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This compensation, it seems, must come from two sources:
A.."Assuming that the technical progress involves the use
of new and improved machinery, the amount of employment
generated in the investment goods industries must be set
against the loss of employment in the industries which
introduce the new methods.
B. As Marx rightly argues, the total labour employed
(including that used in the investment goods industry )
must be smaller with the new methods than with the old -
and the difference represents the gain in productivity.
This gain, in principle, represents a potential increase
in standard of life, made possible by using the labour
set free for the production of more consumer goods.
The compensation argument says that by the technical
progress new real income has been createdand this will
automatically provide the demand for the additional output
and therefore for the displaced labour.
Each o these points gives rise to a long series of consideration
ad A. )
1. We have first to exclude the case in which the technical
improvement accurs on the occasion of the replacement
of an old machinery which would have had to be undertaken
anyhow. There need be no new employment here, unless the
new machine is more costly ( in terms of manpower ) than
the old one.
It must be admitted, however, that most replacement in
industry is motivated by technical obsolescence, so that
the argument looses some of its force.
2.1r the investment goods industry islocated far away -
in the extreme case, if it is in another country -
the compensation becomes problematic or fails.