Carte Blanche: Andrew Yang And The Threat Of Automation

Andrew Yang’s presidential campaign for the 2020 Democratic nomination is based almost completely on one idea. This is the narrative that America will permanently lose millions of jobs in the next five to ten years due to automation. As he writes on his campaign website, “A third of all American workers are at risk of permanent unemployment. And this time, the jobs will not come back”. His policy solution is a Universal Basic Income of $1000 per month to anyone over the age of 18, paid for by a new tax from companies that benefit the most from automation. Andrew Yang comes from a background of entrepreneurship, having worked for a healthcare startup company and ran a national education company that grew to be #1 in the country. Recently, Yang appeared on Ben Shapiro’s Sunday Special for an interview to speak on his believes and presidential campaign. His ambitions for 2020 have brought back an economic debate that has existed for centuries.

The theory of automation replacing labor is portrayed as an error in the free market, under the impression that it makes average people worse off. As large companies invest in more machines and efficient production processes, the marginal value of previously required labor is diminished, and unemployment ensues. The picture painted is the decline in jobs for the middle class and impoverishment, while the capitalists become richer through the profitability of automation. Asking the question, “what will we do about automation in the future” is thought to devastate the idea of laissez-faire capitalism for many. For the populist left and right, automation is seen as one of the factors leading to the decline in manufacturing jobs, and it pontificates that it will be a problem for trucking as well. If this is a real problem, it can justify tariffs, welfare programs like Universal Basic Income (UBI), or outright limits on automation itself. Besides Yang, Tucker Carlson from Fox News was also interviewed by Ben Shapiro where he called for the government to ban certain types of automation, like that of the trucking industry. He told Shapiro that because of job displacement, “We’re gonna have ten million dead families, and the cascading effect will wreck your country”.

It is a common theme of “robots are stealing our jobs” propaganda to always portray this as a new idea and new problem that needs a solution immediately. Contrary to all the rhetoric though, this idea has existed for centuries, naturally because all capital goods reduce the amount of labor necessary for production. Displacement of labor caused by technology was recognized by David Ricardo in the early 1800s. Popular culture throughout the 19th and 20th centuries portrayed average Americans as victims of technology replacing them in the job market. John Steinbeck builds his entire plot of The Grapes of Wrath on the destruction of farm labor due to capitalism and the rise of farm equipment replacing human workers. John Maynard Keynes described “technological unemployment” as due “to our discovery of means of economizing the use of labour outrunning the pace at which we can find new uses for labour”. Labor unions fought throughout history against nearly every productive machine invented and mainstream thought follows them. However, in the historical context of this debate, the make-work fallacy has been exploded by economists plenty of times.

Frederic Bastiat makes proponents of this belief fall flat on their faces with The Candlestick Maker’s Petition in 1845. Henry Hazlitt wrote one of the most popular books on economics to this day, Economics in One Lesson, published in 1946, with a chapter devoted to smashing to the fallacy of machines replacing jobs as a cause for permanent unemployment. Regardless of what has been discovered in the past or how the increase in machinery has actually affected society throughout history, the propaganda will always tell us that “this time” is when automation will really cause permanent unemployment. The Guardian reported in 2018 that “Automation could destroy millions of jobs. We have to deal with it now”. The fuel of statist rhetoric is the idea that “this time is different” and if we (the state) do not act (use force) immediately, then indescribable problems will follow.  Throughout the decades when make-workers feared the same problem for all new capital goods dating back to the wheel, the catastrophic unemployment they spoke of was actually an unimaginable increase in real wealth that humanity had never experienced before. But somehow they just know that this next machine will be completely different.

During Andrew Yang’s interview with Ben Shapiro, he makes a few comments toward the beginning that can speak to how he would challenge a debate opponent on this topic. He acknowledges the progress made in an economy by industrial technology but speaks of a discoordination of gains made by companies that employ machines and the ability of displaced workers to find new jobs. The UBI proposal, as he explains, is a device to make up for worker displacement and to return the gains made by these companies back to society. Our current economy, as he describes, is on the “fourth industrial revolution” that will leave increased and permanent unemployment, especially in manufacturing and trucking. Yang speaks of the first industrial revolution as if it were a recession bringing new levels of poverty and unemployment, rather than the exact opposite reality of an explosion in technology and real wealth.

Ben Shapiro does not spend a lot of time challenging Yang’s narrative on automation and jobs and challenges rather the efficiency of his UBI proposal. Yang uses low labor-force participation as an example of automation killing employment, while Shapiro argues on the other hand that this is due to a massive welfare state. On the topic of automation, Andrew Yang does not discuss a clear theory of capital nor wealth in society and uses the idea that work itself is more valuable than the products it creates. Overall, he uses a lot of vague terms like “worker meaning” or collective societal values as a substitute for individual subjective value and marginal productivity of labor. A clear critique of Yang’s view of automation can be formed by a review of the accumulation of capital in an economy.

Capital constitutes anything with the purpose of expanding production or making the current level of production easier. At some point in the history of humanity, individuals had only their hands to work with. Means of production are anything that reduces the labor necessary for production or lowers costs: tools, vehicles, machines, automation, etc. When capital is accumulated over time, prices of goods decrease and living standards increase, bringing a rise in real wealth. Real wealth is determined by the real resources available to individuals.

When capital is accumulated in society, the productivity of labor increases. A farm laborer can produce, for instance, 12 pounds of soybeans per year with no tools but his hands, but with the invention of shovels, he can produce 1200 pounds per year. As a laborer, this employee increases his marginal utility for his employer, and therefore his wage. Without a shovel, his absence would have cost the employer 12 pounds of the product, but now his absence will cost 1200. If the employer is still producing the same amount of soybeans, he now requires fewer employees that are paid at higher wages, as opposed to more employees at lesser wages.

The displaced laborers from the soybean industry are not left for dead. Society not only now requires the production of shovels but everything individuals might spend their resources on now that they spend less on soybeans. As Henry Hazlitt and Frederic Bastiat taught, the significant economic factors are unseen. This displacement of workers as their marginal productivity increases is simply the change in labor required as capital accumulates in society. Allowing this change is vital to an economy where living standards increase to the levels we know now.

A note on capital is that there is no difference between complete automation of jobs and simple improvement in productivity. Both scenarios decrease the amount of human labor necessary for the current level of production. Any improvement in technology, whether full automation or not, increases productivity and the marginal utility of labor. Logically, there is no difference between slicing in half the labor required to ship goods in the trucking industry by means of automation and slicing in half the farm labor required by means of the shovel. Both automated trucking and shovels are capital goods that increase the marginal productivity of human workers and must displace previous employment structures in order to expand real wealth.

A final point where Andrew Yang’s world view does not line up with economics is the idea of automation as a predatory act and Say’s Law. Yang describes a future where automated companies profit from cheaply produced consumer goods while the rest of society is left unemployed. Yet, if the middle class is supposedly unemployed, who is voluntarily buying those consumer goods produced enabling the automated companies to turn a profit? In other words, there has to be a plot hole in this narrative because the people are supposed to be unemployed, yet capital that produces consumer goods is still profitable and has value. This is because the story is not a real-world situation. Say’s Law basically states that individuals must produce value in order to have purchasing power. The law is easier to comprehend in a barter economy because it is clear that one must possess a good first in order to engage in trade. However, entering money into an economy changes direct exchange to indirect exchange, and individuals are still trading goods and services for goods and services indirectly, so Say’s Law still applies. In the context of the automation question, the narrative from Yang cannot be true because if individuals are purchasing consumer goods, enabling profit for companies that produce with automation, they had to have previously produced value in order to gain purchasing power in the first place. So the caricature of large automated companies existing in an economy with an unemployed middle class cannot exist.

A concluding look at Andrew Yang’s overall view of automation is that he leaves out many aspects that will need explanation to defend his claims. In his interview, he does not allude to a real theory of how wealth is created in society, which is important in a discussion on automation. He uses vague terms when answering questions like “social fabric” and “worker meaning”, but nothing that describes real wealth or accumulation of capital. The main question that anti-automation intellectuals need to answer, is why the development of technology that saves labor is different from the technology that saved labor at any given point in time in the past. In other words, if society would be better off from preventing trucking automation, should the invention of wheels and shovels also have been prevented to save jobs? Logically, this is a perfectly fair question consistent with Andrew Yang’s reasoning. It is true that the candidate was limited in words during his interview with Ben Shapiro, however, he is using his worldview to justify a new massive entitlement program for the country and requires a complete explanation. It is also true that Ben Shapiro did not present the same challenges that Yang would have faced in a discussion with an Austrian School economist.

Fortunately, on September 9, Andrew Yang will most likely meet these arguments in his debate with Antony Sammeroff at the Soho Forum. Sammeroff is co-host of the Scottish Liberty Podcast and has written a book called Universal Basic Income: For and Against. Recently, Sammeroff discussed Andrew Yang and his interview with Ben Shapiro on an episode of the Tom Woods Show, which can provide an insight into the arguments Yang will face in the September debate.