Jevons Paradox in action: The more efficiently a resource is used , in this case labor, the higher the demand for it will be.
The thing about labor is that it's not just any old resource. It's a resource whose price determines consumers' incomes. And consumers' incomes determine how much stuff they buy.
There's a common myth that technology will make everything cheaper. It won't. Some things will get cheaper and other things will get more expensive. Economic policies prevent deflation, and therefore prevent the general price level from adjusting downward. If the price of one good decreases, the price of another good necessarily increases to compensate.
Furthermore, labor can't be one of those goods whose price increases. At least not on its own. As labor becomes more efficient, the amount of money going to labor decreases for each unit of output. If we leave it up to the markets, increased labor efficency would lead to lower incomes and lower output and further lower incomes.
But we have economic policies to address that too. We don't just leave it up to the markets. Instead, we do our best to negate the efficiency (labor productivity) that technology would have otherwise enabled. This keeps people's incomes reasonably high.
Economic policies keep people employed, keep wages high, and keep labor inefficient. The Jevons Paradox doesn't really apply here... at least not in any kind of straightforward way.
Tim O'Reilly -- and many economists (armchair or otherwise) -- seem to completely miss this point.
The thing about labor is that it's not just any old resource. It's a resource whose price determines consumers' incomes. And consumers' incomes determine how much stuff they buy.
There's a common myth that technology will make everything cheaper. It won't. Some things will get cheaper and other things will get more expensive. Economic policies prevent deflation, and therefore prevent the general price level from adjusting downward. If the price of one good decreases, the price of another good necessarily increases to compensate.
Furthermore, labor can't be one of those goods whose price increases. At least not on its own. As labor becomes more efficient, the amount of money going to labor decreases for each unit of output. If we leave it up to the markets, increased labor efficency would lead to lower incomes and lower output and further lower incomes.
But we have economic policies to address that too. We don't just leave it up to the markets. Instead, we do our best to negate the efficiency (labor productivity) that technology would have otherwise enabled. This keeps people's incomes reasonably high.
Economic policies keep people employed, keep wages high, and keep labor inefficient. The Jevons Paradox doesn't really apply here... at least not in any kind of straightforward way.
Tim O'Reilly -- and many economists (armchair or otherwise) -- seem to completely miss this point.