Productivity and the Economy: A Blast from the Past.

This fits nicely with the economics I’ve been studying lately.

Robots are going to put people wholesale out of work!

Been hearing that refrain much?

Or recently there was a post online that implied that Solar was better than Coal or Gas from the perspective of employing more people to produce the a given amount of energy:

If we switch from Coal and Gas to solar we’ll employ more people producing energy Ms. Kohn implies.

Yay?

No, not yay.

Go back to basic, basic economics.  What does wealth actually consist of?  Is it money?  Can you eat money?  Can you drive money to work?  Ride it to a pleasant destination for a vacation?  Stay in money when you get there?  Watch money for entertainment?  Read money? (While there are some words on most money, I find it rather lacking in plot and character development.)

No, money is not wealth.  In the end it’s simply a scorekeeping system representative of goods and services.  The money isn’t wealth.  What you can buy with it is wealth.

And this is the basic principle:  the more goods and services that are available to you as an individual, the wealthier you are as an individual.  Likewise, the more goods and services available to a society the wealthier that society.

So to make a society richer, so that the individuals within it can be richer, you need to make more goods and services available.

Humans have been trying to do that–to produce more goods and services out of the finite amount of time and effort available from the sum total of people able to engage in that production since the first individual hooked up an ox rather than his brother to his plow.  Instead of one guiding and one pulling they now had two brothers each able to guide separate plows and since oxen can pull farther and longer than ones brother, each was able to put more land into cultivation.  So instead of a family barely being able to feed itself (if they were lucky) a family could feed a small community, a community of potters, of stonemasons, of glaziers and smiths, of artists and craftsmen of all forms.

This was the birth of civilization.

And it continued.  The widespread use of water mills in the middle ages replacing much that was done with muscle power before.  Steel mills with water powered triphammers forging iron products in a fraction of the time that hammers driven purely by a smith’s arm could accomplish.

Then came steam and the beginnings of the Industrial Revolution.  Early automation in the form of punch-card looms.

There have certainly been complaints about these new advances putting people out of work.  A movement supposedly started by an individual who was probably mythical “Ned Ludd” arose to object vociferously and violently to the use of automated looms.  However, the automation proceeded and far from putting people out of work the economic boom created jobs in wholesale lots.

Thus it has been with every major increase in productivity–in producing more goods and services with less human time and effort.  The changes, despite doomsday predictions, have invariably led to more goods and services being available, often goods and services that the people before the change could never even have imagined.  The societies have become wealthier.  And the people within them have become wealthier.

When changes happen quickly, there can be a period of disruption while things adjust.  And the change is not without pain.  But then, nothing worthwhile is without pain, whether it’s a skill acquired, improvement in ones physical condition, all the way up to a newborn baby.  Change and growth are painful.  But then, so are stagnation and death.  In the former case, the benefits more than outweigh the transitional pains.

This is why silly claims like “the rich get richer and the poor get poorer” can never be sufficiently mocked.  The “poor” of today have at their fingertips wealth that not even the wealthiest of a hundred years ago could have dreamed.  A cell phone.  A cheap, smartphone on a “prepaid minutes” plan–costing about one full day’s work at unskilled labor rates–giving the person who owns it access to more information than even existed a hundred years ago, by several orders of magnitude.

Or they can use it to watch videos of cats.

Productivity creates wealth.  And that benefits everybody.

Turning back the clock, requiring more human time and effort, to produce the same goods and service–including the energy required for the production of other goods and services–depletes wealth, makes everyone poorer, harms everybody.

You want to create jobs?  Don’t make energy more expensive in terms of the effort needed to generate it.  Look to how to use the cheaper energy available to us to create more goods and services.  That benefits everybody and not just those getting the “new jobs” at the expense of making things worse for everybody else in a decline that in the end will hurt them too.