Involuntary Unemployment is an Artifact of Economic Policy

There is a fierce debate in economics about involuntary unemployment. Neoclassical economists argue that all unemployment is voluntary and against Keynesians who accept involuntary unemployment. I argue that policies create involuntary unemployment and neoclassical model failure is an effect of that.

Mancur Olson, in his book The Rise and Decline of Nations states:

Only madmen — or an economist with both ‘trained incapacity’ and doctrinal passion — could deny the reality of involuntary unemployment.

This is a weak argument by virtue of an appeal to mental capacity, an informal logical fallacy.

I initially thought that there is something called involuntary unemployment. But now I believe this is due to neglecting the fact that governments set a minimum wage and numerous other controls and by virtue of the law there are no jobs below that compensation level. Let the labor market free and there is no involuntary unemployment as it clears. Obviously neoclassical economics is neoliberal. This is not to say that I agree but these are the facts. Only a selective and even emotive approach to the relation between unemployment and compensation can justify involuntary unemployment. In other words, involuntary unemployment is a claim that characterizes either a voluntary unemployment state, an excuse that is, or unemployment imposed by government controls.

More importantly, the creation of involuntary unemployment by virtual of instituted policies can be used as an argument against the validity of neoclassical models. Thus, socialists can increase minimum wages, that could create involuntary unemployment, and then they may came back and argue about the failures of neoliberal policies.

Let me be clear that I believe that both camps represent the past and a failed mode of thinking that has led many people and even whole countries to despair. The world needs a new approach to the problem of employment that will be practical and will be based on realistic considerations about the impact of automation and robotics now and to come. The real issue is how many people are being replaced every day by machines, computers and software. I have been there and I know they are many and the impact is a total disaster. Do we want a world for humans or for machines and their creators only? Let’s talk about that and leave red herrings and straw man arguments aside because the damage is already huge and at some point it will be irreversible and may lead to the new universal war of man against machine with many more casualties that all wars in the history of humanity combined.


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