Sudden disruption

by Russ Roberts on May 15, 2009

in Work

Here is Adam Smith speculating in The Wealth of Nations on the dynamic nature of the British labor market if all tariffs and barriers to imports were removed. Surely, there would be mass unemployment and catastrophic disruption. Not so, says Smith. And he uses a very elegan natural experiment to make his case:

Secondly, though a great number of people should, by thus restoring the
freedom of trade, be thrown all at once out of their ordinary
employment and common method of subsistence, it would by no means
follow that they would thereby be deprived either of employment or
subsistence. By the reduction of the army and navy at the end of the
late war, more than a hundred thousand soldiers and seamen, a number
equal to what is employed in the greatest manufactures, were all at
once thrown out of their ordinary employment; but, though they no doubt
suffered some inconveniency, they were not thereby deprived of all
employment and subsistence. The greater part of the seamen, it is
gradually betook themselves to the merchant-service as they could find occasion, and in the
meantime both they and the soldiers were absorbed in the great mass of
the people, and employed in a great variety of occupations. Not only no
great convulsion, but no sensible disorder arose from so great a change
in the situation of more than a hundred thousand men, all accustomed to
the use of arms, and many of them to rapine and plunder. The number of
vagrants was scarce any-where sensibly increased by it, even the wages
of labour were not reduced by it in any occupation, so far as I have
been able to learn, except in that of seamen in the merchant-service.
But if we compare together the habits of a soldier and of any sort of
manufacturer, we shall find that those of the latter do not tend so
much to disqualify him from being employed in a new trade, as those of
the former from being employed in any. The manufacturer has always been
accustomed to look for his subsistence from his labour only: the
soldier to expect it from his pay. Application and industry have been
familiar to the one; idleness and dissipation to the other. But it is
surely much easier to change the direction of industry from one sort of
labour to another than to turn idleness and dissipation to any. To the
greater part of manufactures besides, it has already been observed,*62
there are other collateral manufactures of so similar a nature that a
workman can easily transfer his industry from one of them to another.


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