7 votes

Long Term flaw in the economy I don't hear addressed

There's a fundamental problem with the economy that I haven't heard addressed by anybody, perhaps because it is a bit academic. But I am wondering what y'all think about it (or maybe point me to some related reading).

The problem I see is that technology combined with a growing population is causing the value of human labor to decline (The demand for human labor overall is going down while the supply is going up).

Now I know all the arguments about better paying high skill jobs being created, and that's good. I also know that the more productive tech means lower costs for consumers which overall can raise the standard of living.

However, not everyone is suited to high skill or high tech jobs. There is simply a fairly large portion of the population that will never be able to offer a positive return on investment for their abilities, regardless of how much training/education is available to them. Or what little wage they earn will purchase so little that it's hardly worth doing. Even if you magically fixed every problem with the education system (which you obviously won't), it would still leave an ever growing portion of the population unable to "keep up". The more efficient robots, 3D printers, software, etc. gets, the less demand there is on the market for human labor overall (while supply continues to rise).

We produce more stuff by far than we did in the 50's (for example), yet everyone seems to need to work harder. Part of this is just cultural materialism, and of course interference by the gov't and the Fed, but part of it is also the impact of the lowering value of labor in general (as I see it).

I can imagine a more Utopian society where we all work less and less over time, and are contented with more modest lifestyles (which gradually improve with the ever improving tech), thus keeping a larger portion of the population relevant. But of course that's a fantasy. It's not efficient (at least in the short term) to have 2 people do a job that one person could do, and a lot of people would rather work longer hours in order to keep their pay higher anyway.

Is there a free market solution to this problem? Seems to me that even in the purest Ayn Randian world (I can use her name as an adjective right?) it would inevitably lead to revolt by the underclasses whose labors become worthless, but maybe I'm missing something. The only answer I can think of is "we'd have to hope the free market comes up with a solution", but I'm curious if anyone has more insight than that.




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Cyril's picture

In the hope it won't be "tl;dr" I'd recommend the following

In the hope it won't be "tl;dr" I'd recommend the following, if not read yet, and I believe most relevant to a fair portion of your concerns:

That Which is Seen, and That Which is Not Seen

VIII. Machinery
IX. Credit
XI. Frugality and Luxury
XII. Having a Right to Work, Having a Right to Profit

http://bastiat.org/en/twisatwins.html

'HTH,

"Cyril" pronounced "see real". I code stuff.

http://Laissez-Faire.Me/Liberty

"To study and not think is a waste. To think and not study is dangerous." -- Confucius

Adaptation

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Several points...

First, you have to understand we're living in a distorted economy based on an illusion of wealth, and economic demand.

To keep our economic cycle of ever increasing debt going there must be ever increasing consumption. This is all supported by inflationary money (incidentally, that's why we produce more stuff now but everyone must work harder, the currency loses purchasing power while people become more and more indebted).

Getting back to my above point, we have an illusion of demand. Earlier comments in this thread are correct. Growing food, which is very labor intensive, is the real structure the economy should have.

Until you have technology which effectively replaces farm labor people will need to do that. They will mostly do it for themselves, but they will be wealthy in that regard (plenty of food to eat, and freedom).

If you add sound money to this model then people will see their purchasing power maintained, and as technology brings down the cost of production you will see your utopian society where people work less and less over time, and are contented with more modest lifestyles. Those with higher skills of course don't need to do intensive labor (grow food) to gain wealth.

Someone downvoted

this?

What is it you disagree with or think is incorrect? A downvote without comment gives me no chance to reply.

Full Production vs Full Employment

The issues is not new as during the industrial revolution the same rhetoric that machines were taking mens jobs was used to scare people, just as it is today with the technological advances.

The other night I heard mainstream stats on how many jobs are forecast to be lost with the gains in technology and how by 2021 it would be a big deal and the government will have to get involved.

Now consider an argument based on employment versus production. Have you read Economics in One Lesson? I posted a link to the PDF below. It is free from Mises.org

You have identified many positive outcomes from using labor saving technology. New labor saving machines must first be developed & produced, installed, and operators must be trained. Production also needs technicians to maintain such equipment. The new equipment is justified when the technology raises production by increasing efficiency, and that is the point.

The argument of Full Employment versus Full Production stands out the most for me on this. The government looks too often at full employment without regard for full production. The bottom line is you CAN have full employment without full production, but you can NEVER have full production without full employment.

Have you read Econ in one Lesson. Here is the PDF on-line

Check out the PDF online for Economics in One Lesson is a great read and a small book and I highly recommend.

http://mises.org/books/economics_in_one_lesson_hazlitt.pdf

--3D

I think you have it

I think you have it backwards.

"...but part of it is also the impact of the lowering value of labor in general (as I see it)."

The value of labor increases as technology increases.

Example: A bike cost $16.75 in 1900 and the average income was $0.21/hour, so that means that it cost 4786 minutes of labor to purchase a bike.
A bike cost $104.92 in 1990 and the average income was $11.35/hour, so that meas that it cost only 554 minutes of labor to purchase a bike.

Seems to me that the technological innovations from 1900-1990 has increased the value of labor by around 9x (in terms of bikes).

How about some other commodities? 1 pound of butter cost 74 minutes of labor in 1900 as compared to 11 minutes in 1990. 1 pound of rice cost 20 minutes in 1900 as compared to 3 minutes in 1990.

If you're worried about labor being "obsoleted", what about the people who manually picked corn cobs who lost their jobs to combine harvesters? Surely we'd have far more unemployment today because people can't get a job picking corn!

The fact is that society adapts and there are always unskilled jobs for workers (in as much as we have no evidence that this is not true), as long as a government-imposed minimum wage doesn't price out that labor.

This is not the politically correct answer

But the lower skilled wage in being driven into the ground by illegal immigration and it is being perpetrated by the USG. Think about it, what better way to keep wage inflation (symptom not cause) under control then having a flood of cheap labor enter the market place. Not to mention if they can get false SS numbers they will pay into a system from which they will never draw…..these are reasons why the borders cannot ever be closed.

And fraud and just another level of robbing the US taxpayer

result:

http://www.dailypaul.com/290172/another-reason-to-abolish-th...

Your answer:
Politically correct? No.
True? Yes, sadly.

What would the Founders do?

Growing your own food on your own homestead....

should be the basis of any economy. Then you can retire with simple means if desired. (It is better than working for the 'man' as a wage-slave for 30yrs, paying into the government/IRS extortion racket, being forced to subsidize a failed public education, saving all your money for retirement only to lose it all along with your home when the artificial debt bubbles collapses, and having to start all over at the age of 65. I digress.)

With a firm grounding of a simple life that is available to all, people can CHOOSE to produce more food than they consume or create another good or service in exchange for any other good or service to increase their standard of living. That is capitalism. That is a free market. Technology just accelerates a person's ability to improve their standard of living. If a technological product is so powerful and so valued, many people will go into producing that product and with competition prices will be lowered for all. A food producer who might have needed to produce 1yrs of food in exchange for that tech product may in the future only have to produce 1 weeks worth of food later. When there is an oversupply of food producers, the costs of food becomes so low others start producing something else that has less supply with more demand and shifts in different sectors of the economy would happen based on the desires and tastes of mankind. There will always be a sector you can participate in to increase your standard of living and if there wasn't you could always just grow your own food and retire on your homestead.

There is really no flaw in free markets. A sustainable society is attainable. Unfortunately the bankers, governments and corporations through governments intervene and create unnatural systems, misallocations of resources, booms & busts before societies eventually collapse.

Increasing your standard of living is a choice and technology makes it easier to do that.. otherwise you can retire sooner living the simple life off the earth.

9-11 Media Fakery: Did anyone die on 9-11?
http://www.cluesforum.info/

http://www.septemberclues.info/

9-11 Actors:
http://www.youtube.com/watch?v=6aPvJSQtmoE

Pysops.. media.. actors.. propagandists... disinfo agents.. fake videos.. fake photos

Growing food

If you plant one successful tomato seed you can get 15 to 50 or more new seeds to plant more tomatoes which each gives you an excessively exponential return. All of the "waste" not eaten for your food can be utilized for food to grow other beneficial things that can provide returns for nutrients to grow even more food. Life feeds on life. All of life has these types of self assembling excessively exponential abundant returns and the primary source of input is water which happens to be the most abundant molecule on Earth and for the most part the seeds to start one's own abundance can be obtained for free. The seed of life is the solution. One's own abundance does not require participation in the economy at all it requires freedom, awareness of nature and some diligent but minimal work.

The most powerful Law of Nature is Time. It is finite and we all will run out of it. Use this Law to your advantage, for it offers you infinite possibilities...

Yes food is the foundation...

Funny I was typing something similar around the same time... and your example shows wealth and standard of living is really unlimited just as you can grow much more than you can ever eat. If you could grow food for the world, you could exchange it for: someone to manicure your nails, trim your beard, a nice suit, a tailor to make it fit, shoes, someone to shine it, an IPad created by the skill and labor of thousands of people, a massage, an automobile created by the skill and labor of thousands.. a mansion created by the skill and labor of thousands..until all the billions around the world would exchange their products & service for their share of the food you provide. If someone didn't have something to offer in exchange, they could simply grow their own food and be content. We create our own abundance.

9-11 Media Fakery: Did anyone die on 9-11?
http://www.cluesforum.info/

http://www.septemberclues.info/

9-11 Actors:
http://www.youtube.com/watch?v=6aPvJSQtmoE

Pysops.. media.. actors.. propagandists... disinfo agents.. fake videos.. fake photos

I agree that growing food

is good, fun, incredibly healthy and your own food has a taste that can't be matched. There is something "spiritual" about gardening (or farming at the larger scale)

It is very labor intensive.

There are not many full time farmers who spend money on massages and tailored suits.

That may change though.

Pre-planned interventions will fail to produce optimal results.

Markets where voluntary exchanges are the rule tend to optimize results for everyone.

No matter what the mix of resources, optimal distribution, utilization and productivity is favored by voluntary interactions.

Free includes debt-free!