Recently, 2020 Democratic presidential contender Andrew Yang appeared on Fox News . During the segment, Yang asserted that the increase in the amount of technology in the private sector, e.g., artificial intelligence, has lead to an increase in unemployment. Like the other candidates in the Democratic primary, Yang embodies the same principles of economic interventionism, though attempting to differentiate his views from those of his counterparts on the left. Unlike the other, however, he has allocated considerable attention to entertaining the notion that if artificial intelligence is not hindered in its progression, it will soon displace millions of Americans from jobs.
Yang has given the impression that he is the “reasonable” and most pragmatic candidate among all presidential contenders, garnering praise from both the left and the right. The entrepreneur is seen as a man of bold new ideas, particularly in regards to his economic protocols. But in essence, Yang’s arguments hearken back to the Technocrat movement of the 1930’s. These ideas seem to be correct superficially, but underscore a severe misunderstanding of the basic economic principles that guide human action.
Henry Hazlitt’s famous book Economics in One Lesson addresses the point raised by Yang, that machines are displacing humans, particularly the chapter titled “The Curse of Machinery”. Hazlitt reduces the problem to simple economic principles. He first asserts that if machines create unemployment, it follows that every technological innovation to this day has done so by improving the manufacturing process, gradually displacing jobs. This logic would lead to the conclusion that to achieve maximum employment, all the technological progression of the past millennia would have to be reversed.
While it may be true that in the short run a machine may displace jobs upon being introduced to a sector, the creation of the machine itself would bring in new jobs. The economizing entrepreneur would only adopt the machine if he sees it as an integral component in expanding his profits. These new profits could be used for expanding his operations, or his own personal consumption. If the former, the entrepreneur could invest in new machinery, in turn creating new jobs, and if the latter, money spent in any given industry would lead to an increase in employment in that industry.
Another point to consider is that goods produced in one industry could be used as capital in another industry. For example, a firm may use machines to create bolts at a faster rate. While this may lead to an initial decrease in the number of jobs in the bolt industry, it would lead to an increase in jobs in another industry. For example, car manufacturers may need to use these bolts, and so they now have more capital to use in manufacturing cars. This would lead to an increase in the amount of jobs in the automotive industry.
The view that jobs would be displaced by a rise in technological innovation is really rooted in the view that the economy is a fixed pie. Only so much wealth exists and only so many people can have it. This is a fallacy. It is the dynamic nature of the economy that leads to the constant expansion of industries, which in turn leads to the expansion of other industries who rely on goods produced by these industries. And as this process guides economic progress, new industries come about. This process of economic progression will never end, so long as we continue demanding goods, which will only lead to an increase in the quality of living.
