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Chapter thirty-one

from Peter Radford

There’s a story about Richard Feynman who is reputed to have said that anyone who claims to understand quantum physics almost certainly does not.  This coming from someone who almost certainly did.  I have much the same reaction to anyone who claims to have understood Ricardo on their first read through his work.  Then again, perhaps it’s just my own struggle: every time I grapple with Ricardo it takes me a while to understand where he’s going.  It’s a case of knowing the plot, but failing to follow the details.

In any case, here we are towards the end of the pandemic-induced economic downturn and minds are turning back to the many longer term issues we were all discussing before the shutdown curtailed conversation and re-focused our minds on shorter term issues.  The march of technology and inequality have always loomed large in my mind so it to those that I am now returning.

One conundrum that interests me is that we are constantly being told to regret the loss of “good paying” factory jobs and their replacement by lesser paying service sector jobs.  Looking back to the beginnings of industrialization those same factory jobs were hardly welcomed.  The threat to traditional ways of life, however much a struggle that life might have been, loomed large in contemporary discussions about the march of technology, the arrival of machinery, and the shift from domestic to factory production.

There are echoes of that early controversy in our current efforts to come to terms with the arrival of things like artificial intelligence and other digital technologies that appear, at least anecdotally, to be altering not just the workplace but deeper aspects of society such as the balance of power between the key factions in the economy.

Technological unemployment is back on the agenda.

Which is why Ricardo is worth recalling.  That enigmatic chapter thirty-one, tucked away as it was at the end of the third edition of his “Principles” seems to betray his entire prior thought process.  He, in this chapter, opened the door to the possibility of technological unemployment, which came as a huge shock to his supporters and critics alike.  It isn’t worth getting into the details of Ricardo’s argument other than to reinforce the point that it appears to contradict his more conventional positions on political economy.  Such was the impact of the shift he made that a veritable industry emerged around the effort to understand why he changed his mind, what the importance of the change of mind was, or, indeed, whether he had changed his mind at all.

The fact remains that chapter thirty-one lays out how, in Ricardo’s mind, the steady rise in the use of machinery and the necessary investment of resources to create that machinery, can affect employment.  His conclusion that, at least in the short run, the uptake of technology can create unemployment shocked his contemporaries most of whom were strenuously engaged in the defense of the use of more and more machinery.

It is the very nature of the argument that intrigues me most: the discipline of political economy was developed in that early era of industrialization precisely to explain the changes going on in the economy and consequently in society at large.  The charged resistance to machinery amongst some elements of the workforce, which rose to various levels of violence at times, was seen as a threat to political stability.  Understanding and explaining the shifting economy was seen as a vital part of establishing the necessary authority to enforce laws protecting the rise of industry from its opponents.  The new economy and the political environment were inextricably linked.  Ricardo was often the go-to intellectual key witness in political discussions, debates, and controversies. He appeared to be a reliable supporter of free trade and all other forms of modernization.

And yet here he was arguing that machinery might not, after all, be such a good thing.  Or, more precisely, he argued that opposition by workers to the uptake of machinery by industry was not a blind or poorly conceived reaction.  It was, according to chapter thirty-one, a highly sensible and reasonable one.

Despite all the theorizing in the interim, economists even today slide too easily into the glib defense of automation by assuring that the implied rise in productivity will, inevitably, provide greater prosperity for all.  Maybe it does.  But is the distribution of that prosperity also, inevitably, to the benefit of the people who, per Ricardo’s chapter thirty-one, might suffer in the short term?  Economists tend to overlook the power struggle that it took to ensure industrialization was a broad based success.  That power struggle was not a short term one.  It lasted a century or more.  Certainly rising productivity added enormously to wealth.  To get that wealth shared more equably was not a shoe-in, and those who suffered in the early years never saw their reward.  Only later generations did.

Are we in a similar position today?  Will the rise of digital technologies render the same thorough-going re-organization of society?  And will the benefits accrue across all society or only to a few — the owners of the digital “machines”?

Paul Krugman, in a column in today’s New York Times, argues that job-loss to automation is not obvious in current data.  He uses the typical equipment of an economist to back up his argument: were labor being displaced by technology we should see a shift in the pace of productivity growth.  We see no such shift.  Therefore upset over the loss of jobs to robots etc is simply anecdotal and not supported empirically.

Is Krugman looking in the right place?

One of the first major effects of the original wave of machinery back in early industrialization was not so much to cause unemployment, although that happened, but to change the nature of employment.  It was as much a social impact as its as an economic impact.  And it rippled out from there to become a political problem.  Simply looking at productivity statistics does not capture such a “first wave” impact.  A gig economy worker is still employed.  But their experience of employment is radically different from that of someone still employed in a more traditional format.

And it is this experience of change that matters because it influences people’s reactions, attitudes, and behaviors.  Major technological shifts manifest themselves as equally significant social shifts.  Experiences and attitudes change.  Only after those social and cultural effects are fully absorbed can we start to understand the longer term economic impact.  We can, for instance, come to regret losing the very factory jobs that our ancestors resisted being created in the first place.

Then, of course there’s that chapter thirty-one.  And Ricardo who said this:

“That the opinion entertained by the laboring class, that the employment machinery is frequently detrimental to their interests, is not founded on prejudice and error, but is conformable to the correct principles of political economy.”

So there can be technological unemployment.  Under-employment too.  It’s that short term versus long term thing again.  And we all know about the long term.

What to do?

  1. April 20, 2021 at 1:42 pm

    From the Ricardo quote and its reference to “political economy,” it seems that political power, who has it, and how they/we get it, is still at the root of the issue for the so-called labouring classes. And then my rudimentary understanding of quantum physics prompted the following thoughts.

    And now it is an existential issue for our species — “in the long run we are all dead” takes on a new meaning than what I believe originally was intended by Keynes.

    Before, the short term was a survival issue for individuals and groups of individuals vs the quality of the circumstances of survival in the long term for them. Now it is both because we are told time is running out because of climate crises and the sixth extinction now under way. And posing it as a long term vs short term “thing” forces a continuation of a binary, linear way of thinking on us not unlike the quantum physics thing.

    Like quantum physics, the micro seems to be at odds with the macro. But really it comes down to the difficulty many of us have and the economics profession has with non-linear thinking, entropy and complexity. At the core of quantum physics is the concept of energy and the relationship with wavelengths which have never been considered seriously in economics. Einstein tried to get us to think in new ways about the relationship between matter and energy.

    As particles move and the wavelengths generate energy, economics gets excited about the price of the material made up of the particles producing energy but not their value to our existence and implications for our non-existence. And the focus on price instead of value shapes the political discourse.

    Quantum physics is about the probability that a particle will exist or arrive at a particular location. But our very observing of it may change its probable location as may particle interactions. Economics seems to have missed this in some way with its focus on equilibrium and formation of so-called laws predicting so-called economic behaviour while ignoring the nature of energy and the behaviour of matter in favour of its price. It seems to be a denial of quantum reality.

    My thoughts stimulated by the article. Thanks Peter Radford.

  2. April 20, 2021 at 2:14 pm

    Thank you for this. Especially for ending with a question. Terry Pratchett is a good writer for finding out what was left behind by capitalism privatizing the commons. Assuming witches of yesteryear would have eventually discovered antibiotics, the so far irrevocable loss we moderns suffer is a world without fun. Although we have themed amusement parks, sports, TV and cruise ships but woe unto those societies like Nicaragua and Russia who look for possible fun via a modern version of autarky enjoyed by villages nestled in common lands.

  3. April 20, 2021 at 2:19 pm

    I should point out that simple observation does not alter particle movement in Quantum physics which is why Shrodinger used the cat metaphor in his teaching.

  4. Gerald Holtham
    April 20, 2021 at 4:32 pm

    Economics is not alone in ignoring quantum mechanics. Every other discipline operating in the domain of directly observable phenomena on earth has ignored it too. Reality is like Chinese boxes or Russian dolls. Everyone focuses on the one, or the level of reality, most relevant to their concerns. While “horizontal” divisions make sense, “vertical” divisions or siloes can be a nuisance. Most social problems require an interdisciplinary approach. That is certainly true of the climate crisis. It requires classical physics, engineering, social psychology, politics and economics to sort out. I doubt if it needs quantum mechanics.

  5. April 21, 2021 at 12:31 pm

    As quoted, Ricardo said “employment machinery”, not “employment of machinery”. In other words he is talking about the employment market (i.e the employer-employee relationship) not being a level playing field. Smith was quite right that specialisation improves skill levels and hence productivity and hence makes possible mass production and increased average standard of living or trading profits; but those like Owen seeking to improve skill levels by investing in education were at odds with those seeking increased trading profits by lowering the skill levels (hence the “market value” of the specialists) by automating their jobs. I too doubt Keynes foresaw his “long run” becoming so existentially short, but perhaps Ruskin did in the preface to his “Crown of Wild Olive” (1866):

    “If [his] labour is so ordered as to produce food, and fresh air, and fresh water, no matter that his wages are low; – the food and fresh air and water will be at last there; and he will at last get them. But if he is paid to destroy food and fresh air, or to produce iron bars instead of them, -the food and fresh air will finally NOT be there, and he will NOT get them, to his great and final inconvenience”.

    I too doubt the relevance of quantum mechanics, which arose in the context of atom smashing and doesn’t explain how energetic motion becomes localised in particles as it does in orbits. So those in the inner layers of Chinese Boxes or Russian Dolls cannot see their context? In the arab number format the ones, tens etc remain as visible as any millions.

    What to do? Replace money with earned credit so love of money becomes dislike of spending it. Replace “lies, damned lies and statistics” with logic, but add Boole’s “neither” and “both” to the “true” and “false” options of traditional logic. Replace the “two number” form of complex number with the reals and imaginaries of the Cartesian navigational form, and study how changing course too quickly leads to chaos.

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