Larry Summers on Job Creation

I am a big fan of Larry Summers’ for the courage he showed in thumbing his nose at political correctness when as president of Harvard he mused in public that part of the explanation for the lack of females in the higher reaches of mathematics, physics and other such sciences might be due to biological differences. See on this here, here, here and here. I wish he would have showed more fortitude in sticking to his guns rather than later apologizing for these eminently reasonable hypotheses he offered, but that is another matter. What I am trying to say here is that in now criticizing him for his views on job creation, I was biased in his favor.

However, no matter how much positive spin I place on him, personally, and therefore on his July 8, 2014 essay in the Wall Street Journal entitled: “The economic challenge: creating jobs” I just cannot seem to turn off my critical faculties in commenting on it.  But, imagine if he had not entered into my good graces for his theories of female incapacities. Then, I would have really let ‘er rip.

Larry Summers is now a professor of economics at Harvard University. As befits such a prestigious appointment, he shows his ignorance of economics at the most basic level. I highly recommend that he read this book, to learn a little bit about his profession.[amazon asin=0517548232&template=*lrc ad (right)]

He stars off on the wrong foot with this statement: “The great economic problem for millennia has been scarcity. People want much more than can be produced.” It is that “for millennia” bit that bothers me. For millennia? That implies that one of these days, perhaps sooner rather than later, the problem of scarcity will have been overcome. Nothing could be further from the truth. As far as economics is concerned, with apologies to former Governor George Wallace of Alabama, “scarcity yesterday, scarcity today, scarcity tomorrow, scarcity forever.” Without scarcity there would simply be no economics, for the dismal science is, if it is anything, the study of human action under conditions of scarcity. We want and shall always want “the sun, the moon and the stars.” We want to travel to other solar systems at speeds faster than that of light. We want to live forever with our physical and mental faculties as they were in our youth.

Next, avers our “economist”: “The economic challenge of the future will not be producing enough. It will be providing enough good jobs.” No, no, no. A thousand times no. What we want are not jobs, but the goods and services created when we work. Jobs are a pain in the neck. They are defined as acts we would not do, since they have disutility for us, were we not paid to do so. No, we want to play¸ all the live-long day, engaging in acts that are enjoyable to us. And to be paid to play is heaven on earth. There are some people who have attained this status: successful musicians, artists, writers, actors, professional athletes, etc. The blessing that economics can call down upon us is that robots can one day do all that is necessary, and we humans can live blessed lives not being called upon to do anything at all distasteful. We shall have reached economic nirvana when we no longer need to work to keep body and soul together; when we can attain this goal through play.[amazon asin=B00KCBCN3Y&template=*lrc ad (right)]

And what is the reason, according to Professor Summers, that there will not be enough good jobs? In a word, technological advances. Our author waxes eloquent about the fact that “The share of American workers employed in agriculture has declined from over a third a century ago to between 1% and 2% today. Why? Because agricultural productivity has risen spectacularly, with mechanization reducing the demand for agricultural workers even as food is more abundant than ever.” You see? Higher productivity is the enemy of job creation. If we go too far down this garden path our Harvard economist warns us, we will be in danger of a post scarcity world, where there are no jobs. Oh, the horror. Let us call upon Henry Hazlitt in his magnificent little book, Economics in One Lesson to shed a little light on the issue: “Among the most viable of all economic delusions is the belief that machines on net balance create unemployment.” This is the first sentence of Hazlitt’s chapter 7, “The Curse of Machinery.”

Not to worry, Summers assures us: when productivity in agriculture rose, there were still jobs available in manufacturing, and then later in the various service industries. But can we count upon this in the future? No, according to our economic guide: “But the long-term trend is inexorable and nearly universal. As in agriculture, technology is allowing the production of far more output with far fewer people… And the robotics and 3-D printing revolutions are still in their second innings.”

Can services take up the slack engendered by farming and manufacturing? Not at all:[amazon asin=B004UHO0P0&template=*lrc ad (right)]

“What about services? A generation from now, taxis will not have drivers; checkout from any kind of retail establishment will be automatic; call centers will have been automated with voice-recognition technology; routine news stories will be written by bots; counseling will be delivered by expert systems; financial analysis will be done by software; single teachers will reach hundreds of thousands of students, and software will provide them with homework assignments customized to their strengths and weaknesses; and on and on.

“Those losing jobs due to increased productivity will be freed up to do things in other sectors. But there are many reasons to think the software revolution will be even more profound than the agricultural revolution. This time around, change will come faster and affect a much larger share of the economy. Workers leaving agriculture could move into a wide range of jobs in manufacturing or services. Today, however, there are more sectors losing jobs than creating jobs.”

It’s those blasted robots. They’re takenerrjobs! (For the uninitiated, I am hereby referring to that magnificent South Park episode when the people from the future were “taking our jobs.” This was a hilarious spoof, which only shows that Trey Parker and Matt Stone are better economists than Larry Summers). Henry Hazlitt, you are needed on this day.

Note, there is not a single solitary mention in Summers’ entire essay of all the government programs that create unemployment: minimum wage and union legislation that artificially boost wages above productivity levels, [amazon asin=1479215120&template=*lrc ad (right)]programs such as Obama Care that create regime uncertainty, the fed and fractional reserve banking that generate the Austrian business cycle, unemployment insurance that subsidizes unemployment, etc.

There is simply no problem with automation. It enables us to have a standard of living the envy of the world. It saves lives, and allows our planet to support more people than ever before. Long live technology. Lookit, Summers, if robots do everything we want done, and we conquer scarcity (hardy har har har) then we will not need jobs. And if not, back to the real world, then there will still be as many employment opportunities are there are people willing to work. If there are not, then wages will fall until there are. This is provided, of course, that the all-loving government does not set a floor under labor compensation. If the state does not mix its tentacles into the free enterprise system and impose involuntary unemployment upon us we will not have this problem. The challenge is not “creating jobs.” Rather, it is to keep the statists from creating unemployment.

What’s going on here? Is the intellectual world going topsy turvey at least in terms of economists at prestigious universities? First Paul Krugman (Princeton) and Tyler Cowan (George Mason) fall for that hoariest of old fallacies, the broken window. Now Larry Summers (Harvard) turns Luddite on us. At this rate that latter will join Ted Kaczynski, the mad Unabomber (Harvard), who swallowed the curse of machinery fallacy so deeply that he went out and “did something” about this so-called “threat.” Larry, don’t go down that route! Instead, repent. And, maybe, learn some economics.