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2nd February 2024 (9 Topics)

Old labour market theories won’t work

Context:  

A substantial transformation in the energy economy could potentially generate new employment opportunities, offering a temporary solution. However, the rapid pace of change may outstrip the workforce's ability to adapt.

Evolution of Economic Theories on Human Labour

  • Classical Perspective: Since Adam Smith, classical theories considered human labor essential for production, reducing all processes to labor time.
  • Neoclassical View: Modern theories, including neoclassical economics, assume labor and capital as basic factors with substitution possibilities.
  • Keynesian Approach: Keynesian theory diverges, making unemployment a central concern and offering measures to address it.

Challenge to Traditional Economic Theories:

  • Rise of Automation: Widespread use of robots and AI challenges classical and neoclassical assumptions by making production without human labor a reality.
  • Sraffa's Unique Perspective: Only Sraffa's theory allows for a labor-less economy, acknowledging the dynamic of potential unemployment.
  • Policy Responses: Traditional economists propose structural readjustment, while Keynesians emphasize demand solutions, and practical approaches may involve a mix of strategies.

Unprecedented Threat of Job Displacement

  • Historical Context: Historically, machines increased productivity and created new jobs, countering fears of job loss.
  • Current Shift in Energy Base: Massive changes may create new jobs, but the pace and extent of transformation raise concerns about the labor force keeping up.
  • Uncertain Future: Unlike past shifts, the rapid and far-reaching nature of change makes the impact on employment uncertain, questioning traditional optimism.
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