Every generation experiences the same fear: technology is going to permanently displace workers. The spinning jenny was supposed to idle England’s textile workers. The steam engine would hollow out the trades. Electricity would render physical labor unnecessary. The computer and the Internet would finish the job of ending work. Now, artificial intelligence models have assumed the role of civilization-ending technology, and the doomsayers are back at their posts.

　　This time, however, some of the loudest alarms are coming from the inside. Dario Amodei, the CEO of Anthropic, claims that AI could eliminate half of all entry-level white-collar jobs within the next five years and that unemployment could rise to between 10 and 20 percent. Dan Schulman, the CEO of Verizon, predicts that AI, combined with developments in robotics, could lead to unemployment rates of 20 or even 30 percent in the next few years. BlackRock CEO Larry Fink argues that AI could cause students graduating from college in the next few years to face the highest unemployment rate in years, even without a recession. These are serious people with serious thoughts about a serious issue. Fortunately, they’re also seriously wrong. This is just the latest example in a long series of examples of one of the oldest and most refuted errors in the history of economic thought.

　　Economists refer to this as the “lump of labor fallacy.” Briefly, this is the idea that the total amount of work in an economy is fixed. New technological advancements don’t simply save workers time and effort; they displace labor and permanently destroy it. To be fair, there is surface-level plausibility here. Who among us hasn’t walked past a bank of uncrewed cash registers standing idle before trudging over to the end to go to the self-checkout lane? The rise of the self-checkout lane, which allows one cashier to simultaneously operate four, six, sometimes even a dozen cash registers, certainly seems to have permanently displaced workers.

　　But this framing mistakes a snapshot for a dynamic system. It’d be like looking at a photo of a horse mid-stride and concluding that horses move by flying above the ground. Just like the belief in flying horses, the belief in the lump of labor fallacy is equally disturbing in today’s age. It has been falsified, repeatedly and conclusively, across centuries of transformative technological change.

　　What Adam Smith Knew

　　The deeper error perpetuating this fallacy is not a lack of historical understanding or even economics. It’s actually much more basic. And Adam Smith, writing 250 years ago, understood why the lump of labor fallacy just doesn’t add up.

　　In Book II, Chapter III of The Wealth of Nations, Adam Smith points out the most foundational force in all of economic life. It wasn’t the profit motive or even self-interest, really. He points out that people have an innate and insatiable desire to better their condition. He described it as a desire which, though generally calm and dispassionate, comes with us from the womb, and never leaves us till we go into the grave. In the whole interval separating those two moments,” Smith continued, “there is scarcely a single instant in which any person is so perfectly satisfied with their circumstances as to have no wish for improvement of any kind.”

　　Smith’s point is incredibly powerful. The lump of labor fallacy, at its core, assumes not just that the amount of work to be done is finite, but that by logical extension, the amount of human wants is also finite. Smith demolishes this idea. The desire to better one’s condition is not a checklist of specific wants that can be completed and then put aside. It is a disposition without an end. As technology raises productivity and living standards, we have a greater ability to meet aspirations that would previously have gone unmet. There is always something to improve, some service not yet being rendered, and problems that only become visible through increased prosperity.

　　This is why the predicted catastrophes in the labor market never arrive. The hand-loom weavers displaced by the spinning jenny were a genuine disruption. But the textile industry that followed employed more workers, not fewer, producing vastly more output and at lower prices. In doing so, this generated the demand for goods and services that had previously not existed. Each wave of apparent destruction opened new territories for innovation that could not have been mapped in advance because the wants that would fill them had not yet been articulated. The fallacy considers jobs lost in the immediate term. But it does not count the jobs that are not yet imagined.

　　The lump of labor fallacy gets the economics wrong because it makes fundamental errors in human nature and economic history.

　　A charitable interpretation of the fear this time is not that AI will replace jobs permanently, but that the disruption will be so large and so pervasive that the rate of job loss could far outpace the abilities of entrepreneurs to imagine and create new sorts of work for these displaced workers. And to be honest, it’s a fair concern. But there are two ways in which this can be addressed. One would be to somehow try to slow down the rate of disruption by protecting certain industries and jobs. The other would be to find ways to speed up the process of creating new jobs. On paper and with a narrowly defined set of parameters, both seem equally viable. That quickly changes once politics gets involved.

　　What Mokyr Showed

　　Where Smith tells us why the lump of labor fallacy fails, Joel Mokyr provides us with the framework for understanding the conditions under which it can happen. His answer, developed most fully in his 2016 book A Culture of Growth, centers on what he calls a culture of improvements. Technological change is a necessary condition for economic growth, but it is not sufficient. Sustained economic growth requires the accumulation of useful knowledge, the capability to transform ideas into tangible production, and the cultural openness to embrace change.

　　What Mokyr shows, which directly contradicts the lump of labor fallacy, is that technological transformation is not a redistribution of a fixed stock of work. It is an expansion of the productive frontier itself, which allows for the continuous creation of new goods, services, and occupations that did not previously exist. The steam engine did not merely substitute for ox power. It reorganized how human energy and ingenuity could be deployed. The animating idea became “What else can I do with this steam engine other than replace oxen?” This made possible industries and forms of commerce that no one alive in 1750 could have anticipated. 

　　Like Smith, Mokyr’s culture of improvement is a dispositional idea that is inexhaustible. And, also like Smith, we can see this in our own lives. Who among us has ever completed a task and then honestly thought, “There, I’ve completed all the things that I could possibly do today”?

　　The Fallacy’s Persistence

　　Given all of this, why does this fallacy persist? Frédéric Bastiat’s distinction between the seen and the unseen provides a useful starting point. The jobs displaced by new technology are real and highly visible. The jobs that haven’t been created yet are largely invisible. Even imagining them requires genuine intellectual effort to reason from Smith’s insight and Mokyr’s analysis to the conclusion that today’s displacements will generate tomorrow’s demand.

　　But the public choice dimension is also important and considerably more troubling. The workers in specific industries facing technological disruptions have powerful incentives to lobby for protection. This could include regulation, licensing requirements, featherbedding, or other restrictions that prevent the adoption of labor-saving technologies in order to protect existing jobs.

　　America’s own ports serve as a perfect example of this. While Chinese and European ports have embraced automated cranes, autonomous vehicles, and AI-assisted logistics, the International Longshoremen’s Association has spent years fighting against exactly these technologies in the US, striking in 2024 to further prevent their adoption. The result of this refusal to adopt technology has been that foreign ports are about 40 percent more productive in terms of the time, effort, and cost of getting containers on/off ships in port.

　　The 2025 ILA contract, which covers about 45,000 dockworkers through 2030, includes within it full contractual protections against automation. ILA leaders themselves describe this as “unique among any dockworker labor agreement anywhere [in the world].” Harold Daggett, the ILA president, said it most directly: “Automation does two things. It makes the companies rich and the longshore workers unemployed. Automation doesn’t improve productivity. It destroys lives and livelihoods.”

　　In conclusion, the problems with the lump of labor fallacy were settled long before AI arrived. Smith understood that human aspiration is a disposition, not an exhaustible resource. Mokyr showed that civilizations which honor that aspiration grow, and those that suppress it stagnate. The lump of labor fallacy gets the economics wrong because it makes fundamental errors in human nature and economic history.

　　But wrong ideas with organized constituencies do not stay defeated. The longshoremens contract shows what happens when the fallacy wins a political victory. If AI policy follows the same template, the damage will be measured not in port fees but in trillions of dollars of foregone growth and millions of jobs that never get created. The fallacy is intellectually bankrupt. Whether it remains politically solvent is the question that actually matters.