Friday, June 14, 2013

Paul Krugman's Sympathy for the Luddites

Paul Krugman finally catches up with the Sandwichman:
Mechanization eventually — that is, after a couple of generations — led to a broad rise in British living standards.

But it’s far from clear whether typical workers reaped any benefits during the early stages of the Industrial Revolution; many workers were clearly hurt. And often the workers hurt most were those who had, with effort, acquired valuable skills — only to find those skills suddenly devalued.
As the Sandwichman wrote a little over two years ago (May 7, 2011) in an Open Letter to Paul Krugman:
One of the favorite unintended-consequences stories in economics is the idea that 'technology creates more jobs than it destroys.' This was a standard rebuke to Luddites in the early 19th century, who were portrayed as fearing that machines would create chronic unemployment. It closely resembles the case argued against the mercantilism of the early 18th century by Henri Martyn in Considerations on the East India Trade. The lump-of-labor fallacy appears as the negative version of this story. In fact, the fallacy is sometimes called the Mercantalist or Luddite fallacy.

There is a crucial difference between the two sides of the story, though. The technology creates jobs story is openly embraced by economists and triumphantly played as the trump card in debates over employment policy. The fixed-amount-of-work story, though, is only attributed by economists to Luddites, shorter work time advocates and other 'naive populists' they wish to discredit. In both cases it is the economist (not infrequently, The Economist) speaking, telling the uninitiated to sit down and shut up.


Shag from Brookline said...

This post reminds me to reread the late Kurt Vonnegut's first novel "Player Piano" published in 1952 that addressed this issue.

Eubulides said...

No one catches up with the Sandwichman!

media said...

i think the problem is sand witches. a solution was proposed years ago which has been forgotten. tulips. 'tiptoe through the tulips' ---people just need to get their values (marginal utility) renormalized and then workshare and full employment follows naturally.

as for krugman, corocdile tears aside, although its conceivable and even possible that someone got hurt via division of labor, without that who could get the noble prize cash?

Saint Mankiw explains this in a recent article---some get dessert, while other get deserts, based on productivity.

its tulips all the way down (emergent spacetime).