Praxeology - Episode 12

Translations of this material:

into Russian: Праксиология Эпизод 12 — Человеческий труд. Translated in draft, editing and proof-reading required.
Submitted for translation by IrinaChernykh 16.06.2015

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Why do we labor? Has economic progress made man happier? Can machines steal our jobs?

Hi guys, Praxgirl here.

In our last lesson we covered how to understand what the is utility of a producer good is. We also showed that The Law of Returns can be logically derived from the action axiom.

Now that we understand how man derives utility from consumer goods and producer goods, we can focus on what the laws are for the next element in the process of production, the element of human energy otherwise known as labor.

LABOR VS. LEISURE

Whenever an actor employs his forces and biological abilities into producing a good or providing a service, we call this labor. Like the various scarce things in the world that man uses as means for the removal of his uneasiness, his labor too is an object of scarcity. Every individual has only a limited quantity of energy he can release at any given time, and therefore he must economize his physiological functions. Because we know that nature-given means are scarce, one way for man to increase his rate of production is to increase his expenditure of labor. As we will see, labor like nature has its own unique limitations.

Whenever a man is not engaged in labor, when he is consuming a good or service, this is called leisure.

Leisure is ultimately what action aims at, because as we have seen, action always aims at the attainment of man’s most highly valued ends which he prefers sooner rather than later.

Labor involves psychic costs. What this means is that the only reason man engages in labor is because he values the end labor will yield more than the cost he bears in forgoing his leisure.

Therefore, human action always involves a balancing by an acting individual between achieving his long term ends through his labor, and satisfying his ends now. If he cannot see any value in the next unit of a good he will produce at the end of his labor, he will stop working.

LEISURE AS A CONSUMER GOOD

Labor is not immediately gratifying like leisure. Because the actions of leisure are the final stage in satisfying an end, a useful Praxeological tool is to consider leisure as a consumer good.

In thinking about leisure as a consumer good, it must then conform to all the aspects of The Law of Diminishing Marginal Utility which we talked about in previous lessons. The first unit of leisure will satisfy the most urgently felt desire; the next unit will serve a less highly valued end; the third unit a still less highly valued end, etc.

The marginal utility of leisure decreases as its supply increases, and the utility derived is equal to the value of the ‘end’ that would have to be forgone with the loss of a unit.

DISUTILITY

Labor involves the struggle of delaying immediate gratification to increase gratification at some future point. The actions of labor do not directly satisfy the end sought. In other words, man delays his leisure now because he believes his labor will achieve a more highly valued leisure in the future.

Because labor involves stages that remove an actor from his final satisfying of ends, its hard to perceive the diminishing marginal utility of the ends labor indirectly achieves. Therefore, Praxeology employs the term “disutility of labor” as a tool for understanding the effects labor has when a man evaluates whether he should continue working.

Saying that labor has a “disutility” attached to it is not, however, some sort of inherent quality of labor but merely a reversal of the statement of diminishing marginal utility. If consumer goods have a decreasing marginal utility with each successive unit, then labor has a increasing marginal disutility with every extra unit expended. Disutility increases as a man continues to work.

THE LIMITATIONS OF LABOR

Labor therefore follows the same characteristics of subjectivity as actions aimed at direct consumption. Each individual will perceive the “pain” of labor differently. Stated in another way, each individual will value the fruits of labor differently.

Thus, we can logically conceive of the main limitations in human labor’s ability to increase the rate of production:

1. The amount of people in existence in the world, and the hours in the day. If labor is a scarce resource, then like all scarce resources it will be ascribed to it’s most highly valued ends first. The more people in the world, the higher the supply of labor is and the more wants can be satisfied.

2. The ability of each laborer. People are inherently different. Some people are naturally more athletic while others are naturally better at solving math problems, and therefore expend different amounts of energy and are better suited for some work than for other work.

3. How much disutility labor brings to the actor. As I stated earlier, the disutility labor brings to a man is a subjective matter. Some will value immediate leisure more than others. Genetically identical clones, both with the same amount of expendable energy will differ in their amount of labor depending on what their values are.

Given these main limitations it should be clear that as long as the supply of labor for work that men are able and wiling to produce increases, production will increase too. If people don’t value the fruits that labor offers and want to lay around in leisure, then production will decrease and society will have to forgo the luxuries they had previously accumulated.

TECHNOLOGICAL UNEMPLOYMENT

There have been claims throughout time that technological devices that improve man’s ability to accomplish his labor bring about a detrimental effect.

The confusion for claims that technology makes people lose jobs starts when they confuse their argument by claiming that tools “substitute” or will “replace” labor. What happens is that labor is rendered more efficient by the aid of machinery.

So for example, suppose that it takes James 10 hours to pick 100 berries. If he builds a tool which allows him to pick twice as many berries in the same amount of time, what actually happens is that James’ marginal utility for each successive berry now decreases faster. He can employ more berries to satisfy lesser and lesser wants.

This decrease in urgent desires that berries can fulfill, allow him to realize new and more urgent wants he may have, like building a hut. “Labor-saving devices” help improve our production and push labor into new and unseen jobs. A machine that builds cars may seem as though it is removing the workers who build the cars in the factory, but now too there is suddenly a new demand for workers who build machines that build cars etc.

PRAXEOLOGY AS A THEORY OF INTERPRETING HISTORY

We can now employ our theoretical system of logical deductions in our first analysis of history. Since we know that Labor has an attached disutility to an actor, we can explain why in the course of human history, as man has increased his technological tools and savings, a tendency towards a shortening of the hours of work developed.

The question of whether economic progress has made man happier can be answered as a strong yes. This does not mean that Praxeology asserts that material goods are what will make all men happier, but only expresses the truth that men are in a position to provide themselves better with whatever they want!

CONCLUSION

We have learned that labor has unique universal laws and limitations that can be logically derived just like the universal laws of nature-given means. These laws show that labor is a necessary factor in the production of any good for human consumption. People trade the disutility-bringing labor for the products of labor. And wages are paid for the products, and NOT for the hours of labor people put into their work.

We also learned that technological advancement cannot hurt the employment of labor but benefits us all in our strive to achieve our desires. And finally we introduced how Praxeology can contribute to our understanding of history, a tool which we will be using much more in the future.

I’ll see you guys in the next lesson.