Jakov wrote:

iamthereforeithink wrote:

....But if the Luddite Fallacy (as it has become known in development economics) were true, we would all be out of work by now—as a result of the compounding effects of productivity. While technological progress may cause workers with out-dated skills to become redundant, the past two centuries have shown that the idea that increasing productivity leads axiomatically to widespread unemployment is nonsense.

We arn't all out of work because the market re-adjusts itself. The number is workers is the same with fewer jobs so wages and conditions must fall until a new equilibrium is reached.

naffat wrote:I think that increasingly intelligent automation starts to blur the line between capital and labor by creating capital AS labor. Overturning that dichotomy is most likely a challenge to a lot of traditional economic thinking.

Look at breakdowns of how consumers spend their income. Food, housing, clothing, transport are the vast bulk. Mobile phones and ipads are a tiny fraction of the whole

http://www.ons.gov.uk/ons/rel/family-sp ... ngdom.html

In many ways, the construction industry is very backwards. New technology hasn't been able to reshape the whole work process around it. The only areas of construction that have really been mechanized are excavation and lifting materials--and not even these on some small sites. New machines on a construction site are usually just high-tech tools. They tend to feel more like an extension of our body than something that imposes a mechanical rhythm on our work. Construction materials can be high-tech, but construction is not. The workers adding fiber-optic cables, motion sensors and solar panels to a house, are often using nothing more than hand tools, a cordless drill and a ladder.

In order for new technology and the division of labor to really increase productivity, houses would have to be mass-produced--house production would have to take place on a large scale, and house design would have to be standardized. This has had only very limited success. The units in an apartment building can be designed exactly the same, so after putting the pipes in a few, the plumbers will get the hang of it and be able to go much faster. Still, all the apartment buildings on a block are not the same, and all the blocks in a city are definitely different. Trailers and doublewides are made from standardized designs in factory-like conditions and transported to the buyer. But most homes aren't transportable, and designs are different for different locations. Houses have to be built on land somewhere. In order to mass produce a neighborhood, a developer has to buy up all the land first. This means coaxing or coercing all the different owners of the land he wants to build on to sell to him.

Even when they can get their hands on large areas of land, developers often build in small chunks. Houses are extremely durable. Unlike restaurants, or even car manufacturers, the house-building industry can't rely on replacing old houses as a steady source of demand. The building industry tends to boom when the economy as a whole is growing and to crash when the growth stops. Making an apartment building can take a long time, and the market can change quickly during that time. This creates an extra incentive to build quickly--which means building small. A company building an L-shaped apartment building will sometimes build one wing and make sure it is sold before building the other half. A large company will build a number of small sites, rather than one large one. This (as well as well as the relatively cheap costs of getting into the construction business) means that there are often lots of small contractors competing right along side the big ones.

The backwardness of the construction industry is a bad thing from the point of view of productivity, not necessarily for us. The fact that there are rarely standardized designs means that individual workers have to figure out how things fit together, and we often have a lot of room to do things however we think makes the most sense. The architects are never right the first time. The plans for the HVAC system, the windows, the plumbing and the framing will often not work together. After a few jokes at the expense of the architectural profession, we'll have to work with the guys from the other trades to figure out how to make things work. We get an idea of how the whole building has to fit together. We have to think a bit on top of just doing physical labor. The limited use of machines and the fact that building often goes on at a bunch of scattered, small sites, means that each worker has to learn how to do a number of different tasks. A job from start to finish can take months, and at each stage we might be doing different things. The backwardness of the work process means that the work requires a variety of skills and quite a bit of decision making on our part. In this, the job of a skilled construction worker is closer to that of a white collar worker like a teacher than it is to the job of an auto worker. Keeping in mind how a building has to fit together as a whole, and using a bit of thought and skill at work, makes the job a bit less boring. It doesn't change the fact that we're doing all this to make money for the boss. And once capital can make houses (or teach) like it makes cars, it will.

Jakov wrote:Something from the guardian today.
http://www.guardian.co.uk/technology/20 ... jobs-human

Not a fantastic article, it is only a newspaper after all. More of a summary of stuff we already know about since we've been reading this thread. The comments are way more insightful.

Look at breakdowns of how consumers spend their income. Food, housing, clothing, transport are the vast bulk. Mobile phones and ipads are a tiny fraction of the whole

http://www.ons.gov.uk/ons/rel/family-sp ... ngdom.html

I'm wondering about automation in the building industry. It's quite difficult to automate that yet housing is one of the basic human requirements. It's expensive and labour-intensive and if we are to build a technological utopia it cannot continue like this. Then again in western countries most housing has already been built.

More importantly, the current system would have a large number in unemployed poverty with a few 'lucky' employed overworked labourers along with a tiny minority who own it all.

This is a relevant extract on how the building industry cannot take full advantage of automation and new tools.

Jakov wrote:Basically I don't think the luddite fallacy is always a fallacy.
I've read carefully through this thread and the main argument that the luddite fallacy is a fallacy seems to be an appeal to history. "In the past, workers made unemployed by automation found new jobs, in the service industries for instance. This will definitly happen in the future as well." Correct me if I'm incorrect.


Imagine a time in the far future when all the obvious human desires – food, shelter, to move, to have power, to communicate, to travel - are met by automated industries. Clearly the economic problem will have been solved and there would be no more requirement for waged labour anymore in this society if all the labour is done by robots.

To get between today with N > 0 employed workers to that distant future with N = 0 employed workers, at some point automation must start reducing the number of required workers.

U.S. Suffers Biggest Pay Drop On Record, As Workers Squeezed Tighter
By Mark Gongloff
Posted: 06/05/2013 4:38 pm EDT | Updated: 06/05/2013 5:11 pm EDT
http://www.huffingtonpost.com/2013/06/0 ... 91664.html

The economic "recovery" just keeps getting worse for the average worker: U.S. employers squeezed their employees even harder than usual in the first quarter, leading to the biggest drop in hourly pay on record.

Hourly pay for nonfarm workers fell at a 3.8 percent annualized rate in the first quarter, the Bureau of Labor Statistics reported on Wednesday. This was the biggest quarterly decline since the BLS started keeping track in 1947. Some of the drop was payback for a 9.9 percent surge in hourly pay in the fourth quarter of 2012, as employers shoveled money out the door to avoid tax changes they expected to take place in 2013.

But there have been plenty of such quarterly pay increases in the past. Many were even bigger. Some went on for several quarters at a time. And never has there been such a steep pay drop in response as there was in the first quarter of this year.

Smoothing out the quarterly ups and downs doesn't make the picture look any better. Hourly worker pay rose just 1.9 percent in 2012, a pitiful increase that barely kept up with the 1.8 percent gain in the consumer price index. That was the third-weakest annual increase in hourly pay since 1947, topping only the 1.4 percent gain in 2009 and a 1.8-percent gain in 1994.

Hourly pay has grown by just 2 percent per year, on average, for the past four years, the weakest four-year stretch on record. At the same time, corporate profits are at record highs, and until a recent swoon, the stock market was setting records, too.Workers haven't been reaping the rewards, but their employers have been.

The economy hasn't been getting much out of the bargain lately, either. Worker productivity -- hour output per hour worked -- gained 0.5 percent in the first quarter, according to the BLS. That's weaker than the 0.7 percent gain in all of 2012 or the 0.6 percent gain in all of 2011. Productivity is down dramatically from average annual gains of 3 percent in 2009 and 2010.

Weaker productivity could be good news. Maybe employers have hit the limits of how much they can squeeze out of their workers, meaning they'll have to hire some more.

But it does not bode well for future growth. The U.S. had four straight years of meager productivity going into the Great Recession. Stagnant productivity can erode living standards and leave less money for the kind of research and development that leads to the jobs of the future.

Productivity has seemed decoupled from worker pay for awhile now -- even when the economy is productive, pay has been mostly stagnant, as most of the benefits flow to the very top of the income stack. So, hooray, yet another culprit in the death of the middle class.

Jakov wrote:

Jakov wrote:Basically I don't think the luddite fallacy is always a fallacy.
I've read carefully through this thread and the main argument that the luddite fallacy is a fallacy seems to be an appeal to history. "In the past, workers made unemployed by automation found new jobs, in the service industries for instance. This will definitly happen in the future as well." Correct me if I'm incorrect.


Imagine a time in the far future when all the obvious human desires – food, shelter, to move, to have power, to communicate, to travel - are met by automated industries. Clearly the economic problem will have been solved and there would be no more requirement for waged labour anymore in this society if all the labour is done by robots.

To get between today with N > 0 employed workers to that distant future with N = 0 employed workers, at some point automation must start reducing the number of required workers.

Someone I know pointed out another argument. The luddite fallacy is based on the lump of labour fallacy.
I believe this is a strawman. The technological unemployment thesis is based on what you might call "lump of needs" where every human has a certain need for food, shelter, whatever. Normally people have to work to satisfy these needs, but some of the time robots can do the work for us. Once those needs are met, people don't really demand anything more.

The only way to create more employment then is to artificially create new needs. For example the fashion industry relies on people buying new clothes before the old clothes have worn out.
So perhaps the reason unemployment hasn't gone up so much is because of the creation of new desires through advertising ?

edit: The question then is, can advertising forever convince us to work more to consume stuff we don't need?

Jakov wrote:

Jakov wrote:

Jakov wrote:Basically I don't think the luddite fallacy is always a fallacy.
I've read carefully through this thread and the main argument that the luddite fallacy is a fallacy seems to be an appeal to history. "In the past, workers made unemployed by automation found new jobs, in the service industries for instance. This will definitly happen in the future as well." Correct me if I'm incorrect.


Imagine a time in the far future when all the obvious human desires – food, shelter, to move, to have power, to communicate, to travel - are met by automated industries. Clearly the economic problem will have been solved and there would be no more requirement for waged labour anymore in this society if all the labour is done by robots.

To get between today with N > 0 employed workers to that distant future with N = 0 employed workers, at some point automation must start reducing the number of required workers.

Someone I know pointed out another argument. The luddite fallacy is based on the lump of labour fallacy.
I believe this is a strawman. The technological unemployment thesis is based on what you might call "lump of needs" where every human has a certain need for food, shelter, whatever. Normally people have to work to satisfy these needs, but some of the time robots can do the work for us. Once those needs are met, people don't really demand anything more.

The only way to create more employment then is to artificially create new needs. For example the fashion industry relies on people buying new clothes before the old clothes have worn out.
So perhaps the reason unemployment hasn't gone up so much is because of the creation of new desires through advertising ?

edit: The question then is, can advertising forever convince us to work more to consume stuff we don't need?

Another thing I should add, it's not just advertising that creates new needs, but an increase in waste.

When commidities become cheaper, people treat them with less respect and are more inclined to waste them. In the example of textiles, cheap clothes made people treat their garments worse because hey, this shirt only costs 50p. They won't mind so much if it becomes torn and certainly won't mend it if it does. This increases the demand for clothes.

So advertising and waste help save us from technological unemployment.

Perhaps we should waste more in order to keep people in jobs? Well perhaps, but I don't really feel like working more hours so I can buy replacements for stuff I needlessly wasted...

Or conversely if we want to have a high standard of living without working too hard, we just need to avoid waste and ignore advertising/consumerism.

igorfrankensteen wrote:Just my opinion, but I think the reason for the current relative stagnation is straightforward.

The economic bubble that preceded this mess, was built upon imagined monies, AND was specifically and almost entirely designed to allow those at the top of the pyramid to skim cash out of the system, without producing ANYTHING. In response to the collapse of that pyramid scheme bubble, the powerful elite decided to give even MORE cash to the skimmers, in the fantasy that even though no one at the bottom (i.e. the bulk of society) could afford to buy anything, that if you give already rich people enough money, they will hire people to start producing things that no one can afford to buy.

Nothing more mysterious to it than that. We are now in the process of rebuilding slowly with real productivity. I only hope we can keep the "Supply Side" idiots at bay long enough to get back to some semblance of normality.

Loren Michael wrote:
I'm a little uncertain of advertising's place in peoples' forming of desires. I think it's certainly influential in some respects, but I think it's generally oversold in its ability to drive individuals' behavior.

It's something I'm ignorant but curious about.

Loren Michael wrote:
There's certainly a lot of waste as well, but I'm not sure how the accounting shakes out in the end.

But as overcoats are now cheaper, more people will buy them. This means that, though it takes fewer people to make the same number of overcoats as before, more overcoats are now being made than before. If the demand for overcoats is what economists call “elastic”—that is, if a fall in the price of overcoats causes a larger total amount of money to be spent on overcoats than previously— then more people may be employed even in making overcoats than before the new labor-saving machine was introduced. We have already seen how this actually happened historically with stockings and other textiles.

But the new employment does not depend on the elasticity of demand for the particular product involved. Suppose that, though the price of overcoats was almost cut in half—from a former price, say, of $150 to a new price of $100—not a single additional coat was sold. The result would be that while consumers were as well provided with new overcoats as before, each buyer would now have $50 left over that he would not have had left over before. He will therefore spend this $50 for something else, and so provide increased employment in other lines.

Jakov wrote:This entire topic is sadly lacking in accounting. I would be far more convinced if there was more maths about. Maybe I should study some econometrics on my own...


Here's the extract of the chapter, it's pretty clear to me that the writer's argument for textiles not producing technological unemployment is the "elasticity of demand of overcoats", which I can't see as being anything else than a euphemism for increased waste.

Jakov wrote:

But as overcoats are now cheaper, more people will buy them. This means that, though it takes fewer people to make the same number of overcoats as before, more overcoats are now being made than before. If the demand for overcoats is what economists call “elastic”—that is, if a fall in the price of overcoats causes a larger total amount of money to be spent on overcoats than previously— then more people may be employed even in making overcoats than before the new labor-saving machine was introduced. We have already seen how this actually happened historically with stockings and other textiles.

But the new employment does not depend on the elasticity of demand for the particular product involved. Suppose that, though the price of overcoats was almost cut in half—from a former price, say, of $150 to a new price of $100—not a single additional coat was sold. The result would be that while consumers were as well provided with new overcoats as before, each buyer would now have $50 left over that he would not have had left over before. He will therefore spend this $50 for something else, and so provide increased employment in other lines.

http://steshaw.org/economics-in-one-les ... p07p2.html

Then there's the maths-light reasoning of "The extra $50 spent will provide enough demand to make up for the jobs lost to technology". It may be true, it may not, but we can't tell unless we do the accounting.
How do you even figure out if that extra $50 produces enough demand? I don't even know where to start.

igorfrankensteen wrote:Just my opinion, but I think the reason for the current relative stagnation is straightforward.

The economic bubble that preceded this mess, was built upon imagined monies, AND was specifically and almost entirely designed to allow those at the top of the pyramid to skim cash out of the system, without producing ANYTHING. In response to the collapse of that pyramid scheme bubble, the powerful elite decided to give even MORE cash to the skimmers, in the fantasy that even though no one at the bottom (i.e. the bulk of society) could afford to buy anything, that if you give already rich people enough money, they will hire people to start producing things that no one can afford to buy.

Nothing more mysterious to it than that. We are now in the process of rebuilding slowly with real productivity. I only hope we can keep the "Supply Side" idiots at bay long enough to get back to some semblance of normality.