human effort. They increase supply and make it possible to consume more material goods and to enjoy more leisure. Which goods will be consumed in greater quantity and to what extent people will prefer to enjoy more leisure depends on people’s value judgments.
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“Ricardo is the author of the proposition that a rise in wages will encourage capitalists to substitute machinery for labor and vice versa.12 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 of popular economics. Nonetheless, the theorem involved is one of the worst economic fallacies.”
human action, p. 773.
mises seems to differ markedly from hayek over the ricardo effect.
the link to the mit article doesn’t work, by the way.
hmm… works for me.
Doesn’t work for me either.
The change is in skill level and thus pay scale. Machinists were more skilled and better paid than machine operators. What do we call the new labor class? Machine servants? Machine servants require less skill than machine operators. The new machines can be built in India and their servants paid 5 cents on the dollar compared to the US.
Henry Hazlitt also has an excellent chapter on this very subject in his Economics in One Lesson.
When I was reading the article I was just thinking about Hazlitts Economics in One Lesson. I think that referring this guy to Mises is a bit ambitious. He might be able to understand Hazlitt a little easier.
OMG, a laundry-folding robot, at last!!
NOOOOOO!!!!!! People need the jobs! I am calling my union right now. The United Laundry Workers.
Minimum wage laws and forced unemployment lead to the absurd conclusion that labour is a good itself. Actually, any work involves a disutility which is only preferred over leasure due to its product. Imagine a world where no labour was needed and inifinite (machine-made or whatever) production of goods were available. Here you have the Garden of Even where no conflicts regarding those goods arise and there is only abundance.
It just seems GL is creating a straw-man attack on David Autor’s report, but I can’t be sure. Is he really saying robots are stealing American jobs, or did he just say that certain groups are losing because of automation?
Yes, because I use a computer I am depriving employment to a typist or even a scribe. Because I use a mechanical washer and dryer, I am creating unemployment. Even my car is creating unemployment because I’m not paying someone to act as “driver” of a rickshaw.
None of those economists are using horses and candles on a daily basis. Progress is lost on the foolish.
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