The Luddite fallacy is the simple observation that new technology does not lead to higher overall unemployment in the economy. New technology doesn't destroy jobs – it only changes the composition of jobs in the economy.
Technological unemployment is the loss of jobs caused by technological change. Such change typically includes the introduction of labour-saving machines or more efficient processes. Historical examples include artisan weavers reduced to poverty after the introduction of mechanised looms. A contemporary example of technological unemployment is the displacement of retail cashiers by self-service tills.
That technological change can cause short-term job losses is widely accepted. The view that it can lead to lasting increases in unemployment has long been controversial. Participants in the technological unemployment debates can be broadly divided into optimists and pessimists. Optimists agree that innovation may be disruptive to jobs in the short term, yet hold that various compensation effects ensure there is never a long term negative impact on jobs. Whereas pessimists contend that at least in some circumstances, new technologies can lead to a lasting decline in the total number of workers in employment. The phrase "technological unemployment" was popularised by Lord Keynes in the 1930s. Yet the issue of machines displacing human labour has been discussed since at least Aristotle's time.
Prior to the 18th century both the elite and common people would generally take the pessimistic view on technological unemployment, at least in cases where the issue arose. Due to generally low unemployment in much of pre-modern history, the topic was rarely a prominent concern. In the 18th century fears over the impact of machinery on jobs intensified with the growth of mass unemployment, especially in Great Britain which was then at the forefront of the Industrial revolution. Yet some economic thinkers began to argue against these fears, claiming that overall innovation would not have negative effects on jobs. These arguments were formalised in the early 19th century by the classical economists. During the second half of the 19th century, it became increasingly apparent that technological progress was benefiting all sections of society, including the working class. Concerns over the negative impact of innovation diminished. The term "Luddite fallacy" was coined to describe the thinking that innovation would have lasting harmful effects on employment.
The view that technology is unlikely to lead to long term unemployment has been repeatedly challenged by a minority of economists. In the early 1800s these included Ricardo himself. There were dozens of economists warning about technological unemployment during brief intensifications of the debate that spiked in the 1930s and 1960s. Especially in Europe, there were further warnings in the closing two decades of the twentieth century, as commentators noted an enduring rise in unemployment suffered by many industrialised nations since the 1970s. Yet a clear majority of both professional economists and the interested general public held the optimistic view through most of the 20th century.
In the second decade of 21st century, a number of studies have been released suggesting that technological unemployment may be increasing worldwide. Further increases are forecast for the years to come. While many economists and commentators still argue such fears are unfounded, as was widely accepted for most of the previous two centuries, concern over technological unemployment is growing once again.
The Luddite fallacy is built upon the ideals of the Luddites. The Luddites were 19th-century English textile workers (or self-employed weavers who feared the end of their trade) who protested against newly developed labour-economizing technologies, primarily between 1811 and 1816. The stocking frames, spinning frames and power looms introduced during the Industrial Revolution threatened to replace them with less-skilled, low-wage labourers, leaving them without work. They reasoned that owners of automated capital would leave them, as well as the majority of the working class, powerless before capitalists who would pursue cheaper labour than they could afford.
Since then, Luddism has become a byword for opposition to technology (erroneous as Luddites were not anti-technology) based on the idea that automated labor will displace human workers, leaving them without any method of gaining income. The Luddite fallacy, therefore, claims that automation destroys jobs.
However, this has been proven false as, throughout history, the use of labour-saving machines leads to the creation of more jobs that had not been possible before. This requires learning new skills, and thus creates a tree of employment that extends far beyond the original displaced workers. As automation becomes more complex, higher-level skills become more sought after and valuable, and thus even more jobs arise. This works to improve the lives of labourers at large and expand the economy. It can be summarized as thus as technology becomes more complex, the number of jobs needed rises and the skill-set required expands.
The STEM fallacy (also known as the Other Robot fallacy) is the refutation of the Luddite fallacy. It states that proponents of the Luddite fallacy only consider physical automation, and fail to account for intelligent automation that is capable of learning new tasks.