How technological development helps economies and society

We have come a long way from inventing stone tools to axes to hacksaws, but there are still people who believe that technological developments lead to loss of jobs, and are somehow bad for society.

When we make a tool to simplify our job, whether it is a sharp stone to cut wood fast or an ax to remove trees faster, as our ancestors did, or an electric hacksaw which we use today to make chopping of trees even faster than an ax, we make our jobs simpler. The same holds for all inventions-software, robotics, computers, etc. We invent tools to make our jobs simpler, to produce more for the same hours worked. Both capital owners and workers benefit by these improvements in the productive powers of labor, by the employment of new tools, technologies, etc.

Let me give you an example to clarify this: assume you have several wood cutting factories which were employing workers uses axes. Then the owners of these factories buy electric hacksaws. Assume electric hacksaws are 10 times more efficient and you need only 20 minutes to cut a tree, instead of 200 minutes using an ax.

Once an electric hacksaw is employed, the same work can be done in 1/10 of the time. You can employ the worker to do 10 times the work, because now he can chop 10x the number of trees for the same hours worked.  Since the output of each factory can go up by 10x by this operation of replacing axes with hacksaws, it increases the competition for labor-and the net result is that the worker can demand more wages per hour, because he can find jobs with other wood cutting facilities. Maybe the factory owners and the workers will settle for something in the middle- in the extra 9x chopped trees by this operation, maybe 6x will be kept by the factory owners, and the 3x chopped trees (or their wages in dollars) will be kept by the workers, whose real value of labor is increased by this operation.

All parties-capital owners and the workers, benefit by the introduction of electric hacksaws instead of axes for chopping wood. The same holds for all improvements in technology and tools which simplify our jobs-they benefit the workers as much as they benefit the capital owners.

Note that the workers needs to acquire a new skill-the operation of a hack saw in addition to using the ax. As we progress as humans, we operate newer and newer, more complex machines. This is a sure sign of progress.

Jobs losses from invention of tools, machines, robots, AI, etc.

What happens to all the jobs which are eliminated by computerizing the paper ledgers, by employing all these machines in the fabrication of things, like the horse buggy makers who lost jobs to automobile makers or the drinks vending machines which robbed the jobs of people who sold the drinks manually? They are lost, but those workers find other jobs! Our predecessors were doing entirely different jobs than us-there was no NASA or Boeing or Mitsubishi in 1500 AD- clearly jobs shift, and that's the nature of things. But it is nothing to worry about. If a machine or robot takes away a job, the best job for the person who lost their job is making more machines of this kind. This is how Japan does it-that country loves automation, machines, and instead of manual labor, the Japanese want to invent machines and robots for everything, which is the right approach to development. Women are even marrying robots now in Japan, and it is a perfectly legal union! The best job for humanity is to make tools and machines (robots included) which do your work faster, and this is exactly what technological development has been for thousands of years. However, to employ someone to make machine X, you need capital-materials for making the machine X, fixed capital employed in erecting the factory and the machines and tools employed to make the new machine X, and the wages which employees must be paid before machine X comes out of the factory. Economics is about increasing this capital.

Whenever someone talks about loss of jobs because of new software, robots,  tools and machines etc. you should tell them that the best jobs are to develop more software, robots, tools and machines. Repetitive and mundane tasks can be done by machines; and humans can dedicate themselves to producing more and more machines, which is the hard part. When you see a bullet train or a plane you cannot not be marveled at the genius of humanity. If McDonald's can serve burgers using robots, it would be awesome-the people who work in McDonald's right now can find jobs building or fixing or maintaining these robots, instead of flipping hamburgers all day. McDonald's does use a lot of tools and machines already-and every industry benefits from better tools and machines, including robots.

Semiconductors, software, robots internet, telephone, etc. are just an extension (over centuries) of stone age tools, chisels, axes, matchsticks, paper, watches, washing machines, etc...technological advancement is continuous, and we are constantly improving our productive powers by inventing new tools. We produce more for the same work  (same man hours worked) with these tools, which is what human progress is all about.

Primitive tribes have everyone doing something-mostly foraging for food. The more developed the society, the less the need to work. Progress is not about keeping everyone employed-it is about efficiently producing things. That's where tools, machines, robots, AI, etc. help-they help produce consumable goods more efficiently. Lamenting about the loss of jobs because of automation, robots, etc. is the same as lamenting about the progress which intelligent humans make in producing goods more efficiently or cheaply.

The more developed and rich a country, the more tools and machines it has. This does not lower wages; it actually increases wages. It is  the abundance of capital, these tools and machines, which makes people in developed countries produce far more (per hour) than an undeveloped or poor country, where everything is done manually and by hand. If you travel around the world and go from a developed to a poor country-you can see that everyone is working their 8 to 10 hours a day everywhere, but the real production of goods is much higher in a developed country because of tools, machines, etc. Witness giant cranes next to a Japanese highway being constructed; vs people literally with shovels next to a highway in Bolivia. The net work done is 10x or 100x more in Japan...which is why Japan is a rich country.

Another point to realize when people talk about automation etc. leading to job loss is that many workers will become capitalists themselves..some of the biggest companies in the US and the world were founded by ordinary employees or students (think Facebook, Google, Intel, Alibaba). Workers can and will become capitalists, it is not some oppressive scheme in most countries at play that workers will remain workers and capitalists will remain capitalists. Some of the most innovative companies are founded by workers in similar industries (particularly true in Silicon Valley high tech outfits-look at Oracle giving birth to Salesforce, Netsuite, etc.) and the street to become a capitalist is always open-and invention of tools and machines (or software) is one of the best and greatest way to become a rich capitalist yourself, if you are a worker. Many arguments crying about the loss of jobs forget that many people who lose jobs, or quit by their own free will, found other companies and become capitalists themselves, providing thousands of jobs to other people. This is also how immigration helps a country like the USA-immigrants may seem to take away jobs from American citizens in the short run, of a few years, but many of them will start their own businesses, and some really smart ones will found major companies, helping the USA (and themselves) 10 times over. A worker doesn't stay a worker forever in a reasonably rich country, and will try to become a capitalist whenever they can. This point is often ignored by people who are always whining about foreigners taking away their jobs. In summary-foreign workers will not stay workers forever; many of them will start their own businesses and companies and help the country they immigrated to. One thing I have observed after having lived in several countries is that bums don't move or immigrate to other countries-many of  them never even move out of their parents' houses. I have very rarely found lazy immigrants who want to live off dole; but always find a load of lazy citizens in all countries. Bums are too lazy to move out of the comfort of their homes or cities, and will rarely even move within the country, let alone venturing into a new country.

Hopefully you can see clearly with this post that the warnings for loss of jobs because of technological progress are nothing more than luddites' arguments against modernization and technology.

Adam Smith may have underestimated the role of tools and technology in improving production of society

Smith in his Wealth of Nations emphasized the role of division of labor in increasing net production of society, illustrated by his nails example. He may have underestimated the role of better tools and what we call technology today-after all, we know that humans have been making tools since the stone age (sharp tools made of stone, hence the name stone age) and division of labor alone without the invention of tools would probably not lead to the massive improvements in production powers of society (in Smith's scheme division of labor causes the invention of many tools and machines; but that point is not important for the arguments I am proposing here). Even in his pins example in the very first chapter of his 1st book, there are many tools which the workers use to produce so many more nails per day. With good tools, good machines (machines are sophisticated tools) you simplify many tasks; and I am of the opinion that it is the tool makers, the inventors of tools, machines, technologies, etc. who have been driving humanity forward. 

A bow and an arrow are tools invented by some extremely intelligent ancestor of ours. We are always fascinated by new tools and machines and the people who make them, and there is no reason for me to believe that this was not the case in 5000 BC. Even at that time, inventors of tools were held in high regard-and the reason for that is because they are able to simplify jobs, producing more net work for society for the same amount of manual labor. Organizing labor so that each person does one or two things and specializes in them (the skill of a capitalist or a businessperson) is a skill much easier to acquire than inventing new tools and machines.

The large number of  successful corporations today with tens of thousands of workers who dedicate themselves to making tools and machines (Caterpillar, Hitachi, Boeing, Intel, Daimler Benz, Lenovo, Google (software tools), etc.)  is a good example of the skill of tool making being a very important part of society. Machines and tools are where the money is; and what we call high tech today is an extension of the same skills which produced the stone age tools, the bow and arrow, the hoe, etc. etc. And this will go on; the tools we use today will look very primitive in a few hundred years. Even the guns and the powerful cannon of a few hundred years ago, are primitive tools in comparison the the war machines of today. I do believe that humanity's advancement is continuous, and anything which is older than a few hundred years looks really primitive to us, at all times, not just today, but in the past and future (so if you are alive in 1300AD you look at tools from 1100AD as really primitive; and if you are going to be alive in 3200 AD you will think that tools from 3100 and before were really primitive). I cover this "the present is special fallacy" in another article here.

The massive improvement in technology is correlated well with human advancement-and I believe that it is the most important cause of the development as well. Good tools, good machines simplifying our lives so much; and while putting them together is the job of capitalists, I think we all, including the capital owners themselves, value a skilled mechanic or a technology oriented person quite highly.

We don't have to go back in time to see how our ancestors used tools and machinery. In many parts of the world there are still aboriginal tribes, and if you look at how they live, you get a glimpse of how our ancestors lived.