The myth of automation...

There's this guy at work who thinks he is into philosophy.  All he really does is watch the science channel and probably smokes some weed and comes up with some crazy assertions.  Recently in a "debate" he's having at work, he makes the assertion that computers and robots will take all the jobs and people will be out of work.

To be honest, this argument is a very popular one to make.  It is also one that seem true to the average listener; at least on the surface.  But clearly anyone who is uneducated in economics is easily fooled by the seen because they do not understand the unseen.  Henry Hazlitt's 'Economics in One Lesson' is an excellent book to start seeing the unseen.

The concept of automation and computers destroying all the jobs is really the concept of efficiency taken to the extreme.  To be honest, that would be utopia.  People who spout this fallacy forget two important things: 1. Where will the computers and software come from?  and 2. Who's going to buy all the stuff the machines are making?

Businesses turn to using machines so they can increase productivity per unit time, e.g. efficiency.  And why would businesses try to increase productivity?  So they drive costs down which in turn increases profitability.  But you can't turn a profit if people are too poor to buy your products.  In other words, there exists a feedback loop for higher productivity and prices.  You cannot automate to the point where consumer purchasing power is completely destroyed.  It simply cannot get to that point.

However, it is still true that automation will destroy certain jobs.  This is called 'creative destruction.'  Again, what is seen are the destroyed job and what is not seen are the jobs yet to be created from this new creation.  Smart phones, now equipped with GPS and Google Maps, have destroyed the short-lived Navigation systems that car companies were trying to install in every car.  So the people who designed the car navigation systems probably lost their jobs.  However, with the advent of the smart phone, a lot more jobs were created because not only can anyone build an app, a whole industry was created around the smartphone like making cases, dashboard inserts, those mall kiosks that fix your screen, gaming companies having to hire an entirely new department devoted for smart-phone gaming, etc.  The list goes on and on.

The last point with touching one is many businesses make the decision to automate because of the rise of the minimum wage.  There comes a point where it makes more sense for a business-owner to switch from hiring a person at a higher wage to investing in automation.  The cost for hiring a person, in today's world comes with a slew of overhead like paying for workman's compensation, healthcare, Social Security, vacation and benefits.  Once you switch to automation, those overhead costs are gone.  Sure it's replaced with updating software from time to time and some maintenance.