Technological Innovation and Structural Unemployment

Once, when I was in China in 1982, I saw a group of hundreds of people— perhaps even thousands—on their knees armed with trowels paving a new multilane highway by hand. Of course, this task could have been done much more efficiently by machine, even in 1982, and presumably even more efficiently now, but such machines were not being used in China at the time, at least not on this project. No doubt this was because labor-intensive methods of construction provided advantages over the more modern capital-intensive methods available at the time. First, under the conditions then prevailing in China, labor-intensive methods were probably much cheaper, assuming that it is meaningful to make such comparative judgments with regard to costs in a centrally planned economy. Second, and for our purposes much more importantly, labor-intensive methods of construction kept people employed who otherwise would not be. For even if paving machines were made in China at the time (while I am sure they are now I doubt they were then) and thus some of those not employed building the highway could have been employed building the machines used to build the highway, there would have been a net loss in employment opportunities, or at least there was reason to be concerned this would be the case, and this made opt- ing for paving machines less attractive regardless of the relative cost. Otherwise, the only way to explain the Chinese decision to employ this labor-intensive method of construction rather than a more efficient capital intensive method is to think the Chinese neither had the money to purchase paving machines back in 1982 nor the resources and expertise required to build these machines themselves.