Here is how Hazlitt begins Chapter 7:
Among the most viable of all economic delusions is the belief that machines on net balance create unemployment. Destroyed a thousand times, it has risen a thousand times out of its own ashes as hardy and vigorous as ever. Whenever there is long-continued mass unemployment, machines get the blame anew.
Hazlitt’s argument hinges on the phrase on net balance. One page later he admits that machines do in fact create unemployment, as in the case of the English stocking knitters who rioted against the introduction of knitting machines:
Now it is important to bear in mind that insofar as the rioters were thinking of their own immediate or even longer futures, their opposition to the machine was rational. […] the larger part of the 50,000 stocking knitters and their families did not fully emerge from the hunger and misery entailed by the introduction of the machine for the next forty years.
The next sentence I find disingenuous; exactly how much comfort is a displaced stocking knitter supposed to take from the following fact?
But insofar as the rioters believed, as most of them undoubtedly did, that the machine was permanently displacing men, they were mistaken, for before the end of the nineteenth century the stocking industry was employing at least a hundred men for every man it employed at the beginning of the century.
Here Hazlitt is simply following through with a fundamental assumption of classical economics: the free market tends to reallocate resources and labor within a region such that production is maximized. But as Hilare Belloc points out in Economics for Helen, resources and labor will not be reallocated equally within the region. In the case of the rioting knitters, resources and labor were being reallocated away from them, and in such a case it is cold comfort to know that things will work out “on net balance,” i.e. for someone somewhere, if not for them.
I was also annoyed that Hazlitt invoked a common appeal to ridicule concerning labor-saving machinery:
As late as 1970, a book appared by a writer [Gunnar Myrdal] so highly regarded that he has since received the Nobel Prize in economics. His book opposed the introduction of labor-saving machines in the underdeveloped countries on the ground that they “decrease the demand for labor”! The logical conclusion from this would be that the way to maximize jobs is to make all labor as inefficient and unproductive as possible.
Perhaps, if you believe along with Hazlitt (Chapter 10) that “The economic goal of any nation, as of any individual, is to get the greatest results with the least effort. The whole economic progress of mankind has consisted in getting more production with the same labor.” But individuals (and, I suppose, nations) can have other economic goals, e.g. the sustainability of an enterprise. The Amish, for example, recognize that automating away the labor that has traditionally been done by children will result in adults who do not know how to work; therefore, they are very careful not to adopt labor-saving devices that will leave their children without useful work to do, even if they are less productive than a machine might be.
Another questionable maxim of classical economics shows up in Chapter 11, taken directly from Adam Smith:
It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy. The tailor does not attempt to make his own shoes, but buys them of the shoemaker. The shoemaker does not attempt to make his own clothes, but employs a tailor. The farmer attempts to make neither the one nor the other, but employs those different artificiers. […] What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom.
First, I doubt that in 1776 when Smith published those words that the divisions of labor were anywhere near as sharp as he describes them; at least in colonial America plenty of folks made their own clothes, at least repaired their own shoes, and grew their own food. Second, it is certainly not clear that the kind of outsourcing that Smith describes is “prudent” for a family; I’ve argued elsewhere that it is just the opposite, and here is Robert Heinlein’s famous quote on the subject:
A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently and die gallantly. Specialization is for insects.
As this reading of Hazlitt forces me to rethink classical economics in light of the study I’ve made of agrarianism, I’m beginning to see that the evidence is mounting, in the form of failed predictions, that this is not the way man was meant to conduct economic activity. Consider how Hazlitt ends his chapter on full employment:
It would be far better … to have maximum production with part of the population supported in idleness by undisguised relief than to provide “full employment” by so many forms of disguised make-work that production is disorganized. The progress of civilization has meant the reduction of employment, not its increase. It is because we have become increasingly wealthy as a nation that we have been able virtually to eliminate child labor, to remove the necessity of work for many of the aged and to make it unnecessary for millions of women to take jobs.
Wait a minute. Aren’t our meals being passed through drive-thru windows to us by our children? Isn’t the percentage of women in the workforce greater than it has ever been? And isn’t this full employment within the family—father, mother, teenaged children—what it takes to generate the income that keeps the engines of consumption running at a speed that can prop up the economy?
But not all predictions of classical economics have proved false, and I think we in this country are about to experience the truth of the maxim we began with, namely that the market tends to reallocate resources and labor within a region such that production is maximized. In our case, though, the reallocation of labor and resources will happen away from us and towards some part of the globe where people still remember how to work, perhaps China or India.