Okay, here's our next economic principle. Avoid the lump of labor fallacy. What is the lump of labor fallacy? It's simply this.
It's the incorrect notion that there is a fixed amount of work that needs to be performed in the economy. You should see that. That's flawed right away, right?
We know that people have unlimited wants. So if people have unlimited wants, there's always going to be an unlimited amount of opportunities for people have to perform work to satisfy those wants. Even if one want goes away or is satisfied, another want is there and emerges.
So people can always look for these opportunities. Specifically, if you want to think about it, the example that economists like to talk about with the lump of labor fallacy is machines. Do machines create jobs or cost us jobs?
Well, people who fall victim to the lump of labor fallacy say, oh my gosh, watch out for machines. They cost us jobs. And maybe an example they might use is like the E-ZPass system in New York State.
in other states around the country, right? The E-ZPass system is a system which electronically collects money for tolls so that you don't need a toll worker, and it makes a traffic move much more efficiently, much more quickly. And some people say, oh, my gosh, you see, the E-ZPass system cost us jobs because now you had a toll worker who did a job, and now the E-ZPass system comes along, and the E-ZPass system replaces the toll worker. Workers down one, machines up one. But don't you see the problem with that?
Well, some people see an initial problem with it. They're like, yeah, but wait a second. You need people to produce the E-ZPass system.
And so maybe that creates jobs, they say. And then the person who says that the E-ZPass system has cost those jobs says, yeah, but the jobs lost is greater than the jobs gained. And they have a big debate back and forth. But the truth of the matter is, is that they're missing, both arguments are missing all the jobs that are created because of E-ZPass that don't really seem like they have anything to do with E-ZPass.
For example, I can construct a pretty simple argument that. that the E-ZPass system creates jobs in the candy industry. Now, some of you might be saying, how can you create that argument? Well, just think about it.
What does E-ZPass do to transportation costs? It lowers them, right? Because traffic is better.
Time is money. So if transportation costs come down, then the price of candy should come down. All goods and services. But I only care about candy. I love candy, to be honest with you.
I eat KitKat bars for breakfast. I call them breakfast bars. And when I eat them, I eat them four across.
I don't break them individually. bothers the secretary of our department very much. She said, you're an animal. How do you eat them like that?
Don't tell me what to do. I'll eat the Kit Kats, the bars, the way I want to eat them. But anyway, so when I go to the store to buy Kit Kat bars, now that we have an E-ZPass system, that all else being equal, they should be a little bit lower in price than they were before.
And I'm going to try to gobble them up. And when I try to buy more Kit Kats, well, I'm going to need somebody to make those Kit Kats for me. And because of that, you can see how the E-ZPass system creates jobs. in the candy industry or other industries in the country in ways, by the way, that are hard to measure.
So do machines create jobs? Of course they create jobs because there's not a fixed amount of work to be done. Don't commit the lump of labor fallacy. Yes, the machine takes away some jobs, but it creates many, many more other jobs simply by making the world more efficient. Now, in an ideal world, that toll worker.
He'll move to Hershey, Pennsylvania, maybe become part of the new candy revolution, or he'll find something else to do with all the new opportunities that are being created by this new efficient world. The truth of the matter is, if you're 65 years old and you've been working as a toll worker all your life, and you're not going to move to Hershey, Pennsylvania to become part of the candy revolution, to be honest with you, you're probably not going to necessarily get another job out of this situation. You're going to lose your job. And that's where people see the pain of automation and technology and capital. But the truth of the matter is that their kids won't go into being a toll worker.
So definitely over the long run, things like automation create jobs. They don't lead to mass unemployment. They actually create jobs overall by making the world more efficient. And that's kind of a way to think about automation.
You can do this with a number of different examples, not just E-ZPass, ATM machines. ATM machines make banking more efficient. Yes, they replace tellers, but by creating more efficiencies, they put more resources in people's pocket. And they decide to use those resources on other things.
And it creates jobs in other ways. So machines do create jobs over the long run. If you don't see that, sometimes people don't see it because when the machine's invented, you kind of can see the jobs that are lost, where the jobs that I'm talking about are kind of unseen. But let me ask this hypothetical, or let me ask this question. Did the car, did the automobile create jobs or cost us jobs?
Well, most of you are going to say, oh, it created jobs. But if you had been... existing in the time where the automobile was invented, you might be saying, oh no, not the automobile.
Think about all the people in the country who make horse and buggy whips, who make carriages, who drive carriages. They're all going to lose their job because of the automobile. Yes, and then somebody else would say, yeah, but the automobile is going to create jobs. But the truth of the matter is the invention of the automobile not only created jobs in the automobile industry, but it created jobs throughout the country in all kinds of different ways because the world is working more efficiently.
So don't be against technology because you think it's going to cost us jobs. The truth of the matter is it creates jobs overall because we have unlimited wants. Sometimes it helps to think about silly kind of arguments. Think about this.
Maybe 100 years ago, 75 years ago. In a traditional family, women were doing most of the housework within the family. They were washing dishes, they were washing clothes, and they were doing these things by hand.
And then what happened? Then the dishwasher was invented, the clothes washer was invented, and women lost their jobs and have had nothing to do ever since. We all have heard the story about the terribly underworked American woman.
Of course that's silly, right? We know that argument's silly. Because when the machine came in, which made it easier to run a household than it was before, the amount of manpower, I should say manpower, the amount of human power that it took to run a household, you know, dropped tremendously because the machine was doing the work. Well, what did that do? Well, the family had unlimited wants.
That freed up people in the household, most notably women at that time, to be able to go out and find jobs in other ways. And so that's why they're not under work. now because we have unlimited wants.
And when the machine took over that job, that just created an opportunity for them to go out and do something else. So the dishwasher and the clothes washer, these are positive developments. They did reduce some jobs and they created opportunities to do others.
So don't commit the lump of labor fallacy. Let's make sure you really understand the lump of labor fallacy. Does immigration create jobs or cost us jobs?
Well, people who fall victim to lump of labor fallacy say. It definitely costs us jobs because they say, you know, the immigrant comes to the country and they take a job away from a native-born worker and therefore the immigrant is up one, the native-born worker is down one. But that's not really the case because if you think about, let's try this example.
Let's say I'm currently hiring an American worker to mow my lawn and I'm paying him $50 to mow my lawn. And then the immigrant comes over and says, I will do the job for $25 an hour, or $25, let's say, in total. And so I hire the immigrant to mow the lawn.
And the immigrant now has the job that the native-born worker had. That looks like it cost somebody the job, but the truth of the matter is that it now only cost me $25 to mow my lawn. I've now got an extra $25 in my pocket. I don't have to pay that native-born worker $50 anymore. So I have an extra $25 in my pocket.
Well, you know what I'm going to spend it on. I'm going to spend it on those breakfast bars known as Kit Kats and eat them four across and enjoy myself very much. But in order to eat those breakfast bars, I'm going to need somebody who needs to make them.
So the fact of the matter is, is that immigration doesn't cost us job. It creates jobs by making the economy work more efficiently. That's what I want you to avoid. Avoid the lump of labor fallacy. Don't go around suggesting that the amount of work in the economy is fixed.
It's not fixed. People have unlimited wants, and therefore, when somebody comes along, or a machine comes along, or there's some efficiency created which takes away one job, it's just going to create opportunities for a multitude of others. Avoid the lump of labor fallacy.