When you increase the cost of labor, people substitute capital

Etch that into your arm with the nearest pen. That is pretty much all of economics in a nutshell, the What Is Seen and What Is Not Seen in blunter prose.

From that same excellent comment thread over at Will's, commenter secret asian man writes,

Suppose you have a labor-intensive factory with a hundred workers that manages to make a tiny profit offering ten minute lunch breaks [in] Ghana. Given how competitive international markets are, this is not an unlikely situation - competition is strong, and there is very little money to be made off destitute Ghanians anyways (although there is plenty of money to be made fleecing the Stuff White People Like crowd with Ghanian products).

Now let's suppose some SWPL activist causes half-hour lunch breaks to be mandatory. As a result, this labor-intensive Ghanian factory is no longer profitable, because this means half-hour lunch breaks for hundred of Ghanian workers - hundreds of lunch breaks.

All of a sudden, it becomes cheaper to shut down the Ghanian factory, and replace those goods with products made in a ten-person Mexican factory that has roads, power, internet, and a CNC machine. Ten lunch breaks are cheaper than a hundred.

Why? Because when you increase the cost of labor, people substitute capital.

And yet this mistake gets made again and again. It boggles the mind. Getting people to understand this basic economic lesson would do far more than one thousand angrily written pamphlets on the source of natural rights and the reasons why one particular conception of natural rights is the most consistent and true one. If you want to make good libertarians - heck, if you want to make a good society, teach people economics, and the libertarianism will come naturally.

And what a great term, the "SWPL activist". I need to remember that one.

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And also...

Getting people to understand this basic economic lesson would do far more than one thousand angrily written pamphlets on the source of natural rights and the reasons why one particular conception of natural rights is the most consistent and true one.

And it would do far more than one thousand references to Peter Singer's expanding moral circle. So what's your point?

Then you have to explain him

Then you have to explain him why it's bad that those jobs will be going to capital rich country like the US. Then you have to explain that it's bad that his brother and his family gets the jobs and the African loses it, then you have to explain that one ought to be concerned with every human being equally, then... yes truly easy. As Constant puts it, my face is prettier than your ass.

The overall point that capital is substituted to labor was interesting. One funny example is the Paris subway line 14. It is entirely driver less. The only reason why we have such a sophisticated line (capital) is to go avoid the frequent strikes (multiple times a year)

The argument is internal; it

The argument is internal; it is aimed at egalitarians who already share the belief (or think they share the belief) that one ought to be concerned with every human being equally. That's one of the reasons why I think egalitarianism (rightly understood) is so important to libertarianism; when combined with economics (rightly understood), it leads to libertarian conclusions.

When robots are doing 100%

When robots are doing 100% of the labor will they need humans? (Old SiFi theme)

Robots are currently doing

Robots are currently doing well over 100% of the labor that humans were doing before we invented robots. It doesn't seem to be a problem.

capital is labor?

But the Mexican factory increases the demand for CNC Machines, which have some labor involved in making them.

Also, by this same argument, inventing new clever ways to substitute capital for labor costs third world jobs. Which is true, I guess. But it increases productivity and is on net good for the world. Whereas artificially increasing labor costs decreases productivity and is on net bad for the world. But what I'm saying is - there is more going on here than just the substitution. The shift from labor to capital is bad b/c it is artificial and unnecessary, not just because it is a shift.

Unless you just look at things from the Ghanian workers point of view. Then SWPL activists are bad, and so are inventors of robotic sewing factories.