[jmherbener]

There are two reasons that problematic unemployment cannot occur on the unhampered market economy. The first is the diversity of resources in their productive capacities. Because of these differences in productivity, each person is the efficient producer (i.e., the low cost producer) of something compared to other persons. So each person can out compete other persons in his area of comparative advantage.

The second reason is that human person are scarce relative to the surface area of the earth. In other words, there are sub-marginally productive (and therefore, idle) land sites, but not sub-marginally productive persons. Each person who is willing to work in the division of labor can find employment at a wage commensurate with the value of his labor’s productivity. As the human population rises, more entrepreneurs can start up more enterprises to employ more persons as long as we don’t run out of surface area on the earth to put the additional people and their production processes.

These two reasons combined form the argument behind the law of association, i.e., that everyone who has any labor ability at all can participate in the division of labor.

The argument against those who claim that it benefits labor to prevent capital accumulation is that the principle cannot be generalized and hence, it is nothing more than special interest pleading. As soon as one generalizes the principle, i.e., no one should work with any capital goods whatsoever, one can see the fallacy. The argument then is really that all other workers must work with capital so that I and my workers in the weaving industry, say, can maintain our standards of living working without capital. But, standards of living depend on our productivity which depends on our capital stock. So the weavers who retain their jobs with the new capital goods will have a higher standard of living than before. The workers who move into other lines of production with have their wages determined in the same way as everybody does, by the value of their labor’s productivity, which depends heavily on the capital goods they have to work with. Hopefully for them, capitalists and entrepreneurs will continue the process of capital accumulation and thereby, raise their wages and standards of living in the future.