New Menace to the Economy: The ATM

As I wrote the other day, I have a huge backlog of media that really needs to get blogged this weekend. One of the big ones is a short, humorous "Hammertime" video I just put together last week.

In a recent interview on NBC, President Obama continued his long-running trend of making economically illiterate statements to the press. He said:

“There are some structural issues with our economy where a lot of businesses have learned to become much more efficient with a lot fewer workers. You see it when you go to a bank and you use an ATM. You don’t go to a bank teller. Or you go to the airport and you’re using a kiosk instead of checking at the gate. So all these things have created changes in the economy.”

In context, Obama did kind of, half-heartedly, suggest that there is some good to come from automation and efficiency improvements, but his overall view was that this is clearly lamentable because it "costs" jobs and is broadly harmful to the economy.

But, predictably... that just isn't true.

It made my brain explode, so I absolutely had to do a video about it, and for about a week I was trying to find the best way to mock the statement and as frequently happened, Mary Katharine Ham came through with a killer suggestion that just opened it all up for me... so... I made what may be the country's first-ever political attack ad against the Automated Teller Machine.

Check it out:

Efficiency improvement may create some (temporary) job displacement, as some workers and indeed whole industries become outmoded. But as with most bad economists, Obama's position is only looking at the seen effects (negative job displacement), and ignoring the myriad positive "unseen" effects of these kinds of changes.

Of all technological advancements Obama could have chosen to make his point, ATMs are a colossally stupid example, to boot...

For one thing, consider that the reason ATMs exist at all is because people wanted more access to their money at all hours of the day. This enables an immense growth in economic activity to occur that couldn't happen 30 or 40 years ago. Ironically, since Obama also believes that spending/demand drives economic growth, and he has said as much numerous times, then he should positively love the ATM!

It's not hard to understand how this works, but as it happens, I have a perfect real life example from just last weekend.

For as long as I can remember, I have wanted a kayak. I have never really been able to justify spending the $900 or so a decent one costs new, and of course, I have been rather itinerant over the last few years so adding yet another large object to my life that just has to be moved never made much sense.

It's usually nothing more than some online window-shopping, but I often check out craigslist to see if there are any amazing deals on kayaks just for fun. But last Saturday I ran across a deal I just couldn't pass up.

A man was selling a good kayak, paddle and quality life jacket for $440... less than half the price of a comparable new boat, and an even smaller fraction of the total cost, since paddles and lifejackets aren't cheap new either. Knowing that I am about to sign a new 12 month lease, and that I have a solid 3 months of great kayaking weather... it finally made sense to me.

Problem: It was 5pm on a Saturday.

In years past, I would have called the guy (presuming I saw his ad in a newspaper or something, let's not even get into the internet as "job killer" vs. bringer of real economic growth) and when asked if I could bring cash, I would have had to say no. At that point, I would have very likely lost out on that deal, since someone else probably would have had cash and beat me to the punch. Not so thanks to the ATM! All I needed to do last weekend was say, "Hey, I will be right over after stopping at an ATM for cash"... Problem solved.

Commerce achieved!

And it's true of smaller transactions as well... Imagine being out on a Friday night and you are out of cash... Say a buddy wants to grab a slice of pizza. No cash? No pizza. And thus no money for pizza shop owner, no money to his suppliers, to their suppliers, to their families, etc.

ATMs make commerce possible today that largely was not possible before ATMs. It is the same reality of the internet and debit cards, and all the other ways people now have of getting what they need & want 24 hours a day now that they simply didn't have access to until recently.

Hilariously, though, as Market Watch pointed out the other day, not only is Obama's broad assumption that ATMs are bad for the economy wrong, the specific case of it putting bank tellers out of work nonsense as well! The amount of bank tellers has actually increased...

"The number of tellers, in fact, rose to an all-time high of 607,960 in 2007 from 493,000 at the start of the decade, according to the Bureau of Labor Statistics."

Now, granted, that was at the height of the recent financial bubble... But still, it's a bit hilarious, isn't it?

With all the bloviating about other prominent political figure's historical and factual blunders lately, one would think reporters wouldn't give Obama a pass on this stuff. But of course... They do.

Technological innovation is good for an economy in a thousand different ways. It frees up labor and capital to be made more productive, it helps us all by significantly contributing to lower prices and improved quality of the goods and services we need and want on an every-day basis... and with the excess money in our pockets - assuming the government doesn't take all of it - we can start new businesses offering new goods and services and innovate new ways to serve other people's demands (current and future), and for that we will invariably need to employ more people.

Lamenting improvements in technology - particularly those which create greater economic opportunities across the board - is asinine, and should not be something we see an American president engaged in.

Alas, as my friend (and Executive Director of the Foundation for Economic Education) Carl Oberg correctly noted, it will never be in a politician's interest to see the big picture or to explain that even when a few outmoded industries die and people working in them lose their jobs, the local job loss does not mean there is general unemployment as a result of innovation. In fact, all it really means is that the economy is undergoing what Schumpeter termed "creative destruction".

And that, my friends, is an amazingly good thing.


PS. Carl Oberg also said that on further reflection he would prefer to demonstrate more sympathy tothose losing their jobs to innovation. While I do agree, I think that is better dealt with in a different video entirely. Such a video would have to cover the difference between creative destruction that happens naturally, vs. that which happens as a result of force... Obama doesn't seem particularly distraught, for example, by all of the lightbulb manufacturers and glass makers his "green" policies are putting out of work next year.