The Curse of Machinery

0:00My name is Jeffrey Tucker, I'm at the Mises Institute, and today I'm interviewing Robert Murphy, who's an economist, and we're going to be talking about one chapter from this This new edition of Economics and One Lesson, a book that was published in 1946 and republished now, and just as relevant as ever, and Dr. Murphy, the subject of the chapter we're discussing is, has to do with jobs and technology, right? Right. And the title of the chapter is?

0:46The Curse of Machinery. Okay, so what does that mean by the Curse of Machinery? Well, he's referring to the fact, and he shows that it's gone back, far back in history, that anytime a new technique is developed that is a labor-saving device, that people fear it because they think, oh, you're throwing people out of work. And so machinery is a curse because it's just causing unemployment. And so therefore, we ought to resist the introduction of new machines, sometimes with the caveat, unless the machine doesn't save labor. So as long as it's not putting people out of work, then sometimes people say, okay, a new New Machines is a good thing, but if it causes the firm to lay off some people because now we have the machine doing the job of ten men, then that's obviously bad. That's the idea. And he talks about the Industrial Revolution and how this is a controversy back.

1:34But even now, it's a controversy. Even about the Industrial Revolution, you still read people say, well, you know, it was really regrettable. You know, it took people off their wonderful, their happy lives on their landed plots there and drove them to the city. Right, so he goes through, I like what he does in the chapter, so first he just quotes people to make sure you believe he's not setting up a strawman, he just quotes people after people saying just what you've said, and people follow him up to Eleanor Roosevelt saying well yeah in the past it was okay but now this is really serious, during the Depression this is serious, and yeah people just have these false views about what happened in the past and he goes through his statistics to show, actually in a lot of these industries with the new machines, for example the automobile industry, obviously there were more people

2:49The effects are somewhat unpredictable, aren't they, from new machinery? It can cause an expansion of an industry, but it can also cause its complete elimination and displacement of an industry. Right, so you have in mind that the horse and buggies go out of business because of the car. That's certainly one effect, but what he's really trying to focus in on is and even a sillier fallacy in an industry that benefits from the machinery so that they still make the same product but now they use machines to do it. But you're right, he makes the point that sometimes advocates on our side of this issue go too far and they just stress the long-term net effects in general on how everyone must be richer per capita, which is obviously true. With machines, more stuff is getting produced so obviously per Per person, there's more stuff to be consumed, but it is possible that individual labors have you spent your whole life learning a trade and then a machine comes along that does your

3:53job, you might be worse off for a few years. And so it's good that he, he, he, he, he dots all the I's and crosses all the T's and get, and make sure he catches all his threats. It's quite systematic, yeah. Now, a lot of this we can understand from our own work lives. In fact, probably everybody can understand it at some level because we've all benefited enormously from, in the last 15, 20 years. Almost daily, there are new things that help us. Right, I mean it's gotten to the point now where the anti-capitalist criticism is, you know, Oh, give me a break, you know, I want to just be able to go on vacation and not have my boss be able to get in touch with me, and I just could turn off all my pagers, or I was a consumer, I have too many choices, and you go into McDonald's and there's 16 different value menus, and so yeah, now it's almost like they,

4:36even the people who hate capitalism can't with a straight face say it's impoverished us, ______ does not have to say we're overwhelmed with all these choices and all these gadgets that don't really help us. And yet, I'm sure you've had this experience of talking to people and the subject of computers and software, and it's always an interesting dinner time conversation, and there will always be somebody that says something like, you know, I really regret a lot of this in many ways because, you know, we've just become this nation in which, unless you know how to use a computer, there's nothing for you to do. And there's lots of people who just cannot and will not do this. And what's going to become of them? Right. And yeah, at some point, there's always ways you can try to show, no, even anybody, even someone... Like if you've seen it in the fast food restaurants now, like some of the terminals, they just have pictures of the value meals.

5:26And so, I mean, they just do everything business needs to do to cater to any type of, you know, human being of any sort. How can we adapt to use this person, to integrate them into the social nexus of cooperation? But you're right, ultimately if there is somebody that just refuses to learn, what if someone just said, I don't want to use language, what are you going to do about that? Is that a vexing social problem? Well, I don't know, but this is all voluntary decisions happening and if the great majority are benefiting, we're not forcing you to not use computers, we're saying we're going to use computers and you're free to use them if you want to. Doesn't it seem like you meet more and more people, though, that are very successful at what they do, but are doing something that they weren't trained to do at all in college? Doesn't it seem more and more common now? I think so. I mean, I don't know historically what the difference would be, but certainly, yeah. I mean, I'm not doing exactly right now what I thought I was going to be doing.

6:19I thought I was going to be at a college teaching classes, and I'm not doing that right now, but I love what I'm doing. And yeah, you're right. Plenty of people I talk to. It's almost a joke. It's almost a joke. I don't even ask people anymore what your major is, because I know that's more like just saying, what are your hobbies at this point, that has nothing to do. Now I ask people, do you know what you're going to do with your career? Even that's not the right phrase anymore, because that just makes it sound like, oh, I'm going to go work for IBM for my life, and nobody thinks like that anymore. Nobody thinks like that. But don't you have some sense, of course we weren't around, but don't you have some sense that sometime after World War II, there was this perception that, well, your life is really laid out for you. I grew up in Rochester, New York and I think its title was the imaging capital of the world because I had IBM and Xerox and Kodak were headquartered there and yeah there people would be growing in the 80s is when I started really becoming politically aware and then the letters to the editor because Kodak was downsizing so was IBM and all the letters were talking about how it used to be that you know there was loyalty and you put in your hours in the company

7:52I do, too, and it's probably my person. I don't mean to say this too glibly, but I think I have Attention Deficit Disorder. The idea of just doing one thing for 30 years just seems inconceivable to me, so you're right. And this technological progress, it is accelerating. And we just take for granted that every time we buy a new computer that's supposed to do things, then something little happens. What about the next chapter that is titled spread the work? What is a spread the work Scheme. Is this an anachronism these days, or no? No, I don't think it's an anachronism, because most examples, so the Spread the Work Scheme is just the idea that there's a fixed amount of work to be done, and so it would be unfair, you know, left to their own devices, these greedy businessmen would have just picked the most efficient laborers, the ones that they could give the lowest wages to, and they would do all the work and everyone else would

9:06be out of a job, and so we need to have the government or unions come in and put rules in place to spread this fixed amount of work around to make sure everyone gets some pay Pay and get some work in there that would allow there to be more consumer spending and things like that. So that's the idea. And no, most of the examples Hazlitt gives are things like federal rules on overtime pay. He said part of the motivation, the explicit motivation for that when they put those rules into place was we want to give businessmen an incentive not, you know, if they have 80 hours of work to be done, don't give it all to the most productive guy. Give 40 hours to one person and 40 hours to somebody else. So it wasn't about human rights, it was just a sort of silly economic thing. Right, yeah, Hazlitt clarified, he said some of those things were an issue like prohibitions on child labor and things like that.

9:54He said he thinks a lot of the motivation was a sort of, this is unseemly, but he said nobody thought working 50 hours a week was going to physically break someone's back, and that the precise quantitative amounts for some of these things were clearly and explicitly ideas of during the Depression and what have you, we've got to really spread the work around. and then he just goes through and quotes all these ridiculous union regulations, things that I know are still in force today, maybe not the specifics, but the idea that there needs to be the electrician on site to screw in a light bulb and really ridiculous things where someone can't do the work of someone else or else you have to pay him an extra day's wages and you have to pay the guy who should have done it and just all these crazy things. You encounter that in large cities even now.

10:43The Theory of Money and Credit The Theory of Money and Credit The Theory of Money and Credit You know, if there weren't these official regulations, obviously. So we live with the remnants of this fallacy, but is the fallacy itself still around? Do you hear it? I guess, I don't think I hear as much now as Hazlitt seems to make it sound it being prevalent then.

11:30I mean, some of the other stuff in his book about, you know, the benefits of a tornado, boosting GDP because now we have to rebuild, I mean, those sorts of things, The Broken Window Fallacy, I see a lot more now. The Spread the Work idea, it's still embedded in union propaganda, but I haven't seen that being trumpeted too much. I haven't asked you what's wrong with it. What's wrong with actually Spread the Work? With the Spread the Work scheme? We're just assuming that this is stupid. Yeah, we know it's wrong, but again, just to plug Haslitt's book, you know the stuff's got to be wrong, but he just goes through and says, let's make sure we understand why it's wrong. And with this he said, okay, so let's say the government or the union or what have you just sets up a rule where, okay, now there's a certain amount of people working and why don't we say you have to work 75% of the hours you used to and that's the rule.

12:21He said there's two ways, two things that can happen. So if we allow the business to cut wages and so that the workers who used to be employed working so much now earn 75% in their paycheck, he said, well then, you know, all you've done The problem is they're giving some of their money to the people who now fill the gap in it. So it's not that society is richer and you're just benefiting one group at the expense of the other. You're not helping labor because obviously the workers who now get their hours cut back are worse off. And then he said on the other hand, if you insist that, no, no, let's cut back their hours, but you still have to give them the same gross paycheck every week and then also then decide what you want to do. The Theory of Money and Credit

13:32Yeah, you just say in the original equilibrium before this intervention, things were the way they were for a certain reason, and even there Hazlitt clarified that this is under the most generous assumptions that really what happens is the people who are working the most are the most productive. And so if you arbitrarily say you can't work as much and give that job to somebody else, then the total amount of output drops because now you're giving the work to people who aren't as efficient. It's an example of government regulations creating people as some sort of... acting as if all workers are homogenous. In this and in the previous chapter 2, the curse of machinery, he stresses over and over that one of the main things that's wrong with this is this idea that there's a set amount of work that needs to be done and who's going to do it.

14:17when no in general if wages can adjust you can hire as many people as want to work and so then the issue is not there's a these are the tasks to be done who's going to do it but no different tasks can be done I mean labor's scarce and you put workers into where they're most highly needed and then if more machinery comes in oh great now we can do more stuff we can accomplish more things and so you always channel workers to where they're needed most on the margins observation that there's always work to do isn't just an empirical You've got an observation of a certain time and a place, but it's always true, always everywhere, isn't it? Right, yeah. I mean, you've got to, I suppose, come up with crazy scenarios. If there were 10 trillion people and someone would be, you know, labor would no longer be scarce. But yeah, this is clearly, in any practical sense, there's always more work to be done.

15:03The reason people stop working is because on the margin they say, you know what, my leisure is more important. It's not because there's absolutely nothing that human creativity in a pair of hands couldn't Thank you very much, Dr. Murphy, for your wonderful talk.