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Dec. 13, 2012 - Freedomain Radio - Stefan Molyneux
52:58
2280 Automation Causes Unemployment?
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Hi everybody, Steph from Free Domain Radio.
Question from listeners, a couple of questions.
First is, have you ever done any videos on automation and the effects of technology taking away the individual's ability to create for themselves or to trade for other goods and services?
How, oh how, does voluntary relationships help to acquire goods when certain people own the machines and enough land to provide abundance and other people don't have the means to provide anything beyond scarcity?
Well, this is a great question.
Fantastic question.
And it's something that troubles a lot of people who look at the free market system, the system of voluntary exchange.
And what they see is an accumulation of power, of capital, of resources, and therefore of education, of access to more capital, the sort of old boys handshake under the granite club kind of interactions where...
The rich get richer, and the poor maybe get a little richer, maybe stay where they are, maybe decline a little bit.
But here's the basic issue.
So some guy gets a factory, has a factory, does whatever, right?
Maybe he came out of the aristocracy, and so he has a factory because he was pillaging the poor peasants for many medieval moons.
So, he has a factory and the factory costs $10 million to create.
Well, nobody else has $10 million and he already has the factory.
So, what happens?
Well, people can't compete with him because they don't have a factory and can't get one any more than they can go out and buy a $10 million house.
So, they end up working for him.
And he takes profits from their labor and uses that to build more factories and to expand his factory.
And therefore, now he has five factories at $10 million each.
He's got $50 million worth of market resources.
And, I mean, if the workers couldn't buy a factory at $10 million, how the hell are they going to buy a factory at $50 million or a bunch of factories?
So that's not going to work.
Now, then what happens is he moves in this higher economic circle.
He knows people who have investment money and resources, and maybe he cozies up to a politician or two and gets some favorable legislation.
And his kids, of course, go to the best private schools and learn how to play polo on gold horses or whatever.
And as a result of that, the rich tend to get richer, and the poor or the workers tend to stay at the same rate.
Another issue is land is very expensive, particularly in urban centers, so if you have a big farm, then you get the profits of that big farm.
You can invest in better farm machinery and more efficient ways of producing whatever it is that you're producing on the farm.
I believe it's a Twinkie field.
I'm not a farmer.
I think that's clear.
And so you can then go and buy up all the smaller farms, and you sort of, you have a carrot and a stick.
So the carrot is, I will give you a million dollars for your small farm, and if you don't buy from me, then I'm going to use my efficient means of production because I'm such a, like, my farm is 20 times bigger.
I'm going to use my really efficient means of production to undercut you in the market, and then you're going to go out of business, and I will buy your farm for a dollar at bankruptcy court.
So here's a million bucks, and if you don't sell to me, I'm going to undercut you with my really hyper-efficient farm production ways of doing things, and then I'm going to end up.
So there's an accumulation of economic resources into the hands of fewer and fewer people who become more and more wealthy, and as they become more wealthy, then the workers have even less capacity to compete with them.
And this widening of the gap between rich and poor is considered, even if we take out the political aspect, like the favorable legislation aspect, and we just say, okay, this is a pure free market, no government at all, and privately enforced contracts and so on, still we're worried, are we going to see this ever-increasing wealth?
Because the barrier to becoming a capitalist gets higher and higher as capitalist productivity gets more and more efficient.
And so, you're going to get a whole bunch of people who are going to stay as workers and a smaller number of people who are going to accumulate more and more capital and use those increases in capital to further enhance their offspring and give them all the best schools and all that kind of funky stuff.
So, there is this concern.
This goes all the way back to Marx and to people even before Marx.
And it seems to make sense.
It seems to make sense.
The problem is...
That it only seems to make sense if you look at capitalists and workers as if that is the only economic relationship that exists.
But that is not the only economic relationship that exists.
So, let's take an example of a car factory.
Bob's International House of SuperDuper Cars.
The workers who work at Bob's factory are not just in an economic relationship with Bob the employer.
They are in an economic relationship with Bob and the factory and themselves as producers.
So, first and foremost, how do we get a factory?
And we'll talk about the economic relationship in a sec.
How do we get a factory?
Well, the way that you get a factory is by saving money.
I know, I know, you're talking about a $10 billion plan for Intel to manufacture chips.
I get it.
That's not out of throwing your change in the penny jar.
But let's just talk about in general.
If you are in a medieval system where you basically are consuming everything that you produce every year, that's more of the dark ages.
But if you're in a subsistence economy, then you simply don't have any excess, right?
You grow your food and you eat your food.
If you have any money left over, you pay it to a doctor or to someone to pull your teeth or whatever it is.
Funerals, whatever it is.
The priest.
Lord knows, right?
But you don't have any excess.
You are consuming what you produce so there's no possibility of saving anything.
Now, if you end up in a system, and this always has to start with agriculture, the foundation of any advancement in an economy is an advancement in agricultural productivity, because if you don't have any excess agricultural productivity, you can't save anything.
And you also don't have any workers available for capitalists to exploit in their factories, because everybody's a farmer, because if you're not a farmer, you're starving to death.
And this is, of course, what happened in the...
In the early Middle Ages, from the 12th to the 13th century onwards, there was huge increases in agricultural productivity for a variety of reasons, which I won't bore you with here, I'm sure I've bore you with elsewhere.
Now, once you get any kind of excess, then people can save that.
So they defer their gratification and they save their money.
Now, the way that it works is people go to urban centers.
I mean, people save their money in the country by burying gold coins in the back 40 or something.
They don't really release it to any kind of investment.
But people in the city who've got any kind of excess income, generally, they will put it in the bank or invest it or something like that.
Like, so, you know, if you lived in Florence in the 17th century, you would probably invest, if you wanted to, really roll the dice in some kind of, like a ship that was going to the New World and...
Kill all the people and take all their gold.
So you were on a murder cruise.
You'd be investing in a murder cruise.
And then you'd get back some money as you put in.
Same with the East India Company or other kinds of things.
And, you know, if you really wanted to look at free markets in operation, you'd look at how the Flemish stock exchange worked without any government regulation very efficiently and all that kind of cool stuff.
But what happens is you take your excess savings and you put them into some sort of investment.
And what that means is that there are gatekeepers of that capital, whether they are an investment house or the people themselves who are reviewing the possible stocks or options or investments that they can put in, or it's a bank or something like that.
But somebody who's going to sit on a whole bunch of money and who wants to give you a return on that investment.
Now, gold does not breed.
Trust me.
I've tried with all the gold porn, and you can imagine they simply don't move.
So gold doesn't breed.
You need to give it to people who are going to make more out of it.
And the way, generally, that you make more out of the money that you have is you invest in what are called capital improvements or capital equipment.
So what that means is instead of having a guy drag his hands through the ground, you'll buy him a shovel.
That's a capital investment.
You know, if you're growing corn, a shovel, I assume, is quite helpful.
And if you're a politician, it's pretty much required.
But you don't sell the shovel, right?
I mean, it's a broad category, but basically the capital stuff is used to improve productivity, and it's not something you sell.
That's a consumer good, right?
So the capital goods are a shovel.
You don't sell the shovel.
You sell the better, more corn that you get because the guy has a shovel.
Or a plow.
I also hear that they're quite helpful.
And as David Mamet says, they're very good when they're sped up.
And so you'll invest in a plow, you'll invest in bridles, you'll invest in scarecrows, like things that you don't sell, but which improve the productivity of that which you're ending up putting out to the consumer.
I mean, if you're Intel, obviously you'll buy a whole bunch of chip stamping equipment, you don't sell any of that to the public, but you will use it to create the chips that you sell to the dealers who sell to the public, or I guess you sell to the public too.
So, when you defer spending on stuff that you like, there's money that sits around and people want to make more money from the money that's sitting around.
And the way they do that is they give it, or loan it basically, to people who are going to use it to create more efficiencies in whatever it is that they're doing.
So, when I first started in the business world as an entrepreneur, We got a bunch of people to give us $80,000 to start our company.
We got an office.
We bought equipment and all that kind of stuff for phones, computers, faxes, copy machines, all that kind of funky stuff.
And all of that was really, really essential.
We really couldn't have had a business without it.
Now, people ended up making about 1,500% off their initial investment.
We did quite well as entrepreneurs and out of returning our investment to the initial people.
But So they made a huge amount more than a bank would have made.
But the difference, of course, is that if we'd lost money, we wouldn't owe them anything, right?
So if you take a loan out from the bank and blow it on the races, then you have to go and pay back the principal and probably some interest.
But if you get an investor who gives you money and the business fails, you don't owe the money back to the investor, right?
So that's more a risk and pretty much infinitely less security.
I mean, if you're a An investor, you might get 10 cents back on the dollar when they sell off the carcass of the business or whatever, sell off the computers or whatever, but you're really not going to get much.
So that's important to understand.
That's where capital comes from.
So the first thing to understand is that if you want to build a million-dollar factory, you don't need to save a million dollars.
That's okay.
The investment community as a whole has already done that for you.
And rich people, of course, want to invest in good ideas.
And rich people also want to invest in poor people.
When I was first an entrepreneur, I was making $40k a year working at an investment bank as a programmer in Cobol.
And I really didn't take any kind of...
I actually went without salary for a bit.
Whereas if you want to invest in something that some multi-millionaire CEO, I mean, most likely he's going to want some pretty decent return or whatever it is.
He's got high expenses.
So rich people like investing in poor people with good ideas.
It's cheaper to invest in poor people than it is to invest in rich people because they have less overhead, less capital requirements, blah, blah, blah.
They can take less salary.
And they're more eager, right?
They're more grateful.
I was, like, thrilled to get the chance to co-found a company and start it up.
You know, the seven or eight years I spent doing that was, I mean, an amazing ride.
So the first thing to understand is that the poor have a competitive advantage over the rich just in terms of how much they're willing to work for.
So that's an important thing to understand, that the rich...
Put money in banks, investment houses, and those investment houses are always willing and eager to hear proposals from poor people or relatively poor people.
If the ideas are good and, you know, there's a solid enough amount of expertise to get there to get the thing going, then you can do it that way.
So that's important.
Of course, there are other things where you can, you know, if you want to start a landscaping company, the capital requirements, of course, are far less than they would be.
If you wanted to start a chip manufacturing facility or whatever, or if you wanted to be, as some friends of mine are, writers, freelance writers, and it's almost no internet computer, that kind of stuff.
So all of these things are ways of starting businesses, web design businesses, and all that kind of stuff.
These are all ways that you can start a business without a lot of capital.
But even if you do need a lot of capital, then you have to show, obviously, expertise.
People don't want to give money to someone who just has a good idea because good ideas are kind of like a dime a dozen.
Think of all the good movie ideas you've had over the years.
I know I have.
But what really matters is the capacity to execute and what people want to see is people who've got experience in executing, like in getting things done.
And I mean, if you just look at the number of businesses, restaurants that start every year, hundreds of thousands in any particular country.
So, if you look at the economic relationship as a unidimensional thing, like as a straight line between capitalists who's hoarding all his money and workers who's being paid...
Well, that's not realistic.
That's not a true and accurate representation of the Mobius Strip N-dimensional relationship that everyone has.
Now, the other thing that's important is that people sort of have the impression that capitalists take money from workers, right?
Right, so the basic equation goes like this.
So, I could make 50 bucks an hour, but the capitalist is going to pay me 40 bucks an hour and keep 10 bucks for himself.
That waist-coated monocled monopoly man rat bastard.
And that is not accurate.
It's not at all accurate.
The reality is...
So, imagine that...
Someone is a spot welder, you know, at a car factory, a spot welder.
And what they do is they move their arm, they push the trigger for the spot welding, and they wear their blast goggles or whatever it is.
Now, if you just imagine that person naked in a field...
That person is just naked in a field doing the exact same motions or naked in the woods doing the exact same motions.
What's he going to get paid for that?
Well, unless you really are into naked guy in the woods eroticism, not a whole lot, right?
He's just not going to get paid anything for that because he's just moving stuff.
Now, if you put...
A blast helmet on him, like the goggles, then he's probably going to make nothing, really.
We're getting really kinky now.
But he's not going to make anything, because it doesn't add anything.
Put a welding torch in his hand, what's he going to do?
Well, he's going to be heating up part of the forest air, which nobody's going to pay for.
But you see, as you start to add more and more equipment around him, then his labor starts to become valuable.
I mean, if I say, listen, I'm going to put that shed together for you, and I don't have a hammer, and I just mime hitting the nails as if I had a hammer, I'm not going to build the shed.
But if you put a hammer in my hand, suddenly, bang, bang, bang, I am making a useful shed for you.
So, it's not the motions of the worker that creates the wealth.
It is the motions of the worker.
I mean, that's a tiny proportion of it.
The major thing which creates the wealth is the machinery and the capital investment around the worker that allows him to make so much money.
Right?
So, to take a simple example, if I say to you, you can farm this little patch of land...
But you can't use any implements.
Well, what are you going to grow?
Well, you know, probably not much.
You can't use any fertilizer.
You can't use any hoes.
You can't use any scarecrows.
You can't do anything like that.
You're just not going to grow that much.
Let's say you grow 10 bushels of corn.
And then I say, well, listen, I have a plow you can use.
And I have a scarecrow you can use, and I have fertilizer that you can use, and so on, so on, so on, right?
But it is going to cost you five bushels of corn to rent all this stuff from me.
But through that rental of me, you get to grow 20 bushels of corn, right?
This is really important.
So, in the original thing, you just make 10 bushels of corn.
But if you give me five of those, then you will actually make 20, right?
Right?
So you're up five.
You have five more bushels of corn.
Now, after you've been doing this for a while, your kids might say, well, we get 20 bushels of corn.
Why on earth are we giving five to this guy?
Well, because we only get 10 bushels of corn if we don't give five to this guy.
So we're actually getting plus five by giving five to this guy to rent all of his equipment.
And that's the really important thing to understand about wage labor.
You don't have a fixed amount of money that you're making by doing X, which then the capitalist takes away.
What's happening is there is an exchange of value.
The capitalist needs someone to operate the machinery, and the worker needs the machinery to make his physical movements far more productive.
So instead of, well, I could make 50 bucks, but the capitalist takes 10, so I only make 40 bucks, what a ripoff!
You get, well, I could only make 20 bucks without the capitalist, but if I give my time to the capitalist, I double my income.
Now, I'm sure that there are many of you out there who are thinking of these horrible, truly tragic working conditions in Chinese Apple factories or whatever, iPad factories.
It's wretched, absolutely wretched, but you get that it's not a free market.
That's much more akin to To feudalism.
So, for instance, you can get a 12-year prison sentence for even thinking about starting a union in one of those factories.
That's not the capitalists, that's the government.
And don't get me wrong, there are a lot of asshole capitalists out there who love it when the government delivers to them cheap, broken up, smashed up, robot-like machine workers.
But there's the government who educates them.
That's the government who enforces the laws.
That's the government who bans them from collectivizing.
It's the government who restricts investment.
And it's the government who creates crony capitalism or crapitalism, right?
So, again, we've got to look at the people with the guns, not the people with the contracts.
The people with the contracts will take advantage of the people with the guns, but it's the people with the guns who make that all possible.
The fact that there's a centralized coercive hierarchy is what capitalists are always trying to lasso in this sort of crony capitalism model.
But if that is not there, it is ridiculously impossible for capitalists to recreate that on their own.
I mean, capitalists aren't going to create some police force, some judicial system, some Congress, and then someone else is going to create the same army, military, prison system, courts.
I mean, it has to be there in order for people to harness it.
You know, people will go and mine for diamonds.
Diamonds are not a great example because you can make it yourself.
But people will go and mine for coal if it's there.
But they won't go and stuff coal in the ground.
People will use political power if it's there, but they won't go around creating political power if it's not there.
So I think that's, again, I've got more about why this is the case in my free book called Practical Anarchy, available at freedomainradio.com forward slash free.
So I hope you will check that out if you have questions or issues.
Now, here's another thing to look at in terms of the The multidimensional nature of the economic relationships between the capitalists and the workers.
And you know I actually don't like that because it's a prejudicial term.
You know how, I don't know if you saw Spike Lee's movie on Malcolm X, but in it he says, you know, the word black has all these negative connotations and shouldn't be used to describe people and so on.
And not a bad argument, actually.
But...
I don't like the worker thing is even more prejudicial.
I mean, capitalists work very hard and take a lot of risks that workers don't.
And so the idea of this capitalist worker thing doesn't really matter.
It's a prejudicial term.
It's like calling whites virtuous and blacks criminals.
You know, I don't call them blacks.
I call them lazy and well-hung.
It's like, well, that's kind of racist.
So, it is just...
I don't know what the term is for economic prejudice.
Economist?
Oh, my God.
No, that's just Keynesianism.
We'll come back to that.
Stay on target, Luke.
So, the capitalists who are producing...
Sorry, the workers who are producing the goods are also the consumers who are buying the goods.
And this is really, really important.
So...
Somebody invests a million dollars upgrading his factory and produces twice as many cars.
I know this is ridiculous math, but I hope you'll forgive me.
So he can produce twice as many cars.
And let's just pretend there are no other variables.
And what happens is that cars now cost half as much.
Ooh, look at that!
Well, the workers who are producing the cars are also the consumers who are going to buy the cars.
And that's really important to understand.
So, the way that a company is going to grow is that it satisfies consumer demand in some voluntary fashion to the point where consumers are willing to part with their hard-earned money.
It's really hard to get people to part with money for stuff.
Inaction is always the best strategy.
And we are 99.99999% inactive in all of our economic dealings.
I mean, just think of all of the cars you haven't bought today or all the houses you haven't bought today or all the laminated flooring you haven't bought.
I mean, we're all ridiculously inactive.
And getting people to actually pony up, like go drive out, do research, pony up some cash, that's a hard thing to do.
But the way that you expand as a company is you provide better services, products, lower prices, whatever it is.
Some combination of quality and price that hits a sweet spot with significant numbers of consumers.
And this is really, really important to understand.
That the workers are also the consumers, right?
And if a company is doing really well, then what happens is they're doing well because they're appealing to consumers.
In other words, they're appealing to workers.
Clearly, workers outnumber bosses and workers outnumber capitalists, like 20 to 1, 40 to 1, you name it.
Especially now, with all this government interference, it's getting worse and worse.
I mean, the spread, the disproportionality of the economic barbell is ridiculous.
So, a capitalist who is doing something good in the marketplace is only doing that because he is appealing to the economic interest of the workers.
And again, I'm talking about people who are making consumer goods, not people who are making capital goods.
Like, not people who are making stuff that only businesses will buy, but people who are making stuff that consumers will buy.
Right, so...
More than executives need to buy iPads for iPads to be successful.
You understand?
Which is why there are things other than Lamborghinis, cars other than Lamborghinis, and houses under $10 million on the market, right?
So, for a consumer good to have any real success and traction and growth, then it has to have reasonably high volume, in which case it has to appeal more to workers Than it does to capitalists and managers and the executive classes.
Because the workers form the bulk of consumption.
And just, you know, think of a bell curve, right?
That camel hump that is the distribution of so many things in the world.
There are some goods for really poor people, and there are some goods for really rich people.
But the majority of goods are designed for people who are in the middle income layer.
Like the middle four-fifths or the middle two-thirds.
And the reason for that is that when you go to an investor, again, I've done all this stuff, I have some experience in this, when you go to an investor, they want to know, well, how big is your market?
The bigger your market, other things all being equal, the bigger your market, the better it is.
Now, the bigger your market, the more competition, the bigger your market, the more price pressure and so on.
But nonetheless, if you have all other things being considered, if you have a big market, well, that's good.
And this is why when you look at cars, you can get a beater for $500 or you can get a Maserati for $300,000 or whatever they cost.
Who knows?
So, this is really important to understand that the workers...
Form the bulk of the consumers, and no company can succeed in any significant way without pleasing the workers.
Now, please, like I understand there are, you know, $30,000 watches and ridiculous nonsense like that, which I just, I mean, I just find that horrendous.
Fundamentally, just, who needs a $30,000?
I mean, good Lord, go buy 30,000 immunization shots in the third world.
For God's sakes, don't put that crap on your wrist.
Anyway, but...
But there is a market for those, but most of what is made is swatches.
Most of what is made is $20, $30 Timex's.
There is a market for sundials.
It's just not very big compared to wall clocks.
So the capitalist doesn't just get together and grow independent of the will of the worker, of the economic interest of the worker.
And whatever the capitalist invests in To improve the productivity of his workers is, in effect, a wage increase, even if nothing happens to their actual wages.
So, if some factory worker, let's pretend that there's not crazy government-sponsored unions, so someone who works in a factory is making $40 an hour.
And then the capitalist saves up his profits and invests a million dollars and doubles the productivity of his car factory.
Again, I know the math is way off, but just go with it if you can.
So, that I think is really important to understand.
That what happens is, if the capitalist invests all of this money to improve the productivity of his car factory, and he ends up being able to produce twice as many cars...
Then a very interesting thing happens.
The price of cars drops by half.
And that proportion of the workers' wages that is spent on cars doubles in value, right?
Because cars are half the price.
So let's say that the worker is spending $5,000 a year on his car, you know, on a lease or whatever, right?
Well, what happens is, when cars are half the price, he now only has to spend $2,500 a year on cars, on his lease, on his loan, or whatever it is, right?
Now, what's tragic, of course, is that his existing car value drops.
It's complexity, but over time, you understand that by the capitalist investing a million dollars to double...
He's actually handed a $2,500 a year tax-free raise to his worker.
This is the part that's hard for people to get.
And look, I mean, I know it's really, really freaking complex.
I mean, you know you're doing reasonably decent economic thinking.
I'm no economist.
But you know you're doing reasonably economic thinking when it all just gets too complicated to really process it.
You know you're doing really stupid economic thinking, which is non-thinking, when it's just like, oh, well, have the government spend money when there's a recession.
Right?
I mean, when you don't get so complex that it's like, I can't process it anymore.
But that's when you give up and you say, well, that's why central planning can't work.
And you know you're doing reasonably decent economic thinking if and when you just can't process it.
You know, upper frontal lobes breaking up in the atmosphere.
Can't process.
Can't!
So I hope that sort of helps to make some sense.
Whatever the capitalist is doing is, for the most part, he's doing because workers want him to do it.
Because workers are willing to buy whatever the capitalist is producing.
And so the capitalists obviously are in competition for workers and will pay them as much as the market will bear.
But the workers themselves determine their own wages.
Which I think is really, really important.
The workers themselves determine their own wages.
That, I think, is something to understand.
Let's say workers as a whole have this massive amount of sympathy and want to really help out textile workers.
And they say, okay, we are now going to pay double what we used to pay for textile workers.
Products, right?
Muslin cloth or linens or whatever it is that they produce.
I guess clothes and stuff.
That's too general.
Let's say they have massive sympathy for...
For iPad products.
Let's just say that's what they're going to be doing.
Well, so they can all start paying double for iPads and then they will demand that they will do that if the workers' wages double for the factories and so on.
So, if workers are willing to show that kind of solidarity to voluntarily pay extra for things in order to pass through wages to the employees...
Well, fine.
I mean, obviously, that's a voluntary transaction.
Pretty tough to enforce.
And there are distortionary effects as a whole.
Like, you know, when you have free trade coffee or fair trade coffee and you pay extra to coffee workers, that just draws coffee workers away from other industries.
It's kind of inefficient economically.
I mean, it's kind of funny, right?
Because economics is interesting this way.
Because the temptation with economics is to think that that which is most economically efficient is the best.
And we think of that in terms of productivity and so on.
That's not true.
I mean, economists, I think good economists, they don't care if you make a million dollars, quit your job, and sit around picking your nose by a swimming pool.
I mean, it's not bad for the economy.
It's not good for the economy.
It just is what it is.
I mean...
I think good economists don't like it when guns are in play.
But if people want to voluntarily pay more for coffee in order to raise the wages of coffee workers, I mean, it has distortionary effects on the economy of the host country.
Some Brazilian backwater where they suddenly double the coffee price.
Workers' wages, well, of course, what happens is more people want to get into that.
Fewer people do farming.
Fewer people do other kinds of capital equipment.
And you could make a strong case that it would lower productivity gains overall.
But if that's what people want to do and it's voluntary, who's going to care about it?
But, of course, the other thing that happens is if we say, well, I want to double the iPad workers' wages by paying double or an extra 25% of whatever it is for my iPad...
I mean, that has effects.
Of course, now everybody wants to be an iPad worker, right?
Everybody wants to quit their job, go become an iPad worker.
You'll get, you know, massive clamorings.
You know, like how when they have, you know, they open up the hiring for firemen, you get like thousands of people trying to get in because you make an unbelievable amount of money for relatively little amount of work and certainly not the most dangerous job in the world to be a fireman or a policeman.
Try being a fisherman.
Much more dangerous.
So you would get this massive crowding.
And of course, the important thing to remember too is that everything has a hidden cost.
This is the essential thing in my amateur view of economics.
The essential thing is, it's not just my view, it's pretty common.
Don't just look for the visible benefits, look for the hidden costs.
So let's say that you pay double for the iPad and that raises the iPad workers' wage.
Well, you just have that much less money to spend on other goods.
Which is going to lower demand for other goods because you spend $1,000 instead of $500 on an iPad.
You have $500 less to spend on other things.
It's going to lower demand for other goods, thus depressing the wages of the other workers.
So, more people want to go become iPad workers and therefore they'll be applying to other jobs less, which will drive down the wage capabilities or the wages that It's not a zero-sum game.
That's not quite the right way to put it, but everything has hidden costs.
You pay iPad workers more because you voluntarily want to double your purchase price of the iPad.
It simply means that other workers are going to get paid less.
These, I think, are the important things to consider.
And the great thing about economics-type thinking is that you very quickly understand that everything is incredibly complex, far more complex than any human being or a computer or any group of super-smart human beings can ever figure out, predict, or envision.
Central planning says, oh, I want to increase the production of railway, Rails.
Rails for railways.
So they look at all the factories that they think can do it and so on, but they don't know that some guy out in the boonies has a piece of machinery in his bottom that could be converted to use to do railways.
Now, if the price rises enough, then he'll do that, likely.
He'll figure it out and do it.
But just things you don't know as a central planner, you can never figure out.
A central planner, of course, all you ever do is you see and trumpet the benefits, the visible benefits you never really even see or figure out the hidden costs, right?
When you centrally plan things, particularly when you centrally plan prices, You suppress the hidden costs, or to put it more accurately, you transmit, or you transpose or alter.
You transmogrify!
That's the word I'm thinking of.
Thanks, Gavin.
You change the hidden costs from measurable prices to harder-to-measure wait times.
I mean, as we all know, artificially low prices simply creates shortages.
Now, you can measure...
Like, if you double the iPad workers' wages, you could probably measure the subtle impact, the downward impact on all the other workers' wages.
You could certainly measure how many people were trying to get iPad worker jobs.
But if you have all these wage and price controls in place, you can't really...
See it as clearly and how much time people are waiting in line or people who don't get jobs who might otherwise have gotten jobs that doesn't really show up.
So, central planning, it's like having leprosy, right?
I mean, you have to do a visual search of extremities always after the fact because your nerve systems are dead and you can cut yourself and not even know it and that's one of the things that's so dangerous about it.
So, thanks to your patients.
The last thing I wanted to mention, which is again a very common perception, Which is that automation throws workers out of work.
And there's no doubt that that's true.
There's no doubt that that's true, but that is far from the complete story.
Far from the complete story.
So, let's say that There is a magical way to produce iPads entirely through machines and all the iPad factory workers thrown out of a job.
Well, automation kind of sucks for them, right?
No question.
It kind of sucks for them.
But let's say this process drops the price of an iPad by a hundred bucks.
Well, then people who have $500 to spend on electronics, who would have originally spent $500 on the iPad, will now spend $400 on the iPad and $100 on something else.
A wireless headset, a webcam, a gaming keyboard and mouse, you name it.
And so, that will drive demand for other workers.
Now, the workers who've lost their jobs, yeah, they've specialized in that.
That's what they understand.
That's what they know.
That's where their seniority is and so on.
And there's no question.
I mean, that's negative for them.
But if all you look at the jobs that are lost, then you don't understand economics.
You don't understand how society and people work.
Because if the iPad price drops from 500 bucks to 400 bucks, then you have 100 bucks to spend on other stuff.
And let's say you don't spend that, but you put it in the bank instead.
Well, It's still doing good capitalist work because the bank's going to lend it out, right?
So, let's say there are a million iPad purchases a month and the price goes down a hundred bucks and everyone takes that hundred million dollars, puts it in the bank.
Well, you have a hundred million dollars available for capital investments, capital improvements and hiring people and so on.
But let's say nobody does that and all they do is go and buy gaming mice and software.
Well, Logitech is happy.
Microsoft is happy whoever's making these things.
And they have massive increased demand.
They're going to hire workers and so on.
And so the net result of dropping the iPad price $100 is that whereas before $500 represented an iPad, now $500 represents an iPad and a really great webcam.
So what is the net effect in society is that basically you have an extra webcam, which didn't exist before because the demand was consumed by the iPad.
So you have an extra webcam.
Now, people are going to need to make that webcam.
And so there's going to be more workers who are going to be hired over time.
And since all workers are also consumers, then the amount of money that people spend on iPads, you've now basically given each worker, assuming they buy an iPad every two years, a $50 raise every year.
Thank you.
So, it certainly is true that automation costs people their jobs.
But it is more true and more relevant, again, not from a sort of, it's difficult for these individuals, which I hugely sympathize with, Not from that perspective, but from the perspective of, well, this is how we gain wealth in a society.
Not necessarily through automation, although that's an important part of it, but this is how we gain wealth in society.
So when I was a kid, every boss needed a secretary, and you needed, you know, ten tellers in every bank.
And now you need two tellers in every bank, and almost no bosses have secretaries.
Because you've got Computers and Outlook and it's easy to set up your own flights and hotels online and all that kind of stuff.
Type your own letters, voice dictate whatever you do.
Now, it's important to understand that, let's say there were, I don't know, 10 million bank tellers and 10 million secretaries who now don't have jobs or whose jobs have been phased out over the past couple of decades.
Well, those people don't just sit there and join the unemployment lines.
What they do is they go and do something else.
So maybe the bank tellers have gone and become personal trainers and maybe the secretaries have gone and become junior salespeople or senior salespeople or whatever.
But basically now you have a significant extra value in society because the jobs that were being done before are now being automated or being done for much less cost by people using ATMs or executives using Outlook or whatever.
So those have all been, right, those jobs have all been liberated.
They've been liberated and now they can go and do other things and thus satisfying more consumer demand and generating more wealth in the In the economy.
Now, one central problem with central planning and with the state as a whole is that those who lose in an economic transaction are vividly aware of that.
Whereas those who gain from an economic transaction don't usually have a clue about what is going on.
They don't have a clue what happened.
Right?
So, let's say that the government passed a law which said you can't fire secretaries.
You always have to pay them.
Well, of course, all the secretaries would be, I guess, relatively happy because they'd get to keep their jobs and this, that, and the other.
So, yay for them.
The problem is, of course, that all of the economic activity that would have been generated, all the wealth that would have been generated, By the fired secretaries getting other jobs and creating wealth and producing resources or goods or services or something in some other environment.
Those are things that we just don't see, right?
It's like when the government spends...
A million dollars creating 20 or 30 jobs.
Well, of course, the people who get those jobs are like, yay for this government program.
But all the money that was taken in tiny little drips and drabs out of the economy, which then...
Did not go and create other jobs.
Well, those people didn't even know that those jobs were going to be created.
They can't tell.
There's no way for them to trace it back.
And so everyone who suffers the obvious losses in an economy, well, those people are very keen on government action.
Whereas those people who would have gained had the government not acted in such and such a manner, Don't have really a clue about what's happened and can't trace it back and so on.
And this is why politics is so elementally corrupting.
And this is also why those countries, which tend to engage more in central planning, see their economic productivity decline.
Because, look, we're...
I mean, you can't really complain about it.
I mean, we're pretty conservative creatures.
If you train to be a programmer...
You don't want to have your job outsourced for one-fifth the wages to some other country.
A good friend of mine, his job was basically outsourced for a fraction of the money to some guy in India who was willing to work for those wages.
Well, no individual really wants that.
Because that's what you've trained for.
You've got your job, you've got your mortgage, you've got your expenses, and you don't want to go out there and try and figure things out.
I mean, the guys who made horse and carriage buggies, they don't want the car to come along, and the car doesn't want the jetpack to come along, and so on, right?
The guys who used to shovel horse shit off the streets when there were no cars and everybody used a horse to get around, they don't want the car to come along, because they don't want to retrain as mechanics.
And this is particularly true in the lower end of the economic spectrum, right?
So there's this automated burger robot.
Now, I can't believe the words I use in the show.
There's this automated burger robot now that will deliver the entire burger.
I mean, it's like something out of Cloudy with a Chance of Meatballs, right?
I mean, you basically...
I think you even speak to it what you want, you know, a burger with double fries and chili peppers, mayo, and whatever godforsaken stuff you put on that fecal-covered cow meat, and it will then pop the burger out at the other end.
You know, cooked, condimented, and everything.
Now, all of the guys who can't grow a beard don't want the robot to make the burger because they want to be paid.
To make the burger, right?
So they're not going to be big fans of this burger.
But ultimately, of course, it comes down to the customer.
This is the part that people always forget when they talk about the free market.
You know, they think, well, there's a boss and there's a worker.
But the workers are customers.
The boss is also customers.
And the purchasing power of the workers as a whole vastly outstrips the purchasing power of the managers.
So the workers dominate the economy.
This is really, really important.
The workers dominate the economy.
But the fact that Every plus to someone economically is vividly pursued, and every minus is vividly resisted.
But all the hidden costs and benefits are not even noticed.
This is a central reason why you can't have central planning, because central planning is a political process, and political process is It's the squeaky wheel that gets the grease.
It's those who cry the loudest who get the most response.
And those who cry the loudest are always those whose immediate economic interest is threatened by the general progress and growth of wealth in society.
This is why economic productivity is declining.
This is why capital investment is more chaotic.
This is why, I mean, particularly in the US, companies are sitting on huge amounts of money because they face regime uncertainty.
What's coming next?
What laws?
Dear God, help, help, help, right?
And so the last thing I would mention is that people think that unemployment is caused by automation.
And, I mean, of course they're right, in a way.
I mean, if this burger-making robot comes in, then it's got lots of people who don't have jobs.
But I don't see that that particularly matters.
I mean, we could get rid of...
I mean, again, from a big sort of...
From two levels.
One, the big sort of social productivity thing where we want wealth to increase as a whole just because it makes people's lives more pleasant and safer and healthier and so on.
That's number one.
Number two is that the alternative to letting people lose their jobs through automation is to use force, to use violence of some kind to get them to keep their jobs, either through banning the technology or raising the I mean,
if a guy was fired and he took his boss's children hostage, we would recognize that that was not really a very valid response to being fired.
And in the same way, exerting violent muscle through the political process for the sake of retaining jobs which harms the economic growth of society as a whole means that you get slower economic growth and an expansion of violence and immorality in society corrupts the whole process.
It's lose-lose.
The only people who win, of course, in the short term are the people who get to keep their jobs and their income.
So, the moral issue...
And the productivity issue are very important.
Of course, if you wanted to get rid of unemployment, it's very easy, very simple.
You could get rid of all unemployment and I hope this is clear what I'm talking about when I mean that automation costs jobs and raises wealth and creates more jobs than it costs and better paying jobs than it costs.
Well, imagine if we banned all farm machinery.
All farm machinery was banned.
Well, people still got to eat, right?
So, what would happen is People would have to go and pick crops by hand, and people have to go plant crops by hand, people have to go do all of this stuff by hand, process all of this stuff by hand.
So, you know, immediately, you would have no unemployment.
Again, assuming there was not any particularly high minimum wage.
And everybody would have a job, but you understand, right?
You get that that would be a huge net negative for society, for our wealth.
And so if we got rid of all farm machinery and had people out there doing it by hand, that'd be positively medieval.
And those people would have a job and machinery would be taken away.
There would be a huge net loss to the economy, to technology, to human dignity, and so on.
So I hope this helps.
Again, I'm no particular expert.
You probably want to check out Walter Block, Robert Murphy, Tom Woods, all these guys who really know what they're talking about.
And Mises.org is a great resource for this.
Laissez-faire books, lfb.org forward slash Stefan.
These are also great.
Go to Laissez-faire books, sign up.
Sign up through my page.
I really appreciate it.
And thank you so much for your time and attention.
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