The July/August 2015 magazine The Atlantic features the article “A World Without Work” by Derek Thompson. The cover page says, “Technology will soon erase millions of jobs.” The author acknowledges that past technological progress did not create massive unemployment. Harvesting machines shifted jobs from farming to manufacturing, and then automation shifted jobs to services. But he forecasts that computers and robots will finally bring about the end of work.

An analysis of the cause of employment trends needs to distinguish effects due to markets from effects due to harmful government policy. One problem with this work-ending idea is that the author does not analyze the distinction. He points to the shut-down of the steel mills of Youngstown, Ohio, in 1977, which eliminated thousands of jobs.

But there is no analysis of why the mill shut down. Foreign steel did become cheaper, but the cause may have been governmental policies such as taxation and monopoly labor unions. If governmental regulations, taxes, law suits, and mandates are substantially increasing costs, one cannot claim that technology is causing the job loss, since policy that makes labor more expensive could be driving firms to replace workers with robots.

Let us therefore imagine a pure market economy in which there is no tax or restriction or subsidy on peaceful and honest production. Also, in a pure market there are no transfer taxes or sales taxes. The only taxes are on pollution and on land value. Land is not produced by human action, so a land-value tax does not tax production. Also, since public works and services increase land rent, to avoid a subsidy, almost all the land rent or land value would be collected for public revenue.

In that case, the wage earned by a worker is generally equal to the value he adds to output, taking into account also any negative aspect of the work, such as working at night instead of in daylight.

Even if there is total automation, so that all crops are planted, protected, and harvested by machine, and all goods are made by machines, and many services such as accounting are automated, there will be some jobs for which most customers want to be served by human minds.

Let us therefore imagine a pure market economy in which there is no tax or restriction or subsidy on peaceful and honest production. Also, in a pure market there are no transfer taxes or sales taxes. The only taxes are on pollution and on land value. Land is not produced by human action, so a land-value tax does not tax production. Also, since public works and services increase land rent, to avoid a subsidy, almost all the land rent or land value would be collected for public revenue.

In that case, the wage earned by a worker is generally equal to the value he adds to output, taking into account also any negative aspect of the work, such as working at night instead of in daylight.

Even if there is total automation, so that all crops are planted, protected, and harvested by machine, and all goods are made by machines, and many services such as accounting are automated, there will be some jobs for which most customers want to be served by human minds.

First of all, any complex computer software is vulnerable to “bugs,” both errors in the design and coding, and due to unanticipated problems. Even if robots can perform surgery, most patients would want a human being to monitor the procedure. Human error is also a problem, but at least a human mind can observe when a process is going terribly wrong and try to stop it.

Secondly, there are services for which most people want a sympathetic, creative, and sensitive human mind. A computer could do psychological counseling, and people could perhaps be more candid with a robot, but ultimately people want a human being to make the judgments. Most members of congregations would not attend church if the sermon is just a recording. A computer program could write a novel or nonfiction work, but many readers would find it more satisfying to read something written by a human being.

Third, technology has a cost. It is not necessarily true that robots are always cheaper than human labor. Perhaps a robot would be able to remove weeds from a garden just as well as a human being, but its cost could be higher than a worker if there are no taxes on the labor. The idea that machines are always cheaper than labor assumes that energy and raw materials will have low costs, which may not be the case if there are no subsidies.

Tools are produced from land, labor, and capital goods, so if labor is no longer being used, we are ultimately left with land. It would be a triumph of landowners over labor, because as wages fall, land rent would rise. Higher land rent would capture the gains from economic progress.

But suppose that most of today’s jobs become automated. The share of income going to wages would drop. Derek Thompson says this would be a “triumph of capital over labor.” But he does not define “capital”. Capital can be financial, but money as such is a medium, and does not triumph. “Capital” can also be capital goods, such as machines and buildings. But tools are produced from land, labor, and capital goods, so if labor is no longer being used, we are ultimately left with land. It would be a triumph of landowners over labor, because as wages fall, land rent would rise. Higher land rent would capture the gains from economic progress.

In today’s world, full automation would impoverish workers and enrich landowners. But in the pure free market as described above, the land rent is collected for equal public benefits. With government works and services also automated, most of the funds would be distributed to the public in equal shares. With everybody obtaining an equal share of most of the income, a $16 trillion total annual income would be divided among tax-free annual land-rent incomes of $50,000 for each person.

In today’s world, full automation would impoverish workers and enrich landowners. But in the pure free market as described above, the land rent is collected for equal public benefits. With government works and services also automated, most of the funds would be distributed to the public in equal shares. With everybody obtaining an equal share of most of the income, a $16 trillion total annual income would be divided among tax-free annual land-rent incomes of $50,000 for each person.

But when it is recognized that automation would also reduce the value of capital goods, as machines make other machines, down to the cost of the natural materials and energy, one has to conclude that the solution is to tax neither financial capital nor capital goods, but rather, to equally distribute land rent as a basic income.

Indeed, something like this is advocated by the author, who proposes to more heavily tax the share of income obtained by “owners of capital.” He notes that would bring on the problem of the rich subsidizing the idleness of the jobless. But when it is recognized that automation would also reduce the value of capital goods, as machines make other machines, down to the cost of the natural materials and energy, one has to conclude that the solution is to tax neither financial capital nor capital goods, but rather, to equally distribute land rent as a basic income. An entrepreneur who becomes rich due to his innovation would keep his gain, as would the investors of his projects.

The free-market rent-sharing triumph would be of leisure over labor. With drudge labor eliminated, labor would be truly voluntary. Teachers, artists, and doctors would work because they love the career, the service, and those served. Work would not disappear but become transformed. People would work, not for money, but for respect, admiration, and fulfilment. There would be volunteer labor for the welfare of animals, the environment, culture, and human well-being. Since human desires are unlimited, technology, when used for peaceful ends, will not erase jobs but change them into services done for enjoyment and esteem.

© Text Copyright Fred Foldvary, Ph.D. rights reserved.
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