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The Economic Way Of Thinking Can Help You Make Better Decisions.

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I recommend that everyone majoring (or minoring) in economics take classes in game theory — not  because it’s a field I’m particularly passionate about or have worked in, but because of the essential skills in “the economic way of thinking” that it forces its students to practice.
Game theory, according to John von Neumann and Oskar Morgenstern, whose Theory of Games and Economic Behavior is widely considered the foundational text for the subdiscipline, is the rigorous analysis of interactions between participants facing various alternatives and the rules under which they may make these choices. This captures, and can be extended to, all human interaction and the economy at large. In my mind, game theory quickly becomes this neat intersection of micro and macro skills. It trains its practitioners in the art of individual decision making (individually maximizing payoffs among various options), taking other people’s choice sets into account, and analyzing the systemic outcomes that result from their interaction. In a direct way, it hones the very skills that matter most for an economist’s mindset: understanding opportunity costs, embracing backward induction by thinking through the various domino effects of my – or others’ – actions, and the system-wide outcomes that follow from that. In this sense, game theory helps us think about Henry Hazlitt’s great message in Economics in One Lesson: the foundational economic point that

the art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.

This framework allows us to see counterintuitive things and understand that many direct, commonsensical solutions to perceived ills are usually not very good ones. Take rent control: if the problem is too high rents, we can forbid landlords to charge more than some maximum amount of dollars – with the counterintuitive result that fewer landlords offer up their apartments on the market, fewer people build houses, and the underprivileged renters you intended to help have an even harder time finding accommodation. A well-intended policy backfires.

We can invoke Yale psychologist Paul Bloom’s excellent case against empathy, where our small-scale acts of empathy for the visible and familiar cause disproportionate harm to the invisible and unfamiliar or waste resources with very little to show for it — another case of well-intended actions backfiring.

Or we can provide an example from his colleague Shane Frederick’s CRT personality test for identifying intuitive and deliberative people: if it takes 5 machines 5 minutes to make 5 widgets, how long would it take 100 machines to make 100 widgets?

Before our analytically apt and arithmetically trained brains have a chance to ponder the answer, the intuitive parts of most people’s minds have blurted out the incorrect answer of “100 minutes.” Or take this one, which I first encountered in a behavioral-economics class many years ago: a bat and a ball cost $1.10 in total. The bat costs $1.00 more than the ball. How much does the ball cost?

Again, many people’s intuitive and shortcut-prone minds subtract a dollar from $1.10 and answer “10 cents” before they have a chance to realize that 0.10 + (0.10 + 1) equals $1.20 – not $1.10 as stated in the question. Intuition has clearly gone wrong.

Libertarians have for years made similar arguments about the Drug War. As the Economist’s Britain editor Tom Wainwright showed in his celebrated book Narconomics, officials and their gut reactions to counter drug abuse have left many parts of Latin America in shambles, condemned coca farmers to a life of misery, and contributed to more than the continent’s fair share of narco-trade violence – yet has virtually nothing to show for it in terms of reducing drug supply or the number of people using them. Looking at the opioid crisis – quite the opposite.

The high value-added from an initially low-value crop means that even impressive reductions in the size of coca plantations are easily offset by efficiencies in other parts of the supply chain. Farmers in other jurisdictions simply expanded their coca production in response to crops destroyed elsewhere, leaving individual farmers without revenue but not meaningfully impacting total drug production. A well-intended (albeit paternalistic) policy to protect people from harmful substances ends up contributing to more misery elsewhere, with ultimately very few people protected at home.

This is to suggest that most of our intuitions about the world (and suggested solutions to its ills) are plainly wrong, and that rigorously thinking through them may keep us from taking, supporting, or enacting pretty harmful policies.

Enter Environmental Issues

I like to write about the environment because its vast challenges seem to cause even well-meaning and highly intelligent people to fall prey to their intuitions; their otherwise prudent judgments quickly fly out the window – sometimes even those with some training in economics.

Take nature, the destruction of which left-leaning commentators for years have considered the ultimate failure of capitalism; the activist Naomi Klein even titled her book This Changes Everything: Capitalism vs. the Climate. The desire to feel good impels us to save turtles, replace our plastic straws, recycle raw materials, protect endangered species, reduce paper use, not fly, and the rest of the list that comes with the modern environmentalist creed.

The problem? None of these things achieve the ends their proponents allegedly hold dear. Wasting countless financial and environmental resources to save a handful of turtles might marginally benefit some local ecosystem, but it comes at the much-too-steep expense for the climate that the turtle savior so ardently favors. Recycling most raw materials is more resource- and energy-intensive than digging up new ones. Neither are plastic straws or bags the source of the problem with which they are associated, nor do their metal or bamboo or paper replacement products break even in terms of resource use (at least not for hundreds or thousands of uses – a diligence most people in most places don’t have).

Killing animals in places where property rights over animals have been established doesn’t actually decimate the species. Instead it usually provides the financial incentive to keep more of them alive; hunting endangered animals increases their total numbers rather than diminishing them because the person selling the hunting service now better protects the remaining animals – and has a huge stake in assisting their reproduction. Ecotourism can also have this impact by making gorillas or elephants or rhinos more valuable alive than dead and tying the livelihood of poachers to the preservation of these majestic animals instead of killing them.

But my favorite example is paper, this wholly renewable resource that almost literally springs out of the earth. At the bottom of most corporate emails are kind requests not to print the email unless absolutely necessary. Conserving paper, the reasoning goes, conserves trees; chopping down fewer trees results in more forests.

“Dead wrong,” to invoke Johan Norberg’s well-known videos on the Free to Choose Network.

Most material used to make paper products in the U.S. doesn’t even come from newly chopped down trees; it comes from milling residues or recycled paper. Globally, something like three-quarters of pulp production comes from private, commercially run plantation properties where their owners have every incentive to replenish the forests they periodically clear. A high financial value assigned to dead trees from which we make paper results in the counterintuitive consequence of forest owners planting more trees and expanding their forests – not deforesting the earth.

The (comparatively minor) clearing of the Amazon is rarely done for paper-making purposes, but rather for household firewood or to plant agricultural products like palm oil or soybeans. That might have moral implications for some of our consumption decisions, but refusing to use paper and ceasing to print emails would make little sense if you’re worried about rainforests.

Game theory and economic thinking at large force us to think through these changing effects, supply responses, and relevant elasticities. What happens to the system might differ from what seems to be the outcome of an individual’s action.

The world is dynamic, not static; it is equilibrating and adjusting, not mechanical. The economic way of thinking teaches us that.

 

Joakim Book is a writer, researcher and editor on all things money, finance and financial history. This article first appeared at aier.org

3 Lessons In Protecting Us From Politicians Via The Most Popular Economics Book Ever Written.

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November 28 marked the 125th anniversary (the quasquicentennial, for Latin aficionados) of one of America’s most prolific public intellectuals — Henry Hazlitt. According to Lew Rockwell, he “was familiar with the work of every important thinker in nearly every field,” and “wrote in every important public forum of his day.” He published roughly ten million words as a journalist, literary critic, philosopher, and economist, including Economics in One Lesson, perhaps the most popular economics book ever written

Given that Economics in One Lesson focused on seeing through the logical problems with political proposals that ignore economic realities, it could also have been titled One Lesson in Protecting us from Politicians. Given the frequency and vastly expanded costs of such proposals from politicians and their allied political predators in America today, remembering its lesson is an appropriate way to honor Hazlitt’s birthday.

Hazlitt’s lesson was that “the art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.”

Looking at the Long Run as Well as the Short Run

Policies’ long-run effects are often very different from their short-run effects. Consider rent control. Because rental housing tends to be long-lived, rent control’s erosion of the rental housing stock does not appear very quickly, allowing proponents to allege the effect doesn’t exist, rather than “it doesn’t exist in a major way, yet.” However, the long-term effects of rent control have been likened to widespread bombing in their ability to destroy the housing stock. Similarly, Keynesians’ focus on increasing consumption has reduced saving and investment, depressing the growth of the capital stock and economic growth. As Hazlitt put it, “Today is already the tomorrow which the bad economist yesterday urged us to ignore.”

Looking at all Groups, Not Just Some Groups

Virtually every government expenditure program not wholly financed by the beneficiaries illustrates the need to look at policies’ impacts on all affected groups, not just the ones who receive special treatment. That is because government has no resources of its own, so any largesse must ultimately come from other citizens. So analysis must extend to how and from whom those resources are to be acquired, and the consequences. If resources come from taxes, those effects must be incorporated (including the costs to society from the distortions created in addition to the direct costs of the taxes). If resources come from government borrowing, essentially a government commitment to increased future taxation, the present and future effects must also be considered.

Even the language used to shill for policies often misleads us from Hazlitt’s lesson. For example, “we Americans pay our Social Security taxes and we Americans get the benefits,” is true in a sense. However, it commits the logical sin of using the same word “we” to mean different things. Early generations got trillions more in benefits than they paid, forcing later generations to pay far more than they will get as benefits, but equivocating on what “we” means hides the massive redistribution.

Similarly, programs supported as helping groups like “the poor,” such as minimum wages or housing assistance, which actually impose large costs rather than benefits on a substantial subset of “the poor” (e.g., those who lose their jobs, hours of work, on-the-job training, etc., or who don’t get funding for their housing, but face rental prices raised by subsidies others get), which cannot be squared with helping “the poor” as a group.

Incentives Matter

Hazlitt offers many more illustrations than those provided here, making it a “must read” for anyone who wants to understand policy despite the violations of his lesson involved. However, I think his two-part lesson would benefit from a third part. We must also recognize and accurately evaluate all the margins at which supposed beneficiaries’ incentives are changed, not just one, because policies cannot change just one incentive.

Food stamps (now the Supplemental Nutrition Assistance Program) offer an instructive example. They were intended to increase food consumption of low-income people. However, they actually have very limited effects on food consumption. Almost all recipients get less in SNAP benefits than they would have spent on food, allowing the benefits to be substituted for dollars spent on food, freeing them up to be spent however recipients choose.

Further, since SNAP benefits are reduced as incomes rise, the food stamp program acts as an income tax, reducing incentives for recipients to develop and use their skills to benefit others. Such effects are magnified for individuals in multiple assistance programs, which is very common.

Asset tests have also been applied which kept people from putting together sufficient resources to go to school to learn their way out of poverty or to start a business and earn their way out of poverty.

Ludwig von Mises said of Henry Hazlitt that “in this age of great struggle in favor of freedom and the social system in which men can live as free men, you…are the economic conscience of our country.”

Economics in One Lesson offered important guidance for that struggle. However, during his life, Hazlitt concluded that “So far as the politicians are concerned, the lesson…does not seem to have been learned anywhere.” Now, with far more resources forcibly taken from some for whatever and whoever the government decides, his insights are more important than ever.

Henry Hazlitt – The Economic Conscience of Everything Western Civilization Has Achieved.

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The only way to introduce Poetic Justice Warrior Henry Hazlitt is directly, with clarity, focused on principles, and using examples. This is exactly what he did during seventy years of writing, nearly every day, promoting the virtues of classical liberalism and the morality of capitalism. Hazlitt’s greatest asset was a highly trained mind, one that he developed on his own. During his last year of high school Hazlitt recalled that he “developed what I suppose might be called intellectual awareness.” When he was 21 years old he published his first book, Thinking as a Science. In it he writes,

Have you not often been in a waiting room, noticed people all around you reading, and finding yourself without any reading matter, and wished that you had some to occupy your mind? Did it ever occur to you that you had within you the power to occupy your mind, and do it more profitably than all those readers? Did it ever occur to you to think?

Hazlitt is talking about thinking with a purpose, to solve a problem, to choose a course to pursue. Real thinking, hard thinking, independent thinking, a systemization of all thought. Quoting Ella Wilcox, “It would do for education, government and economics what the alphabet did for language, movable type for printing, and the scale for music.” His systemization is based on a hierarchy of explicitly defined values, something most people are averse to.

Economics in One Lesson

While Henry Hazlitt wrote 20 books including The Anatomy of Criticism, Man vs. the Welfare State, The Foundations of Morality, The Failure of the New Economics, The Conquest of Poverty, the novel Time Will Run Back, Economics in One Lesson became the most popular basic book on economics of all time. As entrepreneur and author Tom Malone says about Economics in One Lesson.

Hazlitt points out the vital need to understand economic policies in terms of how they impact the individual, saying, “What is harmful or disastrous to an individual must be equally harmful or disastrous to the collection of individuals that make up a nation.” He demolishes the major economic fallacies that are promoted by power-lusting politicians and collectivists of every stripe.”

Not only did Hazlitt make rational economic thinking available to mass audiences, he did the same thing with the irrational, convoluted, and pretentious economic thinking of John Maynard Keynes. Chapter by chapter, line by line, Hazlitt took apart Keynes’ widely accepted General Theory by applying Keynes’ ideas to real-life economic choices. Anyone who reads Hazlitt’s principled and consistent The Failure of the New Economics could never abide by Keynes’ General Theory, but statists and collectivists everywhere consider it the bible for their economic central planning schemes.

Hazlitt also understood that Keynes was nothing but a neo-Marxist, and had plenty to say about Marx. For example,

The whole gospel of Karl Marx can be summed up in a single sentence: Hate the man who is better off than you are. Never under any circumstances admit that his success may be due to his own efforts. Never under any circumstances admit that your own failure may be owing to your own weakness. This basic hatred is the heart of Marxism.

From a young age Hazlitt realized that the attacks against capitalism were gaining momentum. But unlike most conservatives, he knew in his heart that capitalism had to be defended on ethical grounds.

The Foundations of Morality

At the age of 70, in 1964, Hazlitt wrote The Foundations of Morality, a book about which he said he was most proud. In fact, during Hazlitt’s 70th birthday celebration, Poetic Justice Warrior Ludwig von Mises toasted,

In this age of the great struggle in favor of freedom and the social system in which men can live as free men, you are our leader. You have indefatigably fought against the step-by-step advance of the powers anxious to destroy everything that human civilization has created over a long period of centuries. You are the economic conscience of our nation.

Extraordinary praise coming from the man whose personal motto was Virgil’s Aeneid. “Do not give in to evil but proceed ever more boldly against it.” In this book Hazlitt declared that capitalism must be defended on moral grounds, not practical.

What is under attack is the capitalist system; and it is attacked mainly on ethical grounds, as being materialistic, selfish, unjust, immoral, savagely competitive, callous, cruel, destructive. If the capitalistic system is really worth preserving, it is futile today to defend it merely on technical grounds (as being more productive, for example) unless we can show also that the socialist attacks on ethical grounds are false and baseless.

Henry Hazlitt’s relentless defense of human flourishing, sometimes single-handed, is rooted in his personal path toward self-creation. As a boy he attended a school for poor, fatherless boys (his father died at Henry’s age 2). His stepfather died when he was 13, leaving the family in dire straits again. In high school he set his mind on becoming a philosophy and psychology student at Harvard. Instead, he attended New York City’s tuition-free City College, dropped out, and went to work for the fledgling Wall Street Journal. His university was books and he was a marvelous student, first in his class.

The Wisdom of the Stoic

Hazlitt continued to write and work for another 28 years after The Foundations of Morality, including a compilation, along with his wife Frances, titled The Wisdom of the Stoics. He summarized his work as “I’ve been preaching liberty as against coercion; I’ve been preaching capitalism as against socialism; and I’ve been preaching this doctrine in every form and with any excuse.” His fellow freedom fighters are some of the most influential thinkers, authors, economists and activists of the 20th century.

As H. L. Mencken said upon selecting Hazlitt to succeed him at the American Mercury, he was the “only competent critic of the arts that I have heard of who was at the same time a competent economist, one of the few economists in human history who could really write.” Hazlitt’s review of Friedrich Hayek’s 1944 The Road to Serfdom led to a Reader’s Digest condensed version and helped catapult this book to worldwide acclaim. In 1950 he was also the co-founder of the libertarian magazine, The Freeman. It eventually became the Foundation for Economic Education, and now the stellar online magazine fee.org.

One of his heroes was Poetic Justice Warrior Frederic Bastiat; they shared a talent for reductio ad absurdum. As Hazlitt replied to Eleanor Roosevelt’s The Curse of Machinery, “Why should freight be carried from Chicago to New York by railroad when we could employ enormously more men, for example, to carry it all on their backs?” He was also an acquaintance of another proud defender of capitalism, personal liberty, and the morality of America’s founding, Poetic Justice Warrior Ayn Rand.

As poetic justice would have it, Hazlitt told Ms. Rand that Mises had remarked about Rand that “he was the most courageous man in America.” She was delighted and Hazlitt introduced them.

 

 

 

 

Automation Does Not Justify A Universal Basic Income

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Today’s most prominent tech and entrepreneurial leaders have been agitating for a Universal Basic Income (UBI) in what has become a growing movement. Richard Branson recently joined Mark Zuckerberg, Elon Musk, Bill Gates, and others by throwing his support behind this massive welfare program, citing, like the others, the fear of automation and technological unemployment.

In late summer, he said:

With the acceleration of [artificial intelligence] and other new technology… the world is changing fast. A lot of exciting new innovations are going to be created, which will generate a lot of opportunities and a lot of wealth, but there is a real danger it could also reduce the amount of jobs.

He continued:

This will make experimenting with ideas like basic income even more important in the years to come.

There are many reasons, both economic and philosophical, to be against the idea of a UBI.But since the UBI is often justified on the grounds that automation is a threat to American employment, it is important to debunk this myth separately.

The first portion of what Branson says is accurate. Our modern world is incredible. As automation advances, the consumer wins by gaining access to higher quality products and services.

We have all experienced the convenience of using a self-checkout station at the grocery store or ordering food from an automated kiosk. Some of us have even experienced the joy of having a delicious cupcake dispensed out of a “cupcake ATM.” Others, like myself, spend a fair portion of our time barking commands at our Google Homes or other personal assistants that we rely on to keep track of our daily schedules and news updates.

Our lives are automated now. They will only get more so with the passing of time. And that is a good thing.

As for opportunities and wealth, Branson is also correct.These technological advancements are creating whole new sectors providing more jobs and more opportunities for more human beings.

But unfortunately, while Branson does express this sentiment, the last portion of his statement seems completely contrary to the words that preceded it. Technological progress does not come at the catastrophic cost of human labor as he and others assert.

The Curse of the Machinery

In his 1946 classic, Economics in One Lesson, Henry Hazlitt spends an entire chapter discussing this phenomenon. “The Curse of the Machinery,” as he calls it, describes the hysteria that has always accompanied technological progress throughout history.

Wasting no time making his point, Hazlitt opens this chapter by saying:

The belief that machines cause unemployment, when held with any logical consistency, leads to preposterous conclusions. Not only must we be causing unemployment with every technological improve­ment we make today, but primitive man must have started causing it with the first efforts he made to save himself from needless toil and sweat.

What makes this chapter of Hazlitt’s book truly fascinating is his use of historical examples to support his point.

Workers during the Industrial Revolution may have never dreamed of a world where automation was integrated into the lives of average Americans. But they did fear a world in which labor-saving machines “threatened” to put them out of work.

In the stocking industry, for example, fear of machines was so intense, massive riots erupted as soon as workers were introduced to the new mechanical knitting machines known as, “stocking frames.” In the midst of all the chaos, new machines were destroyed, houses were burned, inventors were threatened, and peace was not restored until the military eventually intervened. These machine-wreckers were called “Luddites,” and thus a term was born.

During the Great Depression, a group known as the “Technocrats” was formed in direct opposition to new machinery. When the economy goes to hell, everyone is eager to point fingers. And according to Hazlitt, in 1932 the American “Technocrats” cast the blame in the direction of machinery.

“It is enough to say that the Technocrats returned to the error in all its native purity that machines permanently dis­place men—except that, in their ignorance, they presented this error as a new and revolutionary discovery of their own. It was simply one more illustration of Santayana’s aphorism that those who cannot remember the past are condemned to repeat it.”

Already, in 1932 those terrified of technology displacing workers thought themselves revolutionary in their discoveries. Yet, their fears were just a modern manifestation of an age-old fear. Likewise, those in Silicon Valley are misled to believe that automation will cause massive unemployment. But as Hazlitt says, “Not only should we have to regard all further technical progress as a calamity; we should have to re­gard all past technical progress with equal horror.”

And even though the fear of machinery has recurred throughout history, the reality has never seemed to turn out the way the scaremongers claimed it would.

The Market Corrects

In the case of the British stocking knitters, it is true that as many as 50,000 were left jobless in the wake of mechanical stocking frames. However, as Hazlitt points out, “But in so far as the rioters believed, as most of them undoubtedly did, that the machine was permanently displacing men, they were mistaken, for before the end of the nineteenth century the stocking industry was employing at least 100 men for every man it employed at the beginning of the century.”

Likewise, 27 years after the invention of the cotton-spinning machine, which was met with similar hostility as the mechanical stocking frame, the number of workers employed in the industry had grown from 7,900 to 320,000, a rate of 4,400 percent.

When innovation abolishes the need for labor in one specific sector, a period of displacement or correction may occur. But it is never long before new jobs are created elsewhere.

Hazlitt says:

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… After the machine has produced economies sufficient to offset its cost, the clothing manufacturer has more profits than before…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.

There are already examples of this happening presently. Uber, for example, may soon be significantly decreasing its need for human Uber drivers as self-driving cars become a reality. But that does not mean these drivers will be left destitute or jobless. Instead, Uber has simultaneously been expanding its delivery services. From flu shots, meals, and even puppies, Uber offers a variety of services that, at this point in time, still require human employees. If, in the future, drones are capable of replacing human delivery services, it will only be a matter of time before new opportunities become available on the market.

Progress does not come without an initial shake-up of traditional norms as the market adjusts to new technology, but this change should be embraced. As the stocking makers and cotton spinners have taught us, innovation should never be discouraged because with technological progress comes more opportunities for the human race.

And for those who may doubt that jobs do not need to be lost in the name of technology, many may be surprised to learn that despite the advanced weaponry available today, there are more blacksmiths now than at any other point in history.

The great minds of Silicon Valley need not worry, then. As long as innovation continues and markets are left relatively free, there will be no need to fear the mass displacement of employees as a result of automation.

Hazlitt’s “Curse of the Machinery” Explains Today’s Fear of Automation

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At the end of last year, Amazon unveiled, “Amazon Go,” a futuristic, fully-automated convenience store set to open its doors in Seattle, Washington, within the next few months. While this exciting new venture promises to make quick-stop shopping trips easier for busy consumers, critics are wary of this type of advanced automation, and fear its widespread use could jeopardize a vast amount of jobs.

Amazon Go is a truly unique shopping experience free of lines, registers, and checkouts of any kind. Instead, the store utilizes its customers’ smartphones and “grab and go technology,” which allows the consumer to simply walk in, grab desired items, and then get on with the rest of their day.

However, since this modern convenience store does not require human employees, labor activists fear the negative implications Amazon Go could potentially have on employment rates, especially if more companies begin moving toward automation.

These concerns in regards to employment are not necessarily unwarranted, nor are they specific to our modern world. In fact, mankind actually has a long track record of fearing mechanical progress and blaming it for high unemployment rates throughout history.

During the Industrial Revolution, many workers resented mechanical innovation, believing it would result in mass unemployment across sectors which traditionally relied on manual labor. In the stocking industry, for example, fear of machines was so intense, massive riots erupted as soon as workers were introduced to the new mechanical knitting machines known as, “stocking frames.” In the midst of all the chaos, new machines were destroyed, houses were burned, inventors were threatened, and peace was not restored until the military eventually intervened.

Unfortunately, the stocking industry example is not an isolated instance of machines causing mass hysteria over employment concerns. In fact, similar outrage was experienced across the globe throughout the entire Industrial Revolution. In the United States, the Great Depression caused another wave of mechanical skepticism, when a group calling themselves the “Technocrats” blamed mechanical advancements for high unemployment rates.

So widely-held was this fear of machines, economist Henry Hazlitt felt compelled to dedicate an entire chapter to debunking the myth that machines cause mass unemployment in his economic manifesto, Economics in One Lesson. In his chapter entitled, The Curse of The Machinery he writes:

The belief that machines cause unemployment, when held with any logical consistency, leads to preposterous conclusions. Not only must we be causing unemployment with every technological improvement we make today, but primitive man must have started causing it with the first efforts he made to save himself from needless toil and sweat.

To the credit of these mechanical skeptics Hazlitt called, “technophobes,” their fears of unemployment were not entirely incorrect.

In the case of the British stocking knitters, it is true that as many as 50,000 were left jobless in the wake of mechanical stocking frames. However, as Hazlitt points out, “But in so far as the rioters believed, as most of them undoubtedly did, that the machine was permanently displacing men, they were mistaken, for before the end of the nineteenth century the stocking industry was employing at least 100 men for every man it employed at the beginning of the century.”

Likewise, 27 years after the invention of the cotton-spinning machine, which was met with similar hostility as the mechanical stocking frame, the number of workers employed in the industry had grown from 7,900 to 320,000, a rate of 4,400 percent.

Yet, no matter how applicable Hazlitt’s words of wisdom may be in our modern world, there are still those who fear technological progress, rather than celebrate it.

Unfortunately for the naysayers, automation is likely to play a greater role in our lives in the very near future. Already, several fast food companies have begun replacing human cashiers with automated kiosks in order to cut back on costs. Additionally, Uber began piloting its fleet of self-driving cars last year and plans to eventually use these autonomous vehicles to replace its human drivers.

However, there is no need to fear this change. As the great Frédéric Bastiat reminds us, there are positive market elements which may be unseen to many, especially critics of automation.

Uber, for example, may soon be significantly decreasing its need for human Uber drivers, but that does not mean these drivers will be left destitute or jobless. Instead, Uber has simultaneously been expanding its delivery services. From flu shots, meals, and even puppies, Uber offers a variety of services that, at this point in time, still require human employees. If, in the future, drones are capable of replacing human delivery services, it will only be a matter of time before new opportunities become available on the market.

Many may be surprised to learn that despite the advanced weaponry available today, there are more blacksmiths now than at any other point in history. Progress does not come without an initial shakeup of traditional norms as the market adjusts to new technology, but this change should be embraced. As the stocking makers and cotton spinners have taught us, innovation should never be discouraged because with technological progress comes more opportunities for the human race.

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