Technology and Labor

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    What is the Austrian response to the “problem” of labor being put out of work by ever increasing efficiency of technology? The belief of I think the mainstream holds that as technology improves and human labor is not needed as much, eventually efficient machines drive out most human labor as it is much less efficient ultimately leading to mass populations out of work. I know this question must always be raised but I would like to hear your take on it. (I think this is a big part of the rationale behind labor unions and Marxism)


    In the market economy, people devote resources to developing technology and embodying it in capital goods only when it improves efficiency. As a result labor becomes more productive. In other words, real wages or standards of living rise. With higher standards of living people can choose to take more leisure. If economic progress makes it possible for people to produce the same set of consumer goods with eight hours of labor a day instead of twelve, that’s a good thing. And this is precisely what has happened under capitalism over the last 200 hundred years. The work day and work week keep getting shorter and our standards of living keep getting higher. That we are “out of work” for four extra hours a day and one extra day a week compared to people 200 hundred years ago is a good thing.

    Technological advance and economic progress do not make people unemployed even if it reduces the number of people working in some line of production. (They won’t necessary reduce the number of workers since the greater efficiency reduces costs and permits a lower price and therefore, a greater volume of sales and production.) In a market economy, they shift into other lines of production in which their labor is relatively more valuable. While their nominal wages might be lower, their real wages might be higher because of the greater productivity from the technological advance and economic progress. Whether their real wages rise or fall, society at large has more and better consumer goods.

    Wages and prices adjust in a market economy to bring about the array of production processes that best satisfy our preferences.


    I’ve come up with a cool response to this silly argument:
    “If the argument were true then history would have played like this: At the beginning of humanity there was 0% unemployment. Then some people invented the saw and unemployment increased to 5%. Then they invented the wheel and unemployment increased to 15%… After the invention of airplanes, ships, trucks, computer etc. unemployment would be at 95% right now! Of course that’s not the case, so you’re wrong!”
    What do you think?


    We could employ a lot more people if it weren’t for those blasted anti-labor train engines. Wage-earning, car pulling laborers should do that instead! I’m sure the owners of the railroads could absorb the increase cost of wages without passing it on to consumers of the items being transported if only they weren’t so greedy (maybe a price a ceiling would work)….

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