Technological Innovation and Structural Unemployment



Once, when I was in China in 1982, I saw a group of hundreds of people— perhaps even thousands—on their knees armed with trowels paving a new multilane highway by hand. Of course, this task could have been done much more efficiently by machine, even in 1982, and presumably even more efficiently now, but such machines were not being used in China at the time, at least not on this project. No doubt this was because labor-intensive methods of construction provided advantages over the more modern capital-intensive methods available at the time. First, under the conditions then prevailing in China, labor-intensive methods were probably much cheaper, assuming that it is meaningful to make such comparative judgments with regard to costs in a centrally planned economy. Second, and for our purposes much more importantly, labor-intensive methods of construction kept people employed who otherwise would not be. For even if paving machines were made in China at the time (while I am sure they are now I doubt they were then) and thus some of those not employed building the highway could have been employed building the machines used to build the highway, there would have been a net loss in employment opportunities, or at least there was reason to be concerned this would be the case, and this made opt- ing for paving machines less attractive regardless of the relative cost. Otherwise, the only way to explain the Chinese decision to employ this labor-intensive method of construction rather than a more efficient capital intensive method is to think the Chinese neither had the money to purchase paving machines back in 1982 nor the resources and expertise required to build these machines themselves.


Technological Innovation Employment Opportunity Real Wage European Central Bank Full Employment 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. 2.
    For a similar point, see John Kenneth Galbraith, The New Indus trial State (Middlesex, UK: Penguin Books, 2nd edn. 1973), at p. 275.Google Scholar
  2. Samuel Bowles, The New Economics of Inequality and Redistribution (Cambridge: Cambridge University Press, 2012), pp. 14–15.CrossRefGoogle Scholar
  3. 3.
    For further examples of this, see Anthony B. Atkinson and Joseph E. Stightz, “A New View of Technological Change,” The Economic Journal 79 (1969): 573–578.CrossRefGoogle Scholar
  4. 6.
    See Joseph A. Schumpeter, Capitalism, Socialism and Democracy (New York: Harper Perennial, 2008), pp. 81–86.Google Scholar
  5. 8.
    See generally Nicholas Carr, The Glass Cage: Automation and Us (New York: WW. Norton & Co., 2014).Google Scholar
  6. 15.
    See Bruce Bartlett and Timothy P. Roth, “Introduction,” in The Supply-Side Solution, ed. Bruce Bartlett and Timothy P. Roth (London: MacMillan, 1984), p. 1Google Scholar
  7. Ludwig von Mises, “Lord Keynes and Say’s Law,” in Planning for Freedom: Let the Market System Work (Indianapolis, IN: Liberty Fund, 2008), pp. 95–100.Google Scholar
  8. 16.
    See Knut Wickseil, “The Influence of Technical Inventions on Rent and Wages,” in Lectures on Political Economy, Volume L (London: Routledge, 1934), pp. 133–144Google Scholar
  9. 17.
    For further explication of the classical view, which of course applies to cyclical as well as structural unemployment, see A. C. Pigou, Employment and Equilibrium (London: Macmillan, 1941), pp. 77–91.Google Scholar
  10. 19.
    Coherent explanations of how Say’s Law is supposed to work are hard to find. But there are a few. See, e.g., Thomas Sowell, Say’s Law: An Historical Analysis (Princeton: Princeton University Press, 1972), p. 4.Google Scholar
  11. 20.
    See generally Steven Kates, “On the True Meaning of Say’s Law,” Eastern Economic Journal 23 (1997): 191–202.Google Scholar
  12. 23.
    See Jean-Baptiste Say, A Treatise on Political Economy, or, the Production, Distribution, and Consumption of Wealth, trans. Charles Robert Prinsep (Philadelphia, PA: Grigg & Elliot, New American edn., 1923), p. 135.Google Scholar
  13. 27.
    International Labor Organization, World of Work Report 2013: Repairing the Economic and Social Fabric (Geneva: International Institute for Labour Studies, 2013), pp. 80–81Google Scholar
  14. 44.
    John Maynard Keynes, A Tract on Monetary Reform (London: Macmillan, 1923), Ch. 3, p. 80.Google Scholar
  15. 45.
    See John Hicks, A Theory of Economic History (Oxford: Oxford University Press, 1969), pp. 148–154.Google Scholar
  16. 48.
    Expressions of the classical view can be found in many places, but for a good summary of it, see A. C. Pigou, “The Classical View,” in Lapses from Full Employment (London: Macmillan, 1961), pp. 20–25.Google Scholar
  17. 51.
    See, e.g., Nelson Lichtenstein, “Bashing Public Employees and Their Unions,” in A Contest of Ldeas: Capital, Politics, and Labor (Chicago, IL: University of Illinois Press, 2013), pp. 197–206Google Scholar
  18. 53.
    Ironically, those who advocate the restriction of public sector unionization do so not only in the name of labor market efficiency but also in the name of freedom. This argument goes back to at least the 1940s, but perhaps its most vociferous proponent was Sylvester Petro, who began developing and advancing it in the late 1950s. See, e.g., Sylvester Petro, The Labor Policy of a Free Society (Auburn, AL: The Ludwig von Mises Institute, 2007[1957])Google Scholar
  19. Joseph A. McCartin and Jean-Christian Vinel, “‘Compulsory Unionism: Sylvester Petro and the Career of an Anti-Union Idea, 1957–1987,’” in The Right and Labor in America, ed. Nelson Lichtenstein and Elizabeth Tandy Shermer (Philadelphia, PA: University of Pennsylvania Press, 2012), pp. 226–251.Google Scholar
  20. 67.
    See James Tobin, “The Future of Keynesian Economics,” in Policies for Prosperity (Cambridge: MIT Press, 1987), pp. 14–23Google Scholar
  21. 68.
    See Michal Kalecki, “Money and Real Wages” (1939), in Collected Works of Mich ai Kalecki: Volume (Oxford: Oxford University Press, 1991), pp. 21–50.Google Scholar
  22. 70.
    See Michal Kalecki, “Reduction of Wages During Crisis” (1932), in Collected Works of Mich al Kalecki: Volume I (Oxford: Oxford University Press, 1990), pp. 41–44Google Scholar
  23. 73.
    See Jesse Rothstein, “The Labor Market Four Years into the Crisis: Assessing Structural Exp 1 anations”, Indus trial Labor Relations Revlew 65 (2012): 467–500CrossRefGoogle Scholar
  24. 95.
    Michal Kalecki, “Trend and the Business Cycle” (1968), in Collected Works of Michal Kalecki, Volume II (Oxford: Oxford University Press, 1991), pp. 435–450Google Scholar
  25. Michal Kalecki, “A Theorem on Technical Progress” (1941), Collected Works of Michal Kalecki, Volume II (Oxford: Oxford University Press, 1991), pp. 107–116Google Scholar
  26. 97.
    See, e.g., Michael Kremer, “Population Growth and Technological Change: One Million B.C. to 1990,” The Quarterly Journal of Economics 108 (1993): 681–716.CrossRefGoogle Scholar
  27. 98.
    See, e.g., Oded Galor and David N. Weil, “Population, Technology, and Growth: From Malthusian Stagnation to the Demographic Transition and Beyond,” American Economic Review 90 (2000): 806–828CrossRefGoogle Scholar
  28. 99.
    See Richard M. Cyert and David C. Mowrey (eds.), Technology and Employment: Innovation and Growth in the U.S. Economy, Panel on Technology and Employment, Committee on Science, Engineering, and Public Policy, National Academy of Sciences (Washington, DC: National Academy Press, 1987), pp. 30–31.Google Scholar
  29. 102.
    This is the view, e.g., of Erik Brynjolfsson and Andrew McAfee in The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies (New York: WW Norton, 2014).Google Scholar
  30. 103.
    See Thomas Piketty, Capital in the Twenty-First Century (Cambridge: Harvard University Press, 2014)CrossRefGoogle Scholar
  31. Louis Karabarbounis and Brent Neunan, “The Global Decline of the Labor Share,” NBER Working Paper 19136 (Washington, DC: National Bureau of Economic Research, June 2013)Google Scholar
  32. 122.
    See Ricardo, The Principles of Political Economy and Taxation, Ch. 31 (“On Machinery”). For criticism of Ricardo’s views on purely Ricardian lines, see Knut Wicksell, “Ricardo on Machinery and the Present Unemployment: An Unpublished Manuscript by Knut Wicksell,” The Economic Journal 91 (1981): 195–205.CrossRefGoogle Scholar
  33. Paul A. Samuelson, “Ricardo was Right!” Scandinavian Journal of Economics 91 (1989): 47–62CrossRefGoogle Scholar
  34. 124.
    See generally Samuel Hollander, The Economics of Karl Marx (Cambridge: Cambridge University Press, 2008)CrossRefGoogle Scholar
  35. 126.
    See generally Yale Brozen, “The Value of Technological Change,” Ethics 62 (1952): 249–265CrossRefGoogle Scholar
  36. Nathan Belfer, “The Theory of Automatic Reabsorbtion of Technologically Displaced Labor,” Southern Economic Journal 16 (1949): 35–43CrossRefGoogle Scholar
  37. Gregory R. Woirol, The Technological Unemployment and Structural Unemployment Debates (Westport, CT: Greenwood Press, 1996)Google Scholar
  38. 127.
    See, e.g., Donald R. Davis, “Technology, Unemployment, and Relative Wages in a Global Economy,” European Economic Review 42 (1998): 1613–1633.CrossRefGoogle Scholar
  39. 130.
    See Garrett Hardin, “The Tragedy of the Commons,” Science 162 (1968): 1243–1248CrossRefGoogle Scholar
  40. 131.
    See John Maynard Keynes, “Economic Possibilities for Our Grandchildren (1930),” in Essays in Persuasion (London: Palgrave Macmillan, 2010), pp. 321–332.CrossRefGoogle Scholar
  41. 133.
    For further discussion of how we might cash out the distinction between work and leisure, see Robert Slddelsky and Edward Slddelsky, How Much Is Enough? Money and the Good Life (New York: Other Press, 2012).Google Scholar
  42. 135.
    See Erik Brynjolfsson and Andrew McAfee, Race against the Machine (Lexington, MA: Digital Press, 2011), p. 42.Google Scholar

Copyright information

© Mark R. Reiff 2015

Authors and Affiliations

There are no affiliations available

Personalised recommendations