The Robot Unemployment Myth

The financial blog Zero Hedge recently ran a piece on robotic automation that seemed rather out of place among their typically pro-free market articles.  The article essentially concludes that:

“…global structural unemployment…will only get worse as increasing automation leaves more and more millions collecting their 99 weeks of extended unemployment benefits.”

The article cites Hugo Scott-Gall of Goldman Sachs, who writes:

“…you could envision a world dominated by a machine-to-machine economy, where most things are done by intelligent technology, leaving only highly skilled people with the lion’s share of the limited jobs. This would lead to further income inequality. Would estimates of global population growth remain the same if we did not need 10 bn people, and if we didn’t have the means to feed them? And could automation then be seen as a driver of globalisation that through its success provokes de-globalisation?”

Mr. Gall’s interpretation of technological advancement is not a new one.  Karl Marx once said:

“The instrument of labour, when it takes the form of a machine, immediately becomes a competitor of the workman himself.  The self-expansion of capital by means of machinery is thenceforward directly proportional to the number of the workpeople, whose means of livelihood have been destroyed by that machinery.”

Equating the rise of automation with the loss of jobs, or the deterioration of the conditions of labor, has been around for a long time.  Marx cites the invention of the automated loom displacing English hand-loom weavers to prove his point.

“History discloses no tragedy more horrible than the gradual extinction of the English hand-loom weavers, an extinction that was spread over several decades, and finally sealed in 1838. Many of them died of starvation, many with families vegetated for a long time on 2½ d. a day.”

So let’s begin our analysis of these assertions by starting out with a classic Robinson Caruso example.  Mr. Caruso is alone on his island and he must produce everything necessary for his survival and comfort by himself.  Mr. Caruso must fish for food, build a house, procure water for drinking and cooking, farm a field for crops, weave his own clothing, etc.. etc..

What would happen if one day a plane flew over his island and parachuted him a fishing robot?  The robot could fish for him, procuring fish 24 hours a day 7 days a week.  Does anyone think Mr. Caruso would be upset by this?  Wouldn’t the robot free him to focus on all the other tasks that are necessary for his survival?

What if we now gave Mr. Caruso an entire army of robots capable of fishing, weaving, building, etc.. etc..  Would this leave Mr. Caruso without anything to do?  Of course not.  Mr. Caruso could now focus on even further improvements to his condition, beyond what the robots are already providing him with.  He might work on creating an air conditioning system, or art for the walls of his home, or solving some other problem that the robots have not yet been programmed to solve.    Not until every single problem facing humanity as a whole has been solved would Mr. Caruso be left without something productive to do.

Because robots are not capable of coming up with novel solutions to human problems, and because human problems are virtually limitless, humans will always have something productive they could be doing.  Robots will never be able to replace the creativity of the human mind, which requires a consciousness not present in any machine.

So let’s turn our attention to the broader scale of the national economy.  Using Marx’s example of English hand-loom operators, let’s ask ourselves a question.  Would humanity as a whole be better off if the automated loom had never been invented?

Clearly the displacement of manual labor jobs by machine is what has allowed the western world to experience such a dramatic rise of living standards.  And just as clearly, job obsolescence by way of technological advancement has freed up labor resources to engage in much more productive activities.

Like all resources, labor is scarce.  It needs to be efficiently employed in productive activities if the human condition is to be improved.  If the government employed millions of people to dig ditches, and then hired millions more to fill them back up, has the human condition been improved by this?  Is it better that we employ millions of hand weavers to make our clothing when automated looms can do the job instead?

Technology has made millions upon millions of jobs obsolete throughout history.  Chainsaws have reduced the number of people necessary to harvest wood.  Automobile production robots have reduced the number of people necessary to make cars.  And farming technology completely transformed the way labor was employed throughout the 20th century.  A USDA report notes that:

American agriculture and rural life underwent a tremendous transformation in the 20th century. Early 20th century agriculture was labor intensive, and it took place on a large number of small, diversified farms in rural areas where more than half of the U.S. population lived. These farms employed close to half of the U.S. workforce, along with 22 million work animals, and produced an average of five different commodities. The agricultural sector of the 21st century, on the other hand, is concentrated on a small number of large, specialized farms in rural areas where less than a fourth of the U.S. population lives. These highly productive and mechanized farms employ a tiny share of U.S. workers and use 5 million tractors in place of the horses and mules of earlier days.

So nearly HALF of the entire U.S. labor force was displaced by machinery in the 20th century, just in the agricultural sector alone.  Should we then conclude that the periods of high unemployment during the 20th century were primarily caused by technological advancement?  Should we run around destroying farm equipment so that unemployed people today can be put back to work on farms?  Obviously the answer is no to both questions.

Just as in our Robinson Caruso example, technological automation of tedious, dangerous and repetitive tasks frees up labor resources to be put to use doing more productive and creative tasks.  There will always be some ongoing displacement of labor through technological obsolescence, but this is not something to be feared.  We are better off today because we no longer need telephone switchboard operators to connect our calls for us.  We are better off today because we longer need people to operate elevators for us.  And so on and so forth.

The causes of long-term chronic unemployment have nothing to do with technological automation.  In fact, the industrial revolution created a massive demand for labor!  Think of the millions upon millions of migrants who came to America while the nation was still a largely free country.  Ellis Island alone processed 12 million new immigrants from 1892 to 1954.

Should we blame the massive layoffs in the home building sector on the fact that technology has improved the efficiency of home builders?  Should we blame the circular saw for putting home builders out of work? – clearly not.  The causes of structural unemployment are obviously due to the government manipulating interest rates and creating moral hazards in the lending markets.  Austrian business cycle theory shows us that unemployment results when booms, created by cheap credit, go bust.  Cheap credit leads to resources being diverted into unproductive activities.  In order to correct the imbalances in production, layoffs are necessary since labor must be diverted from wasteful jobs in to more productive activities before a recovery can occur. Long-term unemployment results when something prevents that restructuring.

So what’s stopping the restructuring of labor resources today?  Might it be the fact that people can suck down several years worth of  unemployment due to unemployment benefits extensions?  Why should people seek out new lines of work when they can get along just fine without having to lift a finger?  Might it be that the state is still pumping massive amounts of funny money into unproductive activities?  How can industry restructure and create productive jobs if the state is busy bidding up the prices of material resources and diverting them into unproductive activities?  Might it be that artificially low interest rates cause resources to be consumed in the short term, rather than be utilized in the expansion of production?  Might it be that excessive regulations and taxation limit the ability of industry to expand its production of useful tradable goods?

In short, there are a myriad of causes to our present long-term unemployment problem, but not one of them is related to technological advancement or the automation of worker processes.  If robots could do everything for us, no one would need to engage in labor ever again.  The world would be a Utopia, filled with abundant products and services, all provided to us by robots without us having to lift a finger.  We truly would have a Star Trek type of world, where everyone could take whatever they needed without having to pay for anything because there would be a total super abundance of every good and service imaginable.


  • 77Jack

    I think too that there’s so much unemployment because of all the roadblocks the government has put in place that prevent people from starting their own businesses and these roadblocks have been in place for so long that they’ve destroyed the entrepreneurial spirit of people in general.

    Most people seem to believe that corporations supply people with jobs rather than believe that individuals create jobs. I think a lot of people would love to be their own bosses but I don’t think it even occurs to them that they could be.

  • At some point robotics and AI will be sufficiently advanced to replace nearly all human labor. When this happens, we will need to rethink how our economy is structured or face revolution. This article outlines the problem clearly and presents an elegant solution: the creation of a central account to make sure all citizens retain a living wage, whether employed or not.

  • “Robots will never be able to replace the creativity of the human mind, which requires a consciousness not present in any machine.”
    This will happen in the year 2029 according to Ray Kurzweil. “never” is a long time!

  • I agree with your analysis. In fact, for those countries that remain competitive and free, the Robotic Age will usher in unprecedented prosperity and creativity. See (including draft book) –

  • a_hick_in_hixville

    “So nearly HALF of the entire U.S. labor force was displaced by machinery in the 20th century, just in the agricultural sector alone.”

    Unless you want to consider coincidence, it likely had something to with the Great Depression. Most of this first wave of displacement occurred prior to 1930 when the collapse of a speculative bubble (not that much unlike earlier such bubbles that had occurred in eras not involving such a shift) occurred just as the economy was being expected to absorb these people in industrial or other work, and it simply could not do so until a new paradigm of a mass consumption consumer economy was created, largely during the Depression itself, and after WWII. Consider the very idea of Black Friday and the Christmas shopping season as we know it today. Simply did not exist prior to the Great Depression.

    The Great Recession is ironically a similar economic event occurring alongside a debt deflection panic during another era of swift productivity acceleration, technology innovation, and shifting trade patterns. It has not yet ended in that sense, and the chronic underemployment and unemployment trends being sustained by these phenomena still pose potential social and political dislocations until a new equilibrium is reached.

  • Pingback: The Anti Anti Technological Unemployment Manifesto | Essays and other Musings()

  • Adrian LeCesne

    “Why should people seek out new lines of work when they can get along just fine without having to lift a finger?” What about the people who can’t find a job in the first place? The completely disenfranchised will agitate, one way or another. I’m not saying its good or bad, just that it will happen.

  • Bailey Bergstrom

    Human needs are endless, because what constitutes a “need” is up to each individual, and there are billions of those. But, in the not too distant future, couldn’t a particular demand be anticipated and satisfied by business via AI before an industry that supplies humans with jobs could be created? Sure, the advent of various mechanizations throughout history has lead to job loss then massive job growth and better quality of life, but couldn’t that trend be one of exponential loss (as far as quantity of jobs are concerned)? What if mechanization replaces 99% of the jobs out there? So what? There are a few problems with the concerns of an employment apocalypse. All but total job loss may mean that we’re living in a “utopia” at that point. Where we’re completely free to do as we wish with little concern of scarcity. (mechanization has throughout history reduced our direct mindfulness towards scarcity, such as not having to worry about wood for for the cast iron stove in order to cook dinner) Not trying to sound all RBE, just taking into account how mechanization has led to more and more free time and if this trend could eventually lead to the complete obsolescence of “work” for humanity. I do not promote this this btw, I’m not a zeigeister. Just curious if this is what will be, not really interested in what ought to be. The other problem with the employment apocalypse concern is, if all these companies no longer need humans, and all jobs are automated… And nearly everyone is unemployed, how will anyone afford the products of these companies? Something will have to give. Businesses do not live solely off the dollars of “the elite”. How will they survive? What good will the automation do when the factories can’t afford the electricity to run the robots or keep up with maintenance?

  • Cleveland Sumpter

    Maybe we should destroy all machines, with so much time on his hands man thoughts are turn to evil not all but quite a few. We will need people to repair the machines people to build the machines. People are having fewer kids and wars will help with attrition, so they should be ok in the future