Job Killer

Concerns that machines would replace workers went viral during the Great Depression, sparking fears of chronic unemployment

Stories matter. That, in a nugget, is the central premise of Robert Shiller’s book Narrative Economics: How Stories Go Viral & Drive Major Economic Events. The Nobel laureate economist cites Bitcoin, the Laffer curve, and the gold standard as examples of narratives that became infectious, spread by word of mouth, popular media, and more recently the internet. These epidemics can influence the behavior of consumers and companies, causing them to postpone purchases and investments or making them overconfident about their financial future, which may result in excessive risk-taking. Shiller argues that if economists were better at understanding how these contagion episodes unfold, they might be better at predicting recessions and asset bubbles.

Some narratives, like viruses, simply die out. But others mutate or become dormant only to flare up again years or even decades later. Shiller devotes two chapters of his book to one particularly durable narrative—a superbug, if you will. What follows is an excerpt. Concerns that inventions of new machines powered by water, wind, horse, or steam, or that use human power more efficiently, might replace workers and cause massive unemployment have an extremely long history, going back to ancient times. Aristotle imagined a future in which “the shuttle would weave and the plectrum touch the lyre without a hand to guide them.” In such a world, “chief workmen would not want servants, nor masters slaves,” he concluded.

Still, it wasn’t until the 19th century, an era that brought innovations such as the water-powered textile loom, the mechanical thresher, and the Corliss steam engine, that concerns about technology-based unemployment took center stage. The narrative was particularly contagious during economic depressions when many were unemployed.