Realist, not conformist analysis of the latest financial, business and political news

Today’s Indian Misunderstanding Of Economics – India Won’t Have Driverless Cars Because Jobs

Economics isn’t all that difficult – after all, as the man said it’s all obvious or trivial except Ricardo on comparative advantage. This does not though stop some people some completely misunderstanding economics so as to get it all entirely the wrong way around. So it is with this comment from Nitin Gadkari on driverless cars. They’ll not be allowed in India because we need to provide jobs for everyone and automating driving would be to reduce the number of jobs on offer. The problem with this is that Gadkari is not just some random ignorant out there making a mistake, he’s actually the Minister for Road Transport and Highways – thus in charge of this sort of regulation. Therefore his ignorance is going to keep more Indians poorer for longer than would be the case if only he knew what he was talking about.

We don’t want to “provide” jobs and we most certainly don’t want to preserve them by not allowing new technologies. The art and aim of economic development is to destroy jobs whenever we can. That’s the process that makes all of us richer over time. Thus this is a gross, gross, mistake:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] Nitin Gadkari, Minister for Road Transport and Highways confirmed that driverless cars won’t be allowed in India. He said that driverless cars cannot be allowed now as India first needs to provide jobs to everybody. I am open to discussion but I don’t think that is a priority now and the need of the hour is electric vehicles and energy efficient cars. One of the reasons for not allowing driverless cars is that it could lead to drivers losing their job, which will increase unemployment in the country. [/perfectpullquote]

This is to entirely misunderstand what makes us and a society rich. We have scarce resources, we desire to have the maximum output we can from those resources. One of the resources which is scarce is human labour. We thus desire to economise upon our use of the time of the workers. So, if we have them using less time to do this task then they will have time to do a second task. We as a society are now richer by the output of the time spent doing that second task.

Labour, that is, is just like any other economic resource, something we wish to maximise the output from and minimise the input of into any particular process. We are, therefore, always hoping to destroy any one job by using a machine to do it instead. That frees up some labour to do something else. This is, by definition, both something that makes us richer and also economic development.

So what is it that we desire here? Transport services, obviously enough. If we use driverless cars then yes, we need to employ fewer drivers. That means we have freed up some amount of labour to go and do something else. Those ex-drivers might become ballet dancers, nurses, brewers of lovely beer. We as a society are now richer by the value we place upon more ballet, more health care and more lovely beer for we’ve still got those transport services from the machines.Taking human labour away from one task because we can now use a machine to do it makes us richer by the new production from that freed up human labour. Driverless cars make us richer precisely because jobs as drivers disappear.

The Minister, Nitin Gadkari, is simply completely and entirely wrong here. That driverless cars will destroy jobs is precisely the very reason that India should allow them – they’ll make India a richer nation by destroying jobs.

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Jonathan Harston
Jonathan Harston
5 years ago

To use your earlier analogy, India is destroying the possiblity of having a national health service by banning tractors.

Matt Ryan
Matt Ryan
5 years ago

Politicians are there to get (re)elected therefore short-termism is rife. Doesn’t matter if the Indian taxi driver or trunk driver stays poor because of this as long as the politician can get elected in the next few years.

Same reason we in the UK are in the crap with (state) pensions and the NHS – politicians keep promising more than they can deliver. However as long as the can is kicked far enough down the road, they can keep their snouts in the Westminster trough.

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