Re: A Challenge To All Extropians/Free Martketeers

Dan Fabulich (
Sat, 25 Apr 1998 00:06:21 -0400


Paul Hughes wrote:
>1) Is there a single field which is intrinsically safe from automation
>in the course of the next 20-30 years? If you can think of more fields,
>please elaborate.
>2) Are these remaining fields if any, sufficient to employ the majority
>of humanity? If not, what will the rest of humanity do in order to

See my post earlier today (4/24) on the "abolition of work." Jobs would
only vanish if supply outstripped demand. This does not seem likely in the
near future. Even as output keeps increasing thanks to increased
automation, demand for labor keeps increasing at least as fast, if not faster.

>3) For those who are unemployed and do not have sufficient investment
>income, is death the inevitable result? If not, how will they survive?
>4) Will most people alive today be able to save enough before their jobs
>become automated?
>5) If how much money one has saved is the the key to surviving
>automation, does this not portend very badly for young people who have
>had less time to save for their forced retirement? If this is true,
>does this mean that the future is going to be populated almost entirely
>of rich and old people and their children?

First of all, I should state that I am one of those economists who believes
that unemployment happens by choice; that workers rationally choose to be
unemployed (except when there is a legally enforced minimum wage). Most
people find this antithetical to their current worldview, so it will
require a bit of defense.

First, I assert that anybody could work as a volunteer if they so desired.
This is not what most would consider a job, but the fact is that they could
do so and would have no trouble at all finding people who would appreciate
their service, if not pay them for it. So I take it as self evident that
there is ample (if not infinite) demand for free labor. :)

Next, I adopt the law of demand, which simply states that the market will
demand a quantity of a given good based upon its price, and that the higher
the price of a good, the fewer the market will wish to buy, all else being
equal. It is this law which is normally used to presume the existence of a
demand curve in microeconomic markets. It is represented like this:

Wages |\_
| \_
| \_
| \_
| \_
| \_
| \_
| \

This graph simply repeats what I said above, only visually. When wages are
low, or zero, the amount of employment demanded is great. However, as
wages increase, less and less employment is demanded, up until the point
where wages are simply so high that no workers are demanded at all.

Finally, I assert that there is a minimum wage which almost no workers will
accept. This is also self-evident. Just as most workers will not work for
free, they will also refuse to work at the wage of one cent per year.
(Though in some post-colonial nations, it's getting pretty close.)
However, the point is that they COULD work for this wage; they just choose
not to. Similarly, we can represent this with a supply curve, based on the
law of supply which states that the greater the wages paid, the more
employment workers are prepared to put out. Set against the demand curve,
it looks like this:

Wages |\_ _/ <-- supply
| \_ _/
| \_ _/
W* |______\_/
| _/^\_
| _/ | \_
| _/ | \_
|/ | \ <-- demand

Almost no workers work for 0 wages, while more and more are willing to work
as wages increase. Eventually, the supply curve intersects the demand
curve. Workers would be prepared to work at a higher wage than where these
intersect, but there is no buyer who demands labor so much that they are
willing to pay that wage. Similarly, no buyer can cut wages lower that the
supply curve without cutting back the number of workers employed.

So as you can see from these assertions, there should be no involuntary
unemployment, (except for temporary or "frictional" unemployment which may
result from, say, having been fired VERY recently). X workers will not
accept wages lower than wage W, but the market only demands Y workers at
wage W (where Y is less than X); therefore, X - Y workers will simply
refuse to work.

In saying this, I am not saying "Oh, those silly poor. They COULD have a
job if they'd just turn the other cheek and accept a lower wage," because
quite frankly some wages are just so low that they are simply not worth the
effort, particularly to someone who is starving or who must support a
hungry family. 1 cent per year, for example, is not worth the effort, and
I would not consider someone lazy for not accepting it. Unemployment is
real, and the ability of a person to feed themselves in many cases may not
be within their grasp. I'm not trying to say that the poor are poor
because they are lazy.

However, I DO contend that we should stop examining the question from the
perspective of "where are all of the jobs going?" and instead ask ourselves
the question "why are wages so low?" Because, as I think I have shown, the
jobs go when the wages drop, and the jobs reappear when wages increase. In
other words, if buyers were prepared to pay more for the same employment,
more workers would be willing/able to work at that wage. What this would
mean is an increase in the over all demand curve, which might look like this:

| \_
| \_
Wages |\_ -->\_ _/ <-- supply
| \_ \_ _/
W* |____\_ ___*_
|______\_/ ^ \_
| _/ \_| \_
| _/ \_ \_
| _/ | \_--> \_
|/ | \ \

So what we see here, and which was my whole point, is that so long as
demand keeps growing, more and more workers will be employed. For
comparison, automation leads to an increase in the aggregate supply curve:
more total output at a lower price; as a result, the wage level drops in
order to be able to compete with the low cost of capital; eventually, the
wage is so low that it's not even worth going to work.

So what can we do about this? As noted, if demand for labor keeps
increasing, then we can keep unemployment low. Alternately, if we can
increase wages by any other means, this would also decrease unemployment.
One good way to deal with this is through education, which increases the
wage which people can get on the market. Finally, by keeping the price
level low (ie avoiding inflation,) workers will find it increasingly
acceptable to accept a lower wage, because the price of goods will remain
low, and will keep getting lower if automation does everything it's
supposed to do.

And luckily for the unemployed, the free market is already out to do all of
these things for us; though perhaps not as quickly as we might like. The
demand for all goods is increasing, particularly as the population
increases, people get more ambitious, and advertising gets more prevalent.
Moreover, the poor's income/consumption adjusted for inflation as a general
trend is rising, and continues to rise and fall with the growth of the
economy (which, for now, is strong). Similarly, the poor do see the value
of education, and the income effect can be seen most readily in people's
demand for education. College enrollment is many times what it was earlier
in this century, and other low cost sources for education are becoming
increasingly prevalent. And finally, inflation is at an all time low,
thanks in part to the very automation which you fear, and in part by the
skillful meddling of Alan Greenspan. (Nota bene, lf-capitalists:
sometimes, when you get REALLY smart people in government, you almost do as
well as you could under competition. :))

So if you're worried about the poor being replaced by capital, stop
worrying. Instead, we should think about ways we can streamline this
economy and eliminate the impediments to its growth.

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