Source: Decline of Scarcity, 2014
The authors also suggest that technological unemployment—a phenomenon long thought of as impossible by mainstream economists—is in fact possible. They discuss three arguments for how technological unemployment could occur:
- In industries subject to inelastic demand, automation can lower the price of goods without creating any additional demand for those goods (and thus labor to make those goods). Over the long term, as human needs become relatively more satiated, this inelasticity could even apply to the economy as a whole. Such an outcome would directly undermine the luddite fallacy, which is the argument economists traditionally use to dismiss technological unemployment.
- If technological change is fast enough, it could outpace the speed at which workers are able to retrain and find new jobs, thereby turning short term frictional unemployment into long term structural unemployment.
- There is a floor on how low wages can go. If automation technology continues to drive wages down, those wages could cross a threshold below which the arrangement is not worth the employee’s time. Eventually the value of certain workers could fall so low that they are not worth hiring, even at zero price.