Kevin Carson, Creative Destruction, and the Boom-Bust Cycle

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This is probably a waste of time, but I wanted to write about why I think Kevin Carson is wrong in the following passage from his Organization Theory: A Libertarian Perspective. The relevant text can be found here.

Suppose, for the moment, that right-wing libertarians are correct in the exaggerated claims they make for unlimited division of labor and comparative advantage. Suppose that, despite all the evidence in Part One, it really is cheaper for most people to buy most of the things they consume at Wal-Mart, and work for the wages to pay for them. Weigh that against the uncertainty and vulnerability entailed in the quite significant chance of unemployment faced by most people.

As many right-wing libertarians like to remind us, the days of lifetime job security are long past. The “creative destruction” they celebrate means that people in most lines of work can count on downsizing and job changes at the very least several times in a working lifetime, often with prolonged periods of unemployment and debt accumulation between jobs and significant reductions in pay with each move. The sheer hell of it, for the downsized white-collar employee, was depicted by Barbara Ehrenreich in Bait and Switch. From the standpoint of people who work for a living, often mired in credit card debt, keeping their heads above water only by augmenting their purchasing power with the cash value of inflated home equity, a paycheck or two from homelessness or bankruptcy, the flux of the new economy is a lot less exhilarating.

And bear in mind that many of the same people who denigrate artisan or subsistence labor, most notably the Misoids, are not only the same people who celebrate the “creative destruction” that undermines economic security for so many people. They are also the same people who regularly make the most apocalyptic predictions about credit inflation by central banks, the bursting of the housing bubble, and the Misesean “crackup boom.” No little inconsistency when those attitudes are laid side by side.

The first thing I would like to point out is that I don’t know to whom Carson is referring with “the exaggerated claims they make for unlimited division of labor and comparative advantage.” Does anybody say there is no limit to the division of labor? And what does that even mean? In writing this blog post, would I specialize in nouns, while someone else writes the verbs, and so on? This is reminiscent of Carson’s criticism in The Homebrew Industrial Revolution of those who believe the demand for labor is “infinitely upwardly elastic,” whatever that means.

It’s difficult to understand Carson’s understanding of what the limits of the greater productivity from specialization are. It’s apparent he doesn’t think they are zero, since he seems to like barter as a primary method of exchange. But the fact that he likes barter as such suggests that he sees the productive gains from specialization and trade to be minimal.

More to the point, what is this inconsistency he sees in “Misoids”? As far as I can tell, the inconsistency he appears to see is that if Misoids like creative destruction (and the unemployment that results) they should also like (or not have such a problem with) the boom-bust cycle. [I would like to note that the book the above passage is from was published in December of 2008, but the same text was published on his website in 2005. How about the predictive ability of the Miseseans when it came to the bursting of the housing bubble?] But these are quite clearly very different situations.

Let’s consider “creative destruction.” Why might someone celebrate it? I would imagine it is because it signifies technological and productive progress. One could consider the automobile’s replacement of the horse-and-buggy as a primary means of transportation to be “creative destruction”: a new industry replaces another. Consumers, in their own estimation, considered themselves better off by purchasing automobiles instead of buggies. Of course, some individuals, such as the Amish, were not interested in purchasing automobiles and stuck with their buggies. So is creative destruction something to celebrate? If you drive a car instead of a buggy, it would seem so. Of course, it is unfortunate that people employed in the buggy industry had to find another job. But no one celebrating “creative destruction” celebrates this aspect of it.

And, really, what does Carson propose instead? Unless the world is completely static and everything stays the same forever, there will be people who become temporarily unemployed as technologies or consumer preferences change. Every shift of resources to new technologies will mean that employment in other industries have to decrease. There is no getting around this fact. And trying to stop this process makes everyone worse off in the long run. Had the government ensured that the car never replaced the buggy, the computer never replaced the typewriter, the cellphone never replaced the landline, etc., then everyone, even those who became temporarily unemployed, would be much worse off. Thus, I really don’t see what Carson’s problem is here.

Let’s contrast this with the boom-bust cycle fueled by credit expansion. Misoids generally want the government to not intervene to reduce unemployment in the creative destruction scenario, because if they do they delay resources from being allocated to more highly valued uses. Regarding the boom-bust cycle, Misoids want “no further credit expansion.” That is, Misoids don’t want the central bank to fuel the boom in the first place, because this results in malinvestments that must eventually be liquidated. They also don’t want the government to intervene after the boom turns to bust because, here again, trying to keep people employed in occupations that result in losses means that resources could be allocated to higher uses and the state just delays the process.

As such, there is no inconsistency here.

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