Chris Dillow — Technical change as collective action problem

Can capitalism handle technology as technology renders more and more labor economically inefficient and therefore expendable. What happens with demand?

Quite predictably, unprofitable firms will cease to exists. Many of these are those that service less prosperous levels of society and competition turns to more prosperous levels. Presently, the upper forty percent of a developed economy account for a large percentage of sales. 

It is therefore possible that firms would focus production on this segment and write the rest off, letting the fend for themselves. Governments would be left to pick up the slack with welfare programs if at all.

This would be a reversion to the status quo ante from most of history after the emergence of surplus societies in which the ruling elite owned or controlled most of the wealth and resources. It is also the status quo in the Third World in the present.

Stumbling and Mumbling
Technical change as collective action problem
Chris Dillow | Investors Chronicle