King Ludd

A friend of mine was making money as an Amazon.com book reseller. He told me he despised Kindle because it was going to kill the publishing industry. That got my thinking wheels spinning.

I read the following article that had to do with the new trend to self-publish:

http://mobile.latimes.com/wap/news/text.jsp?sid=294&nid=33146179&cid=16689&scid=-1&ith=1&title=Business

I wonder what the economic effect of the horse/carriage industry was after the invention of the car and the economic effect on the ship travel industry after the invention of the airplane. I would assume those industries despised the new inventions as they would soon decimate their own industries.

This led me to read about Luddites which led me to read about a concept in economic development referred to as the ‘Luddite fallacy(the belief that labour-saving technologies (i.e., technologies that increase output-per-worker) increase unemployment by reducing demand for labour).  I never knew about this term but I believed in it because I saw it everywhere. When you go to the movie theater and you pay a kiosk instead of a person. When you check your own groceries out at the grocery store. When you buy a book online instead of going to a bookstore. When all of these jobs are outsourced by machines, what happens to our economy?

Here is a quote taken from the Luddite fallacy link above:

According to neoclassical economists, labour-saving technologies will increase output per worker and thus the production of goods, causing the costs of goods to decline and demand for goods to increase. As a result, the demand for workers to produce those goods will not decrease. Thus, the “fallacy” of the Luddites lay in their assumption that employers would keep production constant by employing a smaller albeit more productive workforce instead of allowing production to grow while keeping workforce size constant.[1] Economist Alex Tabarroksummarises the neoclassical presentation of the fallacy as such:

If the Luddite fallacy were true we would all be out of work because productivity has been increasing for two centuries.[2]

However, the Luddite fallacy is fallacious only at the macroeconomic level: overall employment in the economy will not decrease, but individual workers who do not possess the skills to utilize new technologies may become unemployed.[1]

What are your thoughts on this?

2 Replies to “King Ludd”

  1. An interesting read with a good format

    * Short & Concise – yet Information Dense

    * Great & Fresh subject matter

    * Links to further exploration at the whim of the reader

    * Uncluttered Presentation

    keep going

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