Despite two centuries of evidence to the contrary there is a growing belief that the technological unemployment in our immediate future will result in a significant, permanent job shortage. Because their fear proved to be unfounded, the belief that technological unemployment leads to structural and persistent unemployment is referred to as the Luddite Fallacy. Long before the term 'technological unemployment' was coined, the early nineteenth century Luddites protested the loss of jobs due to the partial automation of the textile industry. Keynes did not condemn 'technical efficiency' but rather posited that it could happen too quickly. What is lost in much of the contemporary discourse is this ephemeral nature of technological unemployment. Also, when technology eliminates a whole job category there is often a period of education for the jobs that remain. The faster the rate of the technological progress, the larger the portion of the labor force that is in this transitional state. However, and this is key, the unemployment is immediate, but the job creation from economic growth takes time. Therefore, generally falling prices results in an increase money supply, which is very stimulative. Central banks today generally manage their money supply to that goal. *Research suggests that an inflation rate of 2% optimizes long term Real GDP growth. *The price reduction is economically stimulative because the money saved by the consume can then be used to purchase additional items which increases aggregate demand.
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*Because the productivity enhancing technology is, subject to patent protection, available to all competitors, in a free marketplace, enterprises will lower their prices to their marginal return on capital in order to capture or defend market share. Therefore, automation decreases labor, increases capital employed and increases profits even as a percentof capital employed. They generally establish a corporate 'hurdle rate' that establishes a minimum risk adjusted rate of return that all projects must meet if they are to be implemented. *Enterprises only purchase productivity enhancing technology if the internal rate of return (IRR) substantially exceeds their cost of capital. ******** The specific mechanisms by which automation results in economic growth is as follows: The introduction of ATMs did, indeed, eliminate jobs and cause new bank teller jobs to not be created. The criticism was improper while there are more bank tellers today, there are substantially fewer than there would be if ATMs didn't offer an alternative to them. This resulted in President Obama's comment being ridiculed in many circles. There are more bank tellers today than there were when ATMs were introduced as was pointed out by The Economist. You see it when you go to a bank and you use an ATM, you don't go to a bank teller, or you go to the airport and you're using a kiosk instead of checking in at the gate." However, the high profile of Google's driverless cars and the well covered Jeopardy victory of IBM's Watson have probably contributed to a general awareness of the accelerating replacement of humans by advanced robots and artificial intelligence software. It likely began with President Obama's 2011 statement, "There are some structural issues with our economy where a lot of businesses have learned to become much more efficient with a lot fewer workers. Recently there has been increased media coverage of technological unemployment.
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