Marginal Counter-Revolution

For some reason, unknown to me, Tyler Cowen is supporting the myth that increasing productivity is posing a threat, even in the long run, to large groups of people in a free market economy. He quotes from Jane Galt the following:
"Something that conservatives, and especially libertarians, have been slow to grapple with is that the more productive our society gets, the greater the possibility that some peoples' labor simply isn't productive enough to support them at a minimum level. ... Are we comfortable telling people to live as if they're nineteenth century peasants, if their cognitive gifts, or education, won't stretch to more?"

Other people than me has of course noticed that the claim that productivity would hurt the poor is bogus. This unless "a minimum level" is referring to a level that is increasing with productivity. The sentence with the "nineteenth century peasants" clearly speaks against this however. In a market economy, competition for jobs drives up wages for unskilled labor at the same rate as increasing productivity makes skilled work pay off better. In a free market with rational agents, this is the case even when unskilled labor productivity fail to increase. Rather than reminding readers about the virtues of free market economy, Tyler points to a way in which increased productivity actually hurt. In areas where many skilled workers want to live, their productivity increase translate into higher housing prices, so the unskilled workers have to move. So what? Aren't we all much better off than people in the corresponding positions in society were say 100 years ago? Isn't this mainly thanks to productivity increases and free markets?

And were are all the hoards of people that "isn't productive enough to support them[selves] at a minimum level" due to centuries of unfettered productivity growth?

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