In my explanation of a classless economy, I suggested that unemployment may be directly caused by the uneven exchange of labor hours. Here is an explanation of how that is exactly the case. For discussion, consider an economy consisting of four people who only need three goods: food, shelter, and clothing. Due to the degree of availability of food, and the wear and tear the environment puts on the rudimentary shelter and clothing they are able to provide themselves, it is generally understood that each inhabitant will have to spend 2 hours a day every day working on each of his or her own needs for food, shelter and clothing. 

Table “Self sufficiency; no trade” presents the numbers for a society where no trade is occurring. The left side of the table (the rows) tracks the output produced by each of the members of this society, and the top of the table (the columns) tracks the recipient of that output. Given that no trade is happening, if we look at Al on the left side of the table, going to the right, we see that Al spends two hours per day on each of food, shelter, and clothing. Going upward, we see that he did this for himself. The same goes for each of the other members of society. Each person in this scenario works 6 hours, and also receives 6 hours of output. The grand total at bottom right shows that our society of 4 people as a whole is working 24 hours per day (6 per person) to meet its basic needs.

Table “Simple, equal trade” shows the result of simple trade. For the most part, each member of society specializes in a trade/craft (maybe two) and trades the output of their work in that craft with other members for their output of their own craft. Going from left to right, we see that Al is doing 2 hours of food collecting for himself, 2 hours for Bob, and 2 hours for Charles. Looking at Bob, we see that he is doing 2 hours of shelter building for Al, himself, and David. Charles spends 2 hours a day making clothes for Al, 2 hours doing the same for himself, and 2 hours collecting food for David. David spends 2 hours a day making clothes for Bob, 2 hours doing the same for himself, and 2 hours building shelter for Charles. Everyone still works 6 hours a day and ultimately gets 6 hours of output.

Table “Trade with equilibrium pricing” exhibits what we see in our own reality today. Here, different trades are not traded equally, an hour for an hour, but are traded at equilibrium prices. Our very simple example doesn’t show how differences in supply and demand determine equilibrium prices for labor, but that’s not the intent of this table. We know how equilibrium pricing works, so it’s not necessary. We only need to show the end result, which is that people trade hours of their labor unevenly. For example, in the table, we see that Al requires 5 hours of Bob’s shelter building output for 2 hours of his own food collecting output. Al also requires 5 hours of Charles’ clothing making output for 2 hours of his food collecting output. Similarly, Bob demands 4 hours of Charles’ output for 2 hours of his own.

The point of this table is not that David has to do all his own work and therefore incurs all the learning curve costs and training costs of knowing several skills. The ultimate point is that Al demands more of others’ time in exchange for his own. Al consumes enough of Bob’s and Charles’ time that they have nothing left to trade with David. Al is living large, and has no incentive to work any more than necessary in order to have something to trade with David. So David has no one to trade with, and trade in this discussion is synonymous with employment, so David is unemployed.

Looking across the table to see how much labor each participant offered in trade, and then looking down the columns to see how much output each participant received in trade, we see results very similar to what we see in real life. Al has worked 6 hours collecting food and trading it for shelter and clothing. In addition to his own 2 hours of food collecting output, he’s received 5 hours of shelter output from Bob, and 5 hours of clothing output from Charles. He’s worked 6 hours, but received the output of 12 hours worth of work.

Bob may take pride in the fact that he gets more of Charles’ time than Charles does of his own, but ultimately he’s working 9 hours and getting 8 hours of output. Charles works 11 hours but gets 6 hours of output. Where society at large had been working 24 hours a day to meet their needs, now they’re working 32 hours a day because of how much everyone is overproducing for Al. 

This isn’t just an interesting way to think about it, this is the accurate way to think about it. The situation isn’t kind of like this, it’s exactly like this. If we trade our hours of labor evenly, we will eradicate unemployment.