Let me ask you something: what you think of the law of diminishing marginal utility? Imagine Ford employed machines exclusively. The idea is that each car Ford produces adds fewer and fewer to his wealth, for what good is one more car you cannot drive? So he sells his cars, but he can only sell for as much as people can afford, and with so many cars on the market, this is quite low.
Ford cannot charge any more than what's offered, so the only thing he can do is accept whatever he finds more valuable among the things offered. It may be that an automated car becomes so cheap it can by exchanged for something trivial (let's call future service X), because the car has no value but to be exchanged.
This process should cause a natural equilibrium in the supply, demand and cost of cars.
Don't you find this argument at all convincing? Why?
Thanks for asking.
I don't think of the law of diminishing marginal utility at all. Never heard of it 'til you asked me. I'm neither an economist nor an intellectual nor do I want to be, but I get what you're saying, though only in terms of how this law purportedly works.
What is this 'argument' that 'this process should cause a natural equilibrium in the supply, demand and cost of cars' suppose to convince me of?
The point of the post is that income for labour is a social tenet that most of us just take for granted and accept. However, jobs are being replaced by technology and the time is not so far away when the demand for labour will be a fraction of what is was when this tenet had some validity.
The upshot is that (in my opinion) we will need to restructure how we think about labour as the primary source of income for the majority, if society is to meet the needs of our new situation and we need to do it fast.
Yet most politicians are still talking about creating jobs at a time when in the long term, that direction has lost validity.
Yeah, I wasn't very clear. Let me try again.
Some centuries ago, 90% of the population worked in agriculture. Food was scarce and traded for things people would find essential. For example, a farmer might not exchange his hard earned food for a haircut or tatoo art. Then mechanization came and people migrated to cities. Only 10% work on agriculture now, but the output of agriculture is greater than ever. This made food so cheap, compared to then, that farmers are willing to trade them for things that would seem futile before. Today, most of us have plenty of food and many have professions that could not be dreamed of before.
The point is that the elite, so to speak, cannot consume what they produce. Even if Ford could produce cars for a penny each, it would only be worth his while in order to trade for whatever it is we're producing. He needs us. The economy never depended on us having jobs, but on people producing whatever the others want in exchange for the things they want.
There's an old story that an American economist was visiting China and saw a group of people digging a trench with shovels. He asked "Wouldn't it be more effective to use an excavator"? To which they answered "Look at all these people. If we used an excavator, all of them would lose their jobs." The economist then argued "If that's the goal, why don't you get even more people to dig with bare hands"? Well, that's how I remember it, anyway.
No worries my man.
And here's the thing. I agree with your points and I'm 100% for technology and 100% for replacing jobs with technology.
Give me the excavator anytime so I can go elsewhere and do something worthwhile.
The issue as I see it is that we are not prepared for a transition to a society where there is a lot less labour required to produce what we need.
We (the average Joe's and Josephines) are telling our politicians that we want jobs because to us jobs means income. Politicians are promising us jobs because they want votes.
The fact is, that what we really want is the ability to keep a roof over our heads and do the best we can for our kids but we live in a society where to do this you must have a job (I'm generalising)- and I think we both agree that digging holes with our bare hands is not a
solution.
Being able to buy a brand new Tesla for $5000 doesn't matter to an unemployed man trying to raise a family if he is struggling to get $500 to pay his rent or mortgage and put food on the table.
Yes, I see. You're absolutely right.
Transitions like this aren't easy in the best of cases. It worries me that government, in trying to produce these jobs, will tinker with the economy and do more harm than good. It is easy for them to produce sudden economic growths through bubbles that will eventually burst. Some argue that the immediateness intrinsic of democracy (which revolves around re-elections) makes this system particularly vulnerable to this.