Why limited demand means joblessness (and what to do about it)

Summary: Mainstream economics assumes demand for almost anything is infinite. Thus, the theory goes, when human workers get replaced by robots, or better design means less human labor is needed, then there will soon be new jobs making new things; the only issue might be retraining. But, if demand is limited (because the best things in life are free or cheap, and everything you own also owns you), then when people get laid off, the jobs are gone for good, because there is nothing more that anybody wants then is already produced. And people having more time outside of compulsory work would be a good thing, if we more evenly shared the wealth from automation and better design, but we don’t — yet.

The best things in life are free or cheap. Everything you own, also owns you. There is a law of diminishing returns on more of the same. Much of human happiness comes from time spent with other people, like family, friends, neighbors, colleagues, or even pen pals. Another source of human happiness comes from experiencing nature or contemplating the infinite. Those things generally don’t require that much “stuff” to do, even as there are some things people want to do that do currently take a lot of resources (like space travel). Our best spiritual traditions tell us that healthy people in a healthy communities don’t need that much to be happy. Mahatma Gandhi, along with many other people, showed us another way was possible to have a good life rather than endless consumption of material items.

Given all that, it might seem surprising that mainstream economics assumes demand for most things is essentially infinite. Thus, the theory goes, when human workers get replaced by robots, or when better design means less work is needed to make things, or when voluntary simplicity or an ecological ethic leads people to buy less stuff of a certain sort, even if there are layoffs, the theory is that there will soon be new jobs making new things to satisfy that unlimited demand; the only issue might be retraining of workers. But, if demand for most things is limited for healthy people in healthy communities, then when people get laid off due to increasing efficiency, it seem more likely that the jobs are gone for good. It is more than the unemployed do not have money to buy things, as bad as that may be for a consumer-driven economy. It is also that even if the unemployed wanted to buy things, the workers who still have jobs could make all anybody could possibly want already, given they are augmented by robots, computer networks, and other forms of automation and access to better designs that may be easier to produce or last longer.

And once people are laid off, they compete with other laid off workers for jobs, so wages plummet, and working conditions decline. So, the few people still with jobs get less happy, and those who don’t have jobs will starve (unless they live off of some sort of needs-based charity or off of relatives that still have jobs or pensions or monetary wealth).

So, the robots and the better design that should make life better for everyone instead makes life worse for most people — because our economic system was designed around an assumption of scarcity, not an assumption of abundance. So, there is a strong moral imperative in our current economic system to connect the right to consume with the amount of labor a person does, in order to motivate people to work and produce even more abundance; thus there is a widespread sentiment that those who do not work should not eat (or, at least, they should not eat well) — even though science tells us reward is actually often no motivator, and competition is problematical. Of course, there are exceptions — those who are disabled in some formal way are considered worthy of charity, those who are in schools or prisons are often given a free pass from work for a time they are being schooled or punished/rehabilitated; and those who are involved in killing people and breaking things in war zones are also deemed as productive and so worthy of being fed.

This issue of a breakdown between labor and productive value has been known about for a long time. It was mentioned in a letter to President Johnson in 1964 called the Triple Revolution memorandum. This website could be seen as an attempt to update those ideas for the 21st century.

From the text of that memorandum from almost a half-century ago, perhaps a little ahead of its time, but none-the-less more and more true as the years go by:

The Nature of the Cybernation Revolution

Cybernation is manifesting the characteristics of a revolution in production. These include the development of radically different techniques and the subsequent appearance of novel principles of the organization of production; a basic reordering of man’s relationship to his environment; and a dramatic increase in total available and potential energy.

The major difference between the agricultural, industrial and cybernation revolutions is the speed at which they developed. The agricultural revolution began several thousand years ago in the Middle East. Centuries passed in the shift from a subsistence base of hunting and food-gathering to settled agriculture.

In contrast, it has been less than 200 years since the emergence of the industrial revolution, and direct and accurate knowledge of the new productive techniques has reached most of mankind This swift dissemination of information is generally held to be the main factor leading to widespread industrialization.

While the major aspects of the cybernation revolution are for the moment restricted to the U.S., its effects are observable almost at once throughout the industrial world and large parts of the non-industrial world. Observation is rapidly followed by analysis and criticism. The problems posed by the cybernation revolution are part of a new era in the history of all mankind but they are first being faced by the people of the U.S. The way Americans cope with cybernation will influence the course of this phenomenon everywhere. This country is the stage on which the machines-and-man drama will first be played for the world to witness.

The fundamental problem posed by the cybernation revolution in the U.S. is that it invalidates the general mechanism so far employed to undergird people’s rights as consumers. Up to this time economic resources have been distributed on the basis of contributions to production, with machines and men competing for employment on somewhat equal terms. In the developing cybernated system, potentially unlimited output can be achieved by systems of machines which will require little cooperation from human beings. As machines take over production from men, they absorb an increasing proportion of resources while the men who are displaced become dependent on minimal and unrelated government measures — unemployment insurance, social security, welfare payments. These measures are less and less able to disguise a historic paradox: That a substantial proportion of the population is subsisting on minimal incomes, often below the poverty line, at a time when sufficient productive potential is available to supply the needs of everyone in the U.S.

The existence of this paradox is denied or ignored by conventional economic analysis. The general economic approach argues that potential demand, which if filled would raise the number of jobs and provide incomes to those holding them, is underestimated. Most contemporary economic analysis states that all of the available labor force and industrial capacity is required to meet the needs of consumers and industry and to provide adequate public services: Schools, parks, roads, homes, decent cities, and clean water and air. It is further argued that demand could be increased, by a variety of standard techniques, to any desired extent by providing money and machines to improve the conditions of the billions of impoverished people elsewhere in the world, who need food and shelter, clothes and machinery and everything else the industrial nations take for granted.

There is no question that cybernation does increase the potential for the provision of funds to neglected public sectors. Nor is there any question that cybernation would make possible the abolition of poverty at home and abroad. But the industrial system does not possess any adequate mechanisms to permit these potentials to become realities. The industrial system was designed to produce an ever-increasing quantity of goods as efficiently as possible, and it was assumed that the distribution of the power to purchase these goods would occur almost automatically. The continuance of the income-through-jobs link as the only major mechanism for distributing effective demand — for granting the right to consume — now acts as the main brake on the almost unlimited capacity of a cybernated productive system.

Recent administrations have proposed measures aimed at achieving a better distribution of resources, and at reducing unemployment and underemployment. A few of these proposals have been enacted. More often they have failed to secure congressional support. In every case, many members of Congress have criticized the proposed measures as departing from traditional principles for the allocation of resources and the encouragement of production. Abetted by budget-balancing economists and interest groups they have argued for the maintenance of an economic machine based on ideas of scarcity to deal with the facts of abundance produced by cybernation. This time-consuming criticism has slowed the workings of Congress and has thrown out of focus for that body the inter-related effects of the triple revolution.

An adequate distribution of the potential abundance of goods and services will be achieved only when it is understood that the major economic problem is not how to increase production but how to distribute the abundance that is the great potential of cybernation. There is an urgent need for a fundamental change in the mechanisms employed to insure consumer rights.

Marshall Brain talks about similar ideas in his online fiction called Manna.
Jacque Fresco and Roxanne Meadows talk about related ideas in the Venus Project. Buckminster Fuller talked about related ideas in his Comprehensive Anticipatory Design Science. And many others have commented on related issues.

This website will explore the causes of joblessness in a modern industrial economy with ever increasing automation and better design. It will also look at new ways to try to solve the issue of the breaking link between having a job and having a right to consume the fruits of our shared commons of technology and biosphere.

Here is a list of some ways to deal with increasing joblessness, even if our economy recovers for those who still have jobs or money, which will be explored in more depth over time. This list is intended to be comprehensive, not prescriptive, as some of the items here are socially harmful even if they create jobs.

  • temporary measures like unemployment insurance and retraining funds, and when those fail, letting people live with relatives who still have jobs or be homeless (the USA now has one million homeless schoolchildren, an amount that has doubled in the last two years);
  • government public works like in the 1930s (infrastructure, arts, research, medicine, etc.);
  • government subsidies to the private sector for new job creation (for example, a direct wage subsidy for new hires or a tax credit for new jobs created);
  • an adoption of “Buddhist Economics” social policy as suggested by E.F. Schumacher (this would be where full employment of everyone who needs a job with a job suited to their talents, interests, and personal growth is a stated societal goal, and other economic goals are subordinate to it; countries with more centrally planned economies like the old USSR had aspects of this as a stated goal, as a right to a job, but may have lacked other aspects of Schumacher’s idea about the quality of the jobs or other values);
  • a “basic income” for everyone, essentially Social Security and Medicaid for all with no means testing;
  • improved local subsistence like with 3D printing and organic gardening;
  • a p2p gift economy (like Wikipedia and Debian GNU/Linux);
  • a shorter work week (like tried in France);
  • mandatory retirement at earlier ages (this would probably need to be combined with some form of retirement package so the retiree could survive);
  • rethinking work to be more fun so it is done as play;
  • alternative currencies, Local Exchange Trading Systems, or other forms of exchange like barter;
  • more formal rationing not necessarily connected to money (like the rationing of food in the UK during WWII or in North Korea more recently, to cite what are generally regarded as good and bad examples of rationing, where UK citizens became healthier and North Korean citizens starved);
  • frugality along the lines of “Use it Up, Wear it Out, Make it Do, or Do Without!“;
  • the opening of new frontiers (creates jobs dealing with new resources and new processes, whether they are newly discovered vacant lands, new seasteads in the ocean, new habitats in outer space, or new frontiers in cyberspace, nanotech, psychological innerspace, spirituality, or something else);
  • lowering the minimum wage to encourage employment (a minimum wage would no longer be needed to assure a living wage if there was a basic income that already supplied a guaranteed minimum income, and so any minimum wage laws might be removed entirely, possibly along with some other employment protections like in the USA the Family and Medical Leave Act of 1993, affirmative action laws, and/or the Occupational Safety and Health Act, that would no longer be as important if people had more choices through a basic income, including the choice not to work or to start their own business, and so had more power to negotiate good terms or walk away from bad ones; without a basic income, reducing or removing the minimum wage may just lead to a race to the bottom in wages and working conditions as workers fight over fewer and fewer remaining jobs if the alternative economic explanations like by Marshall Brain are correct)
  • introducing social benefits like health insurance in countries where they are otherwise provided by as fringe benefits of employment (so there will not be an extra economic incentive to get more out of fewer workers given otherwise fixed fringe benefits cost per employee, and thus the extra management costs of more employees working less hours will more easily be outweighed by the increased productivity of workers who have more leisure time; in general, countries in Western Europe have taken more of this approach as part of their choice of welfare state model than in the USA where social benefits are more needs based)
  • migration to an area with jobs (this can be within a country or even to another country; for example, illegal immigration of Mexicans to the USA or “guest worker” programs like in Germany for people from Turkey and other countries have often provided employment for individuals born in smaller economies; someday emigration to ocean seasteads or space habitats may even be possible in search of employment, just like many people left Europe to move to the Americas and Australia in search of work);
  • increasing the money supply in various ways through banks (in theory, banks with more money will lend it out to create more economic activity, subject to long term problems related to debt bubbles, although in practice banks may just hoard money for perceived future security);
  • increasing bankruptcy or other renegotiation of debts (individuals may see bankruptcy as a chance to start over with borrowing and spending; lenient bankruptcy laws take away some of the fears about borrowing money by borrowers which promotes purchases and new businesses; bankruptcies serve also as part of a transfer of money from those who have it and have saved it to those who spend it; a Jubilee is a year of general forgiveness of debts that could help reset a stalled economy with an excessive rich/poor divide; aspects of the US current recovery plan and bank bailouts connect to this, either by giving money to banks to cover bad loans and sometimes by asking banks to renegotiate old debts like mortgages; hyperinflation can have a similar effect by making old debts easier to pay);
  • accommodating the homeless in tent cities or with other makeshift housing (cities in good weather areas can house homeless people outdoors all year long; this becomes more problematical in cold weather areas where the homeless freeze to death unless kept warm; special technologies like the paraSITE, a cheap inflatable shelter for the homeless, can help with that; such areas can then become engines for job creation for police and social workers);
  • increasing advertising to entice people into more debt (one cause of the current economic crisis as the debt bubble burst);
  • intentionally producing shoddy merchandise or things with planned obsolescence, perhaps encouraged by promoting faddism in the culture;
  • more prisons and even tougher laws on common activities (employs guards and keeps people out of the labor pool);
  • more compulsory schooling and otherwise raising academic degree requirements for jobs (employs guards/teachers and keeps people out of the labor pool, while suppressing true education);
  • more war (employs guards/soldiers, blows up and wastes abundance, and kills or disables workers to keep them out of the labor pool);
  • internment and genocide of those deemed unpersons or non-persons (similar to war, genocide against a minority employs guards/soldiers, kills or disables workers to keep them out of the labor pool, and it also creates a spoils of conquest that can be used to reward soldiers and other workers with land and goods; the genocide against the Native Americans, the genocide against the Jews during WWII, and the internment of Japanese-American US citizens during WWII are all examples of this process; all had employment benefits to the rest of the country as unpersons needed to be guarded or otherwise processed and killed, and those deemed unpersons are also then not part of official unemployment statistics; Marshall Brain also develops a theme related to this in Manna, with the unemployed interned in Terrafoam dorms and speculating about being executed);
  • more bureaucracy as well as more excessive regulation (employs guards/bureaucrats, creates endless paperwork and make-work between bureaucrats that wastes abundance; the US health insurance industry is one example here, with one of every three health care dollars being wasted, but creating a lot of jobs in the process);
  • reducing the informal volunteer sector (many things that can be done by volunteers, including raising young children, caring for the sick or dying, or engaging in civic duties, would take a lot more time if done formally as part of a for-profit enterprise; when formalized, these volunteer tasks may also be done at a lower quality of care which creates jobs related to other spawned dysfunctions, like more psychologists to deal with increased child unhappiness; this is one reason the well-meant movement of women into the workforce may actually have been a net negative as far as societal well being, even ignoring the general decrease in women’s happiness as women transitioned from hard-working volunteer roles with a lot of autonomy to paid labor in authoritarian settings and our society fell into what Harvard Law Professor Elizabeth Warren calls “The Two Income Trap” — ideally, for every woman into the formal workforce, a man would have come out and gone into the informal volunteer workforce including child-care and unpaid civic responsibilities like watching streets to keep them safe, but that did not happen, and thus the net result may have been more total paid work that needed to be done in society, and thus more jobs);
  • increasing competition in a society (as Alfie Kohn and others have pointed out, direct competition in a society is overall a reducer of abundance; while there is a lot of value in a diversity of services and products, once people agree on the value of a service or product, cooperation by people in producing the good or service is almost always more efficient than directly competing with each other, because competition creates wasted duplicate efforts, incompatible standards, confusion among potential consumers, excessive advertising, and even direct sabotage — all of which create more work for everyone though; while it may make sense to have a variety of, say, cameras, whether the groups producing those cameras cooperate or compete in discussing new innovations is the issue; the free software movement, with groups working on different software products but sharing code and ideas under free licenses shows an alternative to commercial product groups working in secrecy and isolation and defending their finished proprietary products with patents and copyrights from those who would copy them or improve them independently; Law Professor James Boyle talks about aspects of this in his free book “The Public Domain“);
  • increased confusion in society (historically, the story of the Tower of Babel relates to this, with a unified cooperative humanity creating a huge tower to the heavens until humanity is scattered across the earth with a confusion of languages leading to misunderstanding and fighting; a current example related to confusion is how commercial spam had damaged the ability of people to cooperate through email, newsgroups, and other online services, but spam still creates many jobs related to filtering email; computer viruses have a similar effect in creating many jobs and destroying much abundance or otherwise decreasing productivity through creating confused computer systems; another aspect of confusion is creating new for-profit products like Vioxx that may be no better than other solutions (or even worse) but using enough advertising dollars to confuse everyone the new products are needed as opposed to cheaper or safer existing solutions; Caltech Professor David Goodstein talks in his “The Big Crunch” essay how scientific integrity can break down under increased competition for funds — but ultimately, lack of integrity creates more jobs dealing with the mess)
  • increased disability and ill health from pollution, advertising, harmful products, or plague (creates jobs for medical workers, and keeps disabled people out of the labor pool; increasing obesity, diabetes, cancer, and autism connected to something like nutritional deficiencies from processed food or lack of outdoor activity in the sun getting vitamin D may contribute to this unintentionally, but whether this gets researched or talked about in depth is intentional; in general the time of the Black Plague was a huge time of opportunity for the survivors);
  • increasing escapism, whether mild and adaptive like watching a bit more funny media or exercising more, or more serious and dysfunctional like alcoholism, drug addiction, internet addiction, or other problems (may keep the individual out of the work force and create jobs tending to them)
  • increasing suicide rates by the unemployed or others affected by societal stress (individuals who have completed suicide but were unemployed are no longer in the official statistics; dead individuals who had jobs now have created an available job, or suicides who also in the process murder others with jobs will increase available jobs by the number of murders; some suicides are forms of insurance fraud; increases employment for police forensics teams and insurance adjustors, as well as social workers and ministers to deal with grieving families and grieving communities; botched suicides may leave someone paralyzed and thus create jobs tending to the disabled person for decades; increases the need for suicide prevention counselors to help suicidal people see other alternatives and to rebuild healthy roots that keep suicidal individuals growing and helping others as they move through what Thomas Moore calls “Dark Nights of the Soul” as times calling for self-renewal and transformation; as an indirect form of suicide, evolutionary psychologists and biologists suggest that increasing heart attacks or strokes in times of stress may be one way that older members of the species unconsciously make way for younger family members in times of perceived resource scarcity, despite the lost wisdom and lost stories);
  • more abortion or birth control (temporarily employs medical staff even if it may reduce future medical jobs caring for children, reduces current costs of child care for unemployed households, and kills or otherwise prevents the birth of potential workers to keep them out of the future labor pool, thus reducing future abundance by having less people around to make things as Julian Simon suggests in “The Ultimate Resource“; sadly, in general, abortions go up in difficult economic times; in Marshall Brain’s Manna story, contraceptives were introduced into the water supply of the unemployed);
  • an aging population resulting directly from small-family policies or even indirectly from anti-family aspects of other social policies (creates jobs for medical workers, social workers, and other assistants to fill roles previously filled informally by children; most industrialized countries are facing aging populations as an indirect consequence of aspects of those societies; social policies in relation to directly discouraging or encouraging large families come into play with a dialog between those who fear overpopulation and resource constraints like is the basis of China’s one-child policy versus those who believe that people can reduce their ecological footprint voluntary or through better technology and that people can expand long-term resource availability through seasteading or space habitats or other means); and
  • increased crime including theft, murder, fraud, smuggling, arson, kidnapping, and tax evasion (individuals sometimes turn to crime as a last resort to feed their families, or support an addiction emerging out of stress, or get back at perceived injustices; eventually the individual usually is either killed during a crime or caught and arrested, which brings them out of the official unemployment figures and creates jobs for police and prison guards; murdered individuals or traumatized victims may also create more jobs dealing with the aftermath as well as remove other individuals from being able to work)
  • social unrest including luddism, machine breaking, vandalism, and rioting (employs guards, police, lawyers, judges, social workers, and others and keeps convicted troublemakers out of the labor pool, while destroying abundance).

Likely we will see a mix of all those in the future, and in fact, a mix of all those is what we have now. The last options of homelessness, advertising, faddism, schooling, prison, war, genocide, bureaucracy, formalization, ill-health, suicide, abortion, aging, crime, and rioting are not recommended, even as our society currently relies on them heavily to destroy abundance and create guarding jobs. Jane Jacobs has called some of these sorts of things “transactions of decline”. It is important to distinguish between creating jobs of various sorts and the overall affect on societal happiness (see “The Broken Window Fallacy“). That’s why, even though all these things increase the GDP, it’s important to have other measures of societal health like a Genuine Progress Indicator.

For example, to elaborate on “The Parable of the Broken Window”, consider a riot about unemployment and hunger where rioters break windows and are arrested for it. Normally, our society might not do anything to create jobs or deal with hunger directly, but faced with this obvious problem, our society needs to act. First, the rioters are taken off the unemployment roles, because they are now prisoners. This reduces official unemployment. Beyond repairing the broken window, all sorts of jobs have been created here, many funded by fiat dollars that now can be justified to be taxed, printed, or borrowed — for police on overtime to respond to the riot, for bureaucrats to institute new security checks, for lawyers and judges to prosecute, defend, and judge the rioters, for prison construction to house the rioters, for guards to guard the rioters, for social workers and psychologists to talk to the imprisoned rioters as well as the ones they harmed, for the media to report on all this, and so on. The GDP soars, and official unemployment goes down a lot. Everyone might have been happier with more free time resulting from abundance that they could spend being good neighbors and good parents given society really did have the resources to provide incomes and food to all these people (even the prisoners now get regular meals), but the only way to make the system work according to its current mythological rules is to justify the spending based on the management of scarcity and violence along the lines of Keynesian economics.

This web site will go into the details of all this over time. That list is defining the landscape of a jobless recovery, showing connections between things that don’t usually seem connected. Like for example, why President Obama just suggested the school year should be longer while our best educators say compulsory school as we know it should disappear entirely.

The important thing to remember is that joblessness is not necessarily a bad thing. It means people have more time for family, friends, hobbies, and volunteerism. What is bad about formal unemployment is mainly not having a right to draw from the fruits of our technosphere and biosphere; otherwise, given a basic income, with the internet, there are endless ways to connect directly to other people to do worthwhile projects, and raising children well is something that by itself can absorb about as much energy as the community can put in to that.

As a society, we need to think hard about how to move beyond our current conceptions of jobs and work, perhaps along the lines of that memorandum from 1964. This rethinking has even been started in various ways by some of those of mainstream faiths.

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2 Responses to Why limited demand means joblessness (and what to do about it)

  1. GS says:

    It is clear that USA population is being fooled by the selfish minority ‘knowledgeable’ with out ‘goodness’ professors, doctors, lawyers, lobbyists, politicians, insurance companies, and even scientists (the list goes on) so they can keep their jobs permanent.
    The common man is fooled by the banks by corrupt advertising in various forms like credit cards etc., into borrowing money that they cannot repay. Now whole ‘intelligent’ systems has failed and every one will face the music but the aforesaid minority who keep their ‘jobs’ permanent or has ‘earned’ enough so that they no longer need to bother about the common mans plight. It is a shame that the ‘richest’ (or the reckless borrower) country has the majority in distress and one million homeless schoolchildren. It is the nature’s law that reap as you sow. The world is silently cursing USA for its waste.

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