Thursday, August 13, 2015

The “Not Enough Jobs” Scenario: An Economic Fallacy (But Possibly an Accurate Forecast)

By Dr. Mark W. Henderson

Once again, a scholar with impressive credentials is broadcasting the gloomy notion that Americans face a job-poor future. The insufficient-jobs scenario appeared in George Mason University economist Tyler Cowen’s book “Average Is Over” a couple of years ago. It resurfaced again recently in the Pittsburgh Tribune-Review. Vivek Wadhwa, “a fellow … director of research … and distinguished scholar” at several prestigious universities, wrote that we need “a new version of capitalism” for “dealing with our jobless future.”

The crux of Wadhwa’s argument is his belief that technological progress will result in a society divided between a technologically savvy elite, who will prosper mightily, and a larger number of Americans whose jobs will be rendered obsolete and won’t be able to find new jobs. There’s an obvious fallacy here: If technological progress reduces employment opportunities, then why are hundreds of millions of people still working in the technologically and economically advanced countries of the world? What is it with these intellectuals and the recurring nightmare that progress results in a dearth of jobs?

An incident that the late economist Milton Friedman related comes to mind: While visiting a populous but undeveloped Asian country several decades ago, Friedman saw a gang of workers using shovels to excavate a hole where a building’s foundation would be laid. Friedman noted that the job would be completed much more quickly if a modern excavating machine were used. His host replied that a deliberate decision had been made not to use such a machine because the government wanted to maximize employment. Friedman’s rejoinder was to the effect that if the goal were to maximize employment in the country, they should ban the use of shovels and equip a far larger number of laborers with spoons. It doesn’t require great vision to realize that a fully employed nation of spoon-wielding ditch diggers would remain a very poor place.

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1 comment:

  1. Friedman's observation can still be seen in Asia today, as scores of low-value job roles and antiquated business processes abound here. As Hazlitt wrote in One Lesson, governments are fascinated by the "jobs fetish", missing the point that a prosperous economy is all about capital accumulation and reinvestment, technological advancement, and efficiencies. An advanced economic model requires entrepreneurs to disrupt industry competition by delivering a more compelling value proposition to new or existing customer segments. This in turn requires key resources that deliver ever-increasing value in terms of their economic output. Interestingly, Obama's going off a few years ago about automated teller machines destroying jobs demonstrated that it is possible for even America's Ivy League elites to be economic ignoramuses, and that the U.S. has to an extent prospered in spite of, not because of, her educated worthies and political lords. Unfortunately, America's power elites are now actually destroying the U.S.'s wealth-producing economy through ZIRP's capital destroying effects.