Machines and Jobs

Questions about Objectivism
1

I had an arguing discussion with a neighbor who said that eventually capitalism implodes upon itself due to vast increases in efficiency. He said that if machines take over the jobs of majority of people, people will have no jobs, and therefore no one will buy anything.

I have read what Ayn Rand has to say about machines needing intellectual creators behind them or they die and that a gold standard is necessary to allow producers to keep all of their savings. I then got to think - what if the gold standard was still enacted and money was in so limited of supply with the growing population? Then how could businessmen sell goods to the masses? Would inflation still exist - but in a different way?

I then thought - in the future would everyone be a machine tech or what? Will ultimately the % of manual production type assembly line workers drop, while the human population grows? If this is the case - it seems like education must become more specialized and work faster so that people are better prepared to enter their chosen field. I am basically contemplating all of this plus the fact that education is a relatively long process to specialize - and that future degrees of specialization will have to be accomplished much quicker - especially due to the increasing rate of technological growth.

I need some counters to the initial argument at least. It seems very abstract and dependent upon variables like expanding markets simultaneously (which might not happen to the degree it needs to happen without the appropriate government intervention).

Henry Ford said that if the majority of people knew how the money supply worked that they would wake up and storm the government.

My neighbor basically said that everything depends on everything- and that once something is understood another variable must be understood.

Obviously there are holes in this logic - because there has to be a way to sustain everything while guaranteeing people individual rights.

Everyone is welcome to respond!

2

I will open the floor with this:

People already work less than they used to, but their work is worth a lot more. The 40 hour a week schedule is pretty standard in North America, and it’s a pretty good deal when you contrast it to say…the medieval era when people worked from sun up to sun down every day for their barest subsistence - what we would call inhuman squalor today. Back then you could have made essentially the same argument if they had been able to conceive of the technology we have today. Did it turn out that way? Heck no!

In the future, people might live 100 times better than we do today but only work an hour a week. Doesn’t seem far fetched given the trend. What will they be working on though? Well, we’ll still have things robots could never do, ie. art. And even if you imagine robots farming the land, manufacturing our clothes, building our cities…don’t they have to be programmed? They will still have to be given instruction you know, which means we’ll still need people trained in all the professions we have today even if they wouldn’t have to do much physical labor themselves - and that’s a good thing. I LIKE having all the labor saving devices I use in my daily life, and furthermore, those labor saving devices are the very things that give physical labor it’s value in the first place.

3

We have had so many generations of technological improvement, even if you take the steam-engine as the starting point. By now, your neighbor should realize that successive generations of machines have taken over more millions of jobs than all the people who have ever been born, and yet (even with the economy in its current state) more people are employed than ever were when the steam engine was invented. So, is he speaking about something real?

One will almost certainly be able to live increasingly well in a modern, highly-technological economy even if one does not have any special skills. A poor farmer from South Asia can come to the US and drive a cab and live better than he did in his own country. In material terms, my office janitor in the US lives better than many people who are better-educated all over the world.

Finally, not all jobs require rocket-science type skills. Millions of people are employed in teaching, tourism, the arts, the police, the military, agriculture and so on. They use more and more technology in their jobs, and yet I don’t think anyone would claim they are really smarter of better educated than their grand-parents generation.

Secondly, part of the development that comes with technology is the so-called “de-skilling”. This is a process by which a machine can do many things that some expert did before, though one still needs a human being to cross-check. However, these human beings are so specialized that they do not need to know more than their very limited area. Consider, for instance, what it takes to train someone to be an ultrasound technician, or any number of such jobs that earn very respectable western-world middle-income salaries.

Finally, some of the most important jobs are managerial rather than technological, and do not require any higher a level of education than they always did.

4

what if the gold standard was still enacted and money was in so limited of supply with the growing population? Then how could businessmen sell goods to the masses? Would inflation still exist - but in a different way?

The first thing to understand is that there is no “optimal” supply of money. If there are a certain amount of goods moving around the economy at a certain velocity, both 1 trillion dollars and 10 trillion dollars are perfectly acceptable as a money supply (or, talking gold, either 1000 pounds or a million are perfectly acceptable). Prices will simply shift to clear the market. The relationship between the amount of value and the amount of money determines the overall price level, but the specific level is irrelevant. It makes no difference to me whether I pay a dime for a Coke when the CPI is 1 or a dollar for a Coke when the CPI is 10.

Inflation understood as an expansion of the money supply would not exist (aside from gold being mined at a very slow rate). In terms of the price level, overall prices would actually fall over time, because innovations will make producers able to create more wealth, while the money supply would not change (but for mining). Thus, with more value and the same amount, the price level would fall, and you would see deflation.

I then thought - in the future would everyone be a machine tech or what? Will ultimately the % of manual production type assembly line workers drop, while the human population grows? If this is the case - it seems like education must become more specialized and work faster so that people are better prepared to enter their chosen field. I am basically contemplating all of this plus the fact that education is a relatively long process to specialize - and that future degrees of specialization will have to be accomplished much quicker - especially due to the increasing rate of technological growth.

Yes, education most definitely has become specialized, and will become much more so. Every new programming language or technological innovation requires more specialization, and the laws of supply and demand for labor will draw people into education that will tend to make them productive in such a system. Education in terms of job preparation is not a long process to specialize at all; school does not equate with education. After learning the basics of math, science, and langeuage, I could learn a programming language on my own and be a valuable, very specialized individual. School is definitely slow to become specialized, but this is precisely why less and less knowledge used in one’s job actually comes from school (more comes from specialized job training, independent learning, etc.)

5

I had an arguing discussion with a neighbor who said that eventually capitalism implodes upon itself due to vast increases in efficiency. He said that if machines take over the jobs of majority of people, people will have no jobs, and therefore no one will buy anything.

Capitalism is nothing more than a social system which recognizes individual rights. What does it have to do with machines or this question? Are there no socialist countries which use machines? Let’s assume you mean that a machine, owned by an individual, is capable of doing the job of another human being. Let’s assume that our machine in this case is cheaper, more reliable, and better at the given task. The owner sides with the machine and decides not to employ the individual. What seems to be the problem?

6

“Machines cause unemployment” is nothing new.

First of all, employment is a poor standard to judge an economy. Is a 100% employment economy always superior to a 90% employment economy? Not necessarily. Employment is just one measure. There is also GDP and quality of life.

It is absolutely true that machines cause unemployment, but only for people using that particular machine. Also, this unemployment is not long-term. Most of these people can find jobs elsewhere, unless they’re lazy and don’t look. By not having to pay these employees anymore, a particular company may lower costs of their products or maybe even train the previous machine operators for other jobs within that company. It is also important to keep in mind that any increase in unemployment is also an increase in potential employees. The industry that bought the machines increased their productivity and gave the machine manufacturer more money. At some point in the future, another industry will hire the workers that are out of a job, and that industry will also increase in efficiency.

There are so many possibilities. There is no indication anything would implode, unless you’re a person that hears “unemployment” and think that’s enough to say anything is bad.

If you’re thinking in the far long-term, like 300 years, machines will allow people to spend more time on education or working in more advanced industries. More money is going into R&D, and less into paying for menial labor. You have to look at the big picture. All you have to do is imagine “What would someone do if they were able to use machines instead of people for labor?”

7

Bastiat’s book “On Economic Sophisms” has a lot of discussion about the hoax of machines causing unemployment. I believe Ayn Rand admired his works.

Two excerpts:

“… man’s inventions do not lessen his opportunities for employment, as the facts in general attest, since there are more of both among the English and the French than among the Hurons and the Cherokees; and, in that case, I am on the wrong track, though I know neither where nor when I lost my way. I should be committing the crime of treason to humanity if I were to introduce my mistake into the legislation of my country.”

and:

"We do not deny that in the course of the transformation [of society toward using more machinery] a certain amount of labor will have been displaced; but we cannot agree that it will have been destroyed or even lessened. "

8

I only read the first paragraph of the OP. Ask your neighbour to give you an example of a single capitalist nation that has “imploded” in the manner he describes.

9

You know, for all the myriad ways people come up with to show capitalism can’t work, is not sustainable, and so on it is still socialism that keeps failing and capitalism that keeps prospering.

10

The people who complain about machines taking their jobs believe, wrongly, that there’s a finite number of jobs and a finite amount of work to be done. There are as many potential jobs as there is wealth to pay for work to be done, and an infinite amount of work that COULD be done. It just doesn’t get done because there isn’t enough wealth to pay anyone to do it.

By freeing up *wealth*, every technological advance creates more jobs. ANY activity which creates or frees up wealth will create jobs. This is also why taxation destroys jobs–because it ties wealth up in unproductive enterprises.

11

There are four things I would like to say:

  1. Machines and jobs.

On this issue, let me quote from Henry Hazlitt’s Economics in One Lesson:

Suppose a clothing manufacturer learns of a machine that will make men’s and women s overcoats for half as much labor as previously. He installs the machines and drops half his labor force.

This looks at first glance like a clear loss of employment. But the machine itself required labor to make it; so here, as one offset, are jobs that would not otherwise have existed. The manufacturer, however, would have adopted the machine only if it had either made better suits for half as much labor, or had made the same kind of suits at a smaller cost. If we assume the latter, we cannot assume that the amount of labor to make the machines was as great in terms of payrolls as the amount of labor that the clothing manufacturer hopes to save in the long run by adopting the machine; otherwise there would have been no economy, and he would not have adopted it.

So there is still a net loss of employment to be accounted for. But we should at least keep in mind the real possibility that even the first effect of the introduction of labor-saving machinery may be to increase employment on net balance; because it is usually only in the long run that the clothing manufacturer expects to save money by adopting the machine: it may take several years for the machine to “pay for itself.”

After the machine has produced economies sufficient to offset its cost, the clothing manufacturer has more profits than before. (We shall assume that he merely sells his coats for the same price as his competitors and makes no effort to undersell them.) At this point, it may seem, labor has suffered a net loss of employment, while it is only the manufacturer, the capitalist, who has gained. But it is precisely out of these extra profits that the subsequent social gains must come. The manufacturer must use these extra profits in at least one of three ways, and possibly he will use part of them in all three: (1) he will use the extra profits to expand his operations by buying more machines to make more coats; or (2) he will invest the extra profits in some other industry; or (3) he will spend the extra profits on increasing his own consumption. Whichever of these three courses he takes, he will increase employment.

In other words, the manufacturer, as a result of his economies, has profits that he did not have before. Every dollar of the amount he has saved in direct wages to former coat makers, he now has to pay out in indirect wages to the makers of the new machine, or to the workers in another capital-using industry, or to the makers of a new house or car for himself or for jewelry and furs for his wife. In any case (unless he is a pointless hoarder) he gives indirectly as many jobs as he ceased to give directly.

But the matter does not and cannot rest at this stage…

Read the entire thing here.

  1. Inflation under a gold standard.

Inflation defined as an increase in the money supply would exist, but it would for obvious reasons be very small and limited. But inflation defined as an increase in the general price level, would (barely) exist.

What would happen is that prices and wages would go down, year after year, as production increased year after year. As long as the prices goes down faster than the wages, there will be a gradual increase in the standard of living, because you can still buy more and more.

(If the wages go down to the same degree as prices, then there will be no increase or decrease in the standard of living. But the normal state under capitalism with a gold standard is a gradual increase, precisely because the production of wealth increases more than the increase of gold money.)

  1. The fundamental fallacy.

The fundamental premise in the argument is that our need and desire for wealth is limited, so the only way we can want more is if we have enough money, why we need an increase in the money supply. But this premise is false, because in reality there is no limit on our needs and desires. There are many observations you make in your own life and in that of others that would make this point obvious: the only reason you do not spend more is because your wallet do not allow it.

Notice that evertime you earn more money, you can always think of something to buy, something that you have postponed until you have the money.

Notice also that every need implies the need for many other things. For instance, in order for you to satisfy your desire of, say, traveling long distances on your vacation, you also need the entire airplane industry - otherwise it would be too expensive to fly. And the airplane industry would not be possible without many other industries, which are needed to supply and entertain the airplane industry, like for instance a steel industry, a oil industry, etc.

The same principle is true of any need and desire of yours. And there are many other observations you can make of your own. The implication of all of this is, however, that there is no limit on the wealth that must be produced. Thus there is also no limit on the work that must be done. As soon as we efficiently can serve one need, thanks in part to the introduction of labor-saving machines, the faster we can consider to satisfy our other needs and desires. This is how an entirely new industry can be created.

On this issue, I recommend you to read George Reisman’s article Production vs. Consumption.

  1. The need of integration.

Yes, your neighbor is right when he said that everything is connected. This entire post of yours is a great example of why one have to integrate your understanding of Objectivism with a proper understanding of many other subjects such as history, economics, and psychology. In this case, it is primarily economics that you need to study and integrate.

Where to begin? What to read? I suggest that you start with Henry Hazlitt’s Economics in One Lesson. Then read Economic Policy by Ludwig von Mises. Then read Markets don’t fail! by Brian P Simpsons. Then read Capitalism: A Treatise on Economics by George Reisman.