For me, reason.tv is the new Penn & Teller: Bullshit!. I love it. Last week, its showcase - The Drew Carey Project - produced the 7+ minute video: Mexicans and Machines: Why it’s time to lay off NAFTA.
For those with less than 7 minutes to spare, Carey pushes the protectionist credo (against NAFTA, “cheap labor” and free markets) to its logical conclusion - that machines are the real problem.
Now, think about it. How are [workers] supposed to compete against something that doesn’t get paid, doesn’t get health insurance, and never goes on breaks?
Carey’s question reminds me of when I worked at Jewel. Sometime in the summer of 2004, corporate replaced 2 of the traditional check-out lanes for 4 of the new cashier-less self check-outs.
For the most part, customer reaction was a mix of curiosity and confusion. There was a vocal minority though that, out of purported principle, really did not like them. Their contempt went something like:
- They’re taking away good jobs.
- Hey, I’m looking out for your paycheck.
- No sir, I’m not supporting China.
- Those self check-outs replace real workers.
Most of the time I remained quiet - customers first! - but every now and then I responded with something along the lines of:
- This job sucks.
- Thanks but no thanks.
- Dude, this job blows. Really.
- Uh, I hope all menial and thoughtless work is replaced by machines.
My self-interest aside, the underlying question of their economic worth remained unanswered. But then - hark! - I read Economics In One Lesson by the undeniably bad ass, self-taught economist Henry Hazlitt.
Chapter VII, entitled “The Curse of Machinery”, starts off with the following:
AMONG THE MOST viable of all economic delusions is the belief that machines on net balance create unemployment. Destroyed a thousand times, it has risen a thousand times out of its own ashes as hardy and vigorous as ever. Whenever there is long-continued mass unemployment, machines get the blame anew. This fallacy is still the basis of many labor union practices.
Still is. Hazlitt, of course, was writing in the mid ’40s. More than 60 years later, unions perpetuate the fallacy. In the seemingly innocuous Self-Scanners Impact Work Force, the UFCW rag plants the seed:
Kimbro initially was excited about the technology when it was first introduced to her store in 1998. But she quickly realized how it affects the workers. She sees her job managing four U-Scans as taking away the hours of two or three cashiers.
Of course, UFCW is correct. Cashiers do lose hours with the introduction of self check-out lanes. But is preventing market entry to such technology the answer? Hmm, I detect a legitimate slippery slope…
The logical conclusion from this would be that the way to maximize jobs is to make all labor as inefficient and unproductive as possible. It implies that the English Luddite rioters, who in the early nineteenth century destroyed stocking frames, steam-power looms, and shearing machines, were after all doing the right thing.
But who cares about logic, right? We want to know about the here and now, whether self check-outs, and moreover, machines “on net balance create unemployment”? Hazlitt answers the full thrust of the unionist-protectionist program with a long (but totally worth it) anecdote.
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. If this enterprising manufacturer effects great economies as compared with his competitors, either he will begin to expand his operations at their expense, or they will start buying the machines too. Again more work will be given to the makers of the machines. But competition and production will then also begin to force down the price of overcoats. There will no longer be as great profits for those who adopt the new machines. The rate of profit of the manufacturers using the new machine will begin to drop, while the manufacturers who have still not adopted the machine may now make no profit at all. The savings, in other words, will begin to be passed along to the buyers of overcoats—to the consumers.
But as overcoats are now cheaper, more people will buy them. This means that, though it takes fewer people to make the same number of overcoats as before, more overcoats are now being made than before. If the demand for overcoats is what economists call “elastic”—that is, if a fall in the price of overcoats causes a larger total amount of money to be spent on overcoats than previously— then more people may be employed even in making overcoats than before the new labor-saving machine was introduced. We have already seen how this actually happened historically with stockings and other textiles.
But the new employment does not depend on the elasticity of demand for the particular product involved. Suppose that, though the price of overcoats was almost cut in half—from a former price, say, of $150 to a new price of $100—not a single additional coat was sold. The result would be that while consumers were as well provided with new overcoats as before, each buyer would now have $50 left over that he would not have had left over before. He will therefore spend this $50 for something else, and so provide increased employment in other lines.
In brief, on net balance machines, technological improvements, automation, economies and efficiency do not throw men out of work.
With that said, the UFCW article I cited before ends with the following dystopia:
And self scanners might be just the beginning of a new trend in technology. The possibility of a day when the entire grocery cart could be scanned and paid for in a matter of seconds, much like speeding through toll booths with an “EZPass”, may be a possibility in the not-too-distant future. The shopper could simply walk through an arch and have their whole order scanned at once, and have it automatically withdrawn from a checking account or billed to a credit card—all in a matter of seconds.
I can’t wait!
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