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On how hard-earned skills become redundant and why that’s not a reason for intervention

As a side-issue to the recent decision by London’s TFL [Transport for London] to stiff Uber for alleged safety concerns (please try not to laugh at the back), it occurs to me that there are various reasons why people across the spectrum, including Tories, seem quite fine with the ban (it may be that Uber will do some sort of deal and get back into business in London, mind). One seems to be a sort of fogeyish dislike of Uber (it’s American, which is vulgar, and relies on newfangled tech that some people don’t understand, such as apps, and satellites, etc); another seems to be “fuck-the-consumer-why-can’t-they-use-the-night bus?” level of grumpy nastiness, and another is a sort of feigned, or maybe real, worry about the loss of a set of skills (learning the streets of London by heart). I regard the first two reasons as so fatuous as to not be worth responding to. The latter, however, does interest me.

Consider, a standard Marxist argument, and indeed one not just associated with Marx but even early classical economics (the Labour Theory of Value) It holds that the value which a provider of a service/product should receive is linked to his labour, his effort and skill (learned via effort), not simply the interplay of demand and supply. There are, of course, all manner of problems with it: you cannot simply work out whether a skilled worker is worth X or Y times more than an unskilled one – there is no formula to do this. Second, resource allocation is impossible if the amount paid for Y or X is based not on the relative differences in wants and scarcities of something, but labour, instead. The marginalist revolution in economics, which broke in the 19th Century and which seems to have passed Marxists by, points out that the subtle differences in the subjective preferences of people for this or that are what drive economic exchange. Prices are signals; a labour theory of value leaves out the vital signalling function of prices, which is why an economy driven by such a theory breaks down, with shortages of much-wanted goods over here, and a glut of not-wanted stuff over there (evidence: socialist countries throughout history).

It may be a bummer for the taxi drivers of black cabs who have spent ages learning the streets of London by heart – getting “the knowledge” – to find that satnav and apps have driven a stake into their business model and potential sources of earnings, and be forced to get all those newfangled gizmos and compete with a chap from Hounslow who is second-generation Indian and who cannot name the first-11 team sheet of your favourite soccer team. But in a free market, technology and innovation means the customer isn’t paying for the effort to acquire a skill, but the outcome of it. And that seems a tough argument to sell, but it is nevertheless correct.

On a related note, this essay by Jeff Tucker of FEE about marginal utility and human happiness is brilliant. I shared it on social media and people who might not normally give a crap about such ideas said how much they liked it. Economic wisdom can spread in mysterious ways!

 

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27 comments to On how hard-earned skills become redundant and why that’s not a reason for intervention

  • Natalie Solent

    I feel a pang for the cabbies, and at the coming loss of the London tradition of “the Knowledge”. However their situation is not much different from that of the drivers of Hansom cabs, with their hard-earned skill in driving and managing their horses, when it became clear that automobiles would supplant them.

  • morsjon

    You could argue that part of the ‘social contract’, adherence to which allows order to be maintained, is that a person’s relative position in society should not be interfered with. Clearly both immigration and technological change does interfere with it. Immigration puts downwards pressure on wages for low skilled work, as does technology (although not just low skilled work), and it also increases competition for public goods.

    Part of the rise of the alt-right relates to an anger of a ‘betrayal’ by the ‘establishment’. They have breached the social contract.

    I have some sympathy with this at least as it relates to immigration. I don’t see the current situation, at least in the US, as tenable.

    Not so for technology, as it can enable low skilled labour as well as compete with it; indeed this is the case with the satnav. It can also make highly skilled labour redundant.

  • morsjon

    Also, there is a link in this post to the previous post about whether a well rounded education is necessary. Clearly it is beneficial for everyone to learn the basic skills needed, mainly reading, in order to retrain.

  • CaptDMO

    “But in a free market, technology and innovation means the customer isn’t paying for the effort to acquire a skill, but the outcome of it.”
    Well then, that throws the U.S. “free” k-12, plus most of the subsequent “higher” education industrial complex, RIGHT into the “special/ protected” garbage heap.
    Let’s have a look at National “Human Resource” interpretations while we’re at it, shall we?

  • Paul Marks

    Sometimes automation is just a cult. For example I know one local enterprise that spent a very large sum of money on an automatic parking system that horribly failed (for example it can not tell the difference between wedding guests who arrive to the enterprise and ordinary customers who arrive to the enterprise – and the exit system often did not work at all). It has been replaced by another very expensive automatic system – which also does not work. The enterprise is now making a massive loss (because few weddings are held there any more and ordinary customers are also well down on the past – partly because of the awful parking system). But at least the person who was replaced by the automatic system (the system that did not work, which was replaced by another system which also does not work) now has more time to type samizdata comments. But one can not make a living doing that.

    Still generally automation is a good idea for a business – even if the old men whose skills are no longer required have to self terminate. For example one could not just carry on with “handloom weavers” – spinning was mechanised (thus creating a temporary boom for the handloom weavers), but eventually it was obvious weaving would be mechanised as well. The handloom weavers did not go off and “retrain” as poets or rocket scientists or something (let us be honest – old men do not “retrain” we die). But there was nothing that could reasonably be done about that.

    As for black cab drivers – it is not their lives that are at risk (they are not going to have to self terminate or anything like that), they just resent having to live on less money.

    Oh dear, how sad, never mind. I wish I had their problem.

  • Johnathan Pearce (London)

    Well then, that throws the U.S. “free” k-12, plus most of the subsequent “higher” education industrial complex, RIGHT into the “special/ protected” garbage heap.

    Not necessarily, as there will be a need for people to be educated to come up with more gizmos, although not necessarily by the current state-run ed. complex in many Western nations.

    morsjon: They have breached the social contract. “They” being anyone who comes up with a cost-reducing, pro-efficiency, pro-consumer choice idea and business model, right? At one point in New York City, it cost up to a million bucks to buy a licenced yellow cab taxi permit from City Hall, a form of rent-seeking revenue generation that puts the guys in Palermo to shame. The idea that the restrictive practices of, say, cab drivers are part of any damned social contract is absurd on its face. Who gave out the right in any contract that such a restrictive, guild practice should be immune from competition?

    Uber is disproportionately represented by immigrants who found they could earn more money doing this and being self-employed. Far from damaging any “social contract”, the entrepreneurial vigour displayed by such disruptive business models and the employment of people able to get on in life actually makes society stronger, not weaker, overall. And I am sure there are plenty who read this website who have had old-style taxi drivers charge them over the odds for taking the “scenic route” with no chance of redress. Uber has put that sort of nonsense to the margins. Good.

    Any of the arguments now doing the rounds about the evils of technology could, for example, have been applied to just about any innovation over the past few hundred years. No doubt all those farm workers smashing threshing machines in early 19th Century England thought that the inventor of those evil gizmos were breaking a “social contract”.

  • morsjon

    I’m not defending it. But there is a logic to it. Ultimately self-serving of course but you can abstract from this to a principle.

    And, whatever the value of upholding this aspect of the social contract is, in my view, outweighed by the lifting out of poverty of the poor, made possible by technology and immigration.

  • Johnathan Pearce (London)

    Morsjon,

    Forgive me if my language was rough. The problem is that there is a great deal of this sort of claim made – that part of the population accepts some sort of restrictive practice etc in exchange for not having certain other issues around. I am not even sure these days that such a notion of “social contract” makes sense with regard to anti-competitive practices where there so obviously is a narrow self interest involved. One might even argue that support for the right to buy/sell without the external, coercive intrusion of the State is what a social contract, in the John Locke/Enlightenment sense, actually is.

  • Watchman

    I suppose the problem with the concept of the social contract is that a contract is only binding if you sign it – it cannot apply without opting in. And therefore any use of this terminology to apply to someone who does not like the idea, and to therefore limit choice to that person, is nothing to do with a contract and everything to do with other people imposing their choices on the individual.

  • rxc

    The “labour theory of value” leaves out a LOT of phenomena that give value to things, from human nature to finance to government regulation, to human ingenuity. It is a theory that a precocious 15 year old with no experience in the world would develop, and is therefore utterly useless for managing any enterprise larger than a home baking operation. And even then, it would miss a lot of details.

    I remember first hearing about the “social contract” at about age 13, and asking why I was bound by something I had never heard of before. There was no answer – the teacher just ignored the question. It is like the original sin of being a white male these days.

    The left is forever inventing these silly concepts – they can’t make anything useful, so they spend their time figuring out new, worse ways to control the distribution of the stuff that others produce.

  • Fraser Orr

    @Paul Marks
    > let us be honest – old men do not “retrain” we die

    Only if you choose to ossify. My father worked in the docks in Glasgow when he was young, then he retrained himself and began working in a patent office, there he took over the computer systems, and, after the computer system became obsolete, when he was in his fifties, he left that job and became a writer.

    Change is possible at any age. And not only change, but change for the good (writing was my father’s passion. He started his own consulting business and did very well for himself.) The biggest problem here is a society meme that old people can’t change, can’t learn a new trade or even the basic idea that people have some sort of god given right to stay in the same job from when they leave school to when they leave the workforce.

    The basic concept of employment is a terrible idea because it reinforces these ideas. It robs people of the basic understanding that they are selling their skills and time for money. Change is good. Doing several careers in a lifetime is a good thing.

  • morsjon

    The left is forever inventing these silly concepts

    As I pointed out, not just the left. The complaints about ‘globalism’, ‘Soros’ and so on that can be easily found on the Breitbart comment threads are ultimately just the same kind of complaint about a breach of social contract.

    This is one reason why I can’t agree with the alt-right (supposedly it contains a lot of ex-libertarians); the other is their monomania about culture/race – which I find weird and unsubstantiated (and to the extent that it is substantiated I still don’t see how it is practically relevant).

    I agree with some of what they say with respect to immigration, in the same way that I think a person would be more legitimately aggrieved to wake up and find that their garden had been taken over by potato growing gypsies (i.e. a parable to immigrants using public resources – as well as changing culture in a highly visible way), than they would be from losing their job to robots.

  • Laird

    “You could argue that part of the ‘social contract’. . . is that a person’s relative position in society should not be interfered with.”

    No, you couldn’t. At least, not if “you” are a rational being with at least a modicum of intelligence. Social mobility has been a fundamental aspect of western society since the start of the industrial revolution. That is the “social contract” (to the extent there really is any such thing, which is another discussion entirely).

    As to the labor theory of value . . . .

  • Stonyground

    Satellite navigation has made ‘The Knowledge’ of London streets obsolete more or less overnight. Some skills are made obsolete by advancing technology but more gradually. My original trade was as a diesel fitter. Part of my job was re-building engines. Apart from collectors of classic vehicles, nobody re-builds engines anymore. The main reason I think is because modern engines do such high milages without wearing out, rebuilds are no longer needed. In the early nineteen eighties when I was still working in that business, engines that had been reconditioned on some kind of production line started appearing. There was also something called a short motor which was a new engine but with all the bits that don’t really wear out missing. You swapped all the non wearing bits off the old one before re-installing it in your vehicle. In the mid eighties I started working with pneumatic systems and pneumatic power tools instead. Diesel engines have now changed so much that my skills in that area are thirty years out of date. I drive a diesel car but if it broke I wouldn’t have much idea how to fix it.

  • Mr Ed

    I wonder if an argument that Black Cabs are ‘iconic’, or part of London’s heritage and a ‘boost to tourism’ but an otherwise ‘free’ good will be trotted out so that they could be ‘listed‘ like old or ‘interesting’ buildings, but with the ‘costs’ falling on their competitors to ‘ensure a competitive market’ by an ‘Uber tax’? Not hoping, just anticipating, an easy sell to Mrs May.

    I have heard suggestions that Uber’s business is ingenious in that it shifts the capital costs of vehicles to the drivers, leaving it with the costs of its app, marketing, compliance and recruitment. However, the drivers can work the ‘system’ to get tax credits by targetting a certain income level that allows for our ‘negative income tax’ to kick in. Not an argument against Uber, but perhaps explaining how it can find so many drivers at the rates it offers.

    I once saw a Black Cab in Tindouf, Algeria (in the Sahara, level with the Canaries). It was not a London cab, it had a Liverpool plate on it. How it got there is perhaps the greatest mystery I have ever encountered.

  • Bruce

    And how many “social contracts” are, in reality, “unilateral gentlemen’s agreements”?

  • morsjon

    However, the drivers can work the ‘system’ to get tax credits by targetting a certain income level that allows for our ‘negative income tax’ to kick in.

    Why wouldn’t that apply to Black Cab drivers too?

  • morsjon

    At least, not if “you” are a rational being with at least a modicum of intelligence.

    It’s nothing to do with intelligence, it is emotion with the justification coming afterwards.

  • morsjon

    As to Paul’s comment, I think that is a bit extreme. But for most people it makes sense to try and make as much money as possible during your peak years, as generally ‘second careers’ will not pay as well. There are exceptions of course.

  • Julie near Chicago

    O/T, but the article caused this to traipse through my head:

    People aren’t buying my doughnuts because my sign says “Doughnuts,” and they have no idea what such a thing might be.

  • The Wobbly Guy

    Sometimes automation is just a cult. For example I know one local enterprise that spent a very large sum of money on an automatic parking system that horribly failed (for example it can not tell the difference between wedding guests who arrive to the enterprise and ordinary customers who arrive to the enterprise – and the exit system often did not work at all). It has been replaced by another very expensive automatic system – which also does not work. The enterprise is now making a massive loss (because few weddings are held there any more and ordinary customers are also well down on the past – partly because of the awful parking system). But at least the person who was replaced by the automatic system (the system that did not work, which was replaced by another system which also does not work) now has more time to type samizdata comments. But one can not make a living doing that.

    They don’t know how to do it right. In Singapore, we have almost completely shifted to automated car parks. For special guests, they just need to obtain a one-use card from the event organisers, and use it at the exit gantry. Easy and convenient.

    A lot of automation in Singapore has driven a lot of no-skill and low-skilled workers out of jobs.

    The biggest problem here is a society meme that old people can’t change, can’t learn a new trade or even the basic idea that people have some sort of god given right to stay in the same job from when they leave school to when they leave the workforce.

    It can be done, but it’s very difficult. Also, there’s clear scientific evidence that intelligence, especially the fluid sort that enables new skills to be picked up, declines after age 30-40. Uncommon individuals can buck this and still find more opportunities, but they are exceptions that prove the rule.

  • Nicholas (Unlicenced Joker) Gray

    The Labour theory of value is one of the shoddiest arguments around. No matter how much time and effort I might put into a mudcake, its’ value would be zero. Why should you pay anything for it? Goods have a subjective value- why do we value gold more than silver, when silver has more uses?

  • Laird

    Of course that’s true, Nicholas. The labor theory of value is one of the most refuted (and most easily refutable) tenets of the whole irrational edifice of Marxism. That’s why I rarely even bother; anyone who trots it out is demonstrating his own abject ignorance (if not simple lack of intelligence). And it’s why I use this cartoon to make the point in a way even the most pig-ignorant Marxist can understand (sorry for repeating it).

  • Julie near Chicago

    Satellite navigation has a way to go before it’s better (more reliably accurate) than human wetware that knows the terrain. There are many instances of GPS’s leading the unwary to someplace distinctly not the intended destination of 100 Podunk Plaza — for instance, by neglecting to mention an important turn, or instructing the “Human” Autosteerer to turn at the wrong spot or in the wrong direction. This I know from experience also, having been a passenger on a couple of such misadventures.

    Even worse are the stories reported (sorry, no links) that “SatNav” (here, anyway, called “GPS”) once in awhile leads the sheep who’s at the wheel to follow a highway into the desert, then an unpaved road, then a mere track that has left the Souls on Board in a spot where they’re too low on gas to get back to a station, or where there’s no way to turn around or otherwise to extract themselves from the posish, save via shank’s mare — but which in which direction? Thus when — and if — they are eventually found, they are permanently hors de combat.

    Don’t please argue that “they should have been paying attention.” It’s an unfortunate fact that humans’ antennae for recognizing the coming debacle absent a change of direction/method/procedure is never 100%. And aren’t we sold GPS on the theory that it’s so much better and easier than relying on paper maps (which also can of course be wrong and often are, but at least there are usually a few clues available on the map itself); besides which, Who needs to polish up their paranoia or at least their smarts before setting out into unknown territory?

    (“Trust but verify,” or at least “Consider, but verify” is a pretty good maxim to take with you, whether you’re using GPS or an old-fashioned printed map.)

    It takes a good deal of just plain background to live as a functional adult. Technology and machines can help us, but we need to be prepared to look after ourselves in a pinch.

    .

    It’s true that if you have a halfway working imagination and the urge to follow certain types of scenarios to their logical ends, you may decide never again to leave the relative safety of your nice warm bed. Nevertheless, GPS has a ways to go before I’d put it ahead of the expert geographer known as the Experienced Taxi Driver when it comes to the likelihood of reaching my desired destination.

    N.B. This assumes that the cabbie is honest, not psychopathic, not careless about unnecessarily driving through seriously dangerous neighborhoods, and more. I’ll grant that GPS isn’t actually psychopathic … though of course its programmers might be. 😈

  • Mr Ed

    Satellite navigation has a way to go before it’s better (more reliably accurate) than human wetware that knows the terrain.

    A satnav is like a chess engine, it has to assign values to alternatives, and assess its position. Sometimes, it will assess a combination of road and traffic data and give a sub-optimal result, and it cannot know what is on the road. I did enjoy taking my satnav on a UK domestic flight and programming my destination, it was quite happy that we were doing around 500 mph, but it kept suggesting sharp turns onto roads 35,000 feet below it. Sometimes, chess engines, virtually invincible in normal play, go into a tizzy trying to solve a chess problem, that a human expert can suss out the gist of with intuition quite easily.

    I’m told that satnavs deactivate near Mach 1, lest they be used for missile guidance by unscrupulous purchases hell-bent on breaching the licence agreement.

  • bobby b

    I can’t calculate the time and gas that GPS and GoogleMaps has saved me over the past few years, but I drive a lot and the savings have been substantial. A good portion of my driving is out in the boonies, where roads aren’t always well-labeled, and it takes the stress out of those trips. (“Turn left in 300 feet!”)

    From recommending alternate, faster, shorter routes instead of the routes I’ve “always” taken from point A to point B, to giving me a head’s up on traffic problems, to just plain getting me to unknown destinations, it has been a great gift.

    Granted, it still believes that one of my sisters lives in the middle of a lake in South Dakota, and the harridan woman who tells me that I’ve missed a turn gives me the willies, but it has been much more of a blessing than a curse.

    “I’m told that satnavs deactivate near Mach 1 . . .

    Yeah, I can’t use it on the motorcycle.

  • Julie near Chicago

    Mr Ed:

    “…[Satnav] was quite happy that we were doing around 500 mph, but it kept suggesting sharp turns onto roads 35,000 feet below….”

    LOLOL!