{"id":479,"date":"2016-11-25T23:30:23","date_gmt":"2016-11-26T04:30:23","guid":{"rendered":"http:\/\/commoncents.blogwyrm.com\/?p=479"},"modified":"2016-11-23T20:30:56","modified_gmt":"2016-11-24T01:30:56","slug":"division-of-labor","status":"publish","type":"post","link":"https:\/\/commoncents.blogwyrm.com\/?p=479","title":{"rendered":"Division of Labor"},"content":{"rendered":"


\n<\/a>This Thanksgiving I thought I would focus on an aspect of the economy, one for which I am extremely thankful and which doesn\u2019t get a whole lot of attention:\u00a0 the division of labor.\u00a0\u00a0 For the past several Thanksgivings, this column has focused on the lessons of private property that the pilgrims experienced (the hard way) as they tried to setup a life in the new world.\u00a0 This time around, I thought it would be appropriate to examine the division of labor as one of the central pieces that make up a voluntary economy.<\/p>\n

I\u2019m not sure where the division of labor was first noted in the historical record, but it is clear that human society has organized itself for millennia around the idea of a person training to learn a set of narrowly-defined skills\u00a0 and then working within a \u2018trade\u2019 that allows them to apply those skills effectively.\u00a0 There are at least three basic, fundamental reasons for why specialization helps.<\/p>\n

First there is always a setup, an overall cost for getting things in order.\u00a0 This cost includes the time spent on the learning curve wherein the tradesman learns the specific set of skills required and the capital required to support the activities.\u00a0 Since it is a non-reoccurring cost it will be \u2018cheaper\u2019 when amortized over a large number of the same tasks.\u00a0 This ensures that the cost passed on to the consumer will be smaller, and thus more economical, when spread over multiple items.\u00a0 The only way to realize these per-unit savings is to have experts devote their time to reaping this benefit.<\/p>\n

Second, there is the fact that with practice comes speed.\u00a0 A person who focuses his time on a limited set of tasks becomes much faster, since he is not distracted with the need to \u2018change gears\u2019 in his thinking or actions.\u00a0 The increased speed results largely from the fact that the uncertainty and the wrestling with what to do and when is taken out of the activity.\u00a0 An excellent example of this is the speed that results from someone who knows how to type using all ten fingers compared with the hunt-and-peck typist.\u00a0 The net result is an improvement in overall productivity.<\/p>\n

The third reason that specialization thrives is that with practice also comes innovation.\u00a0 The expert has a chance to see the same operations over and over; to experience what works well and where improvements in the process can be made.\u00a0 As a result, new techniques, materials, or processes and organizations are more likely to occur to the expert compared with someone only tangentially familiar with the trade.<\/p>\n

Adam Smith noted the amazing effects of the division of labor in his An Inquiry into the Nature and Causes of the Wealth of Nations<\/em><\/a> (which most people shorten to simply The Wealth of Nations<\/em>).\u00a0\u00a0 In Chapter 1, Smith notes:<\/p>\n

[T]ake an example [of] the trade of a pin-maker: a workman not educated to this business \u2026 could scarce, perhaps, with his utmost industry, make one pin in a day, and certainly could not make twenty. But in the way in which this business is now carried on, not only the whole work is a peculiar trade, but it is divided into a number of branches, of which the greater part are likewise peculiar trades. One man draws out the wire; another straights it; a third cuts it; a fourth points it; a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations; to put it on is a peculiar business; to whiten the pins is another; it is even a trade by itself to put them into the paper; and the important business of making a pin is \u2026 divided into about eighteen distinct operations.\u00a0 I have seen a small manufactory of this kind, where ten men only were employed, \u2026 make among them about twelve pounds of pins in a day. There are in a pound upwards of four thousand pins [and] \u2026. [t]hose ten persons, therefore, could make among them upwards of forty-eight thousand pins in a day.<\/div>\n

A conservative estimate of the gain that results from this specialization is to over-estimate the non-experts output at 10 pins\/day and to under-estimate the 10-man factory at 40,000 pins. The gain is then a factor of 400 per person.\u00a0 This is but one aspect of what can be achieved by the division of labor guided by what Smith termed the Invisible Hand<\/a>; the social benefits that result from individual pursuit by members of an economy of their own rational best-interests.<\/p>\n

There is an interesting consequence that results from the division of labor; no man really knows how to make anything.\u00a0 By this is meant that no man can really know how to start purely from natural resources and, by expending his time, effort, and knowledge, build even the most modest of modern objects that society as a whole takes for granted.<\/p>\n

In a famous essay entitled I Pencil<\/em><\/a>, Leonard E. Read explores the complex set of operations, events, processes, and connections required to make something so \u2018mundane\u2019 as a pencil.\u00a0 Written in 1958, the essay emphasizes four points about the pencil and, by extension, the economy as a whole:\u00a0 1) its creation is contingent on innumerable products and services that precede it, 2) no single mind knows all of these products and services nor knows how to put them together, 3) its creation is a miracle of the Invisible Hand, and 4) that men and women can accomplish amazing things when free to try.<\/p>\n

Unfortunately, the essay is a bit old fashioned in its language and lacks what is probably the most essential element in today\u2019s modern, hyper-stimulated world: pictures.\u00a0 To this end, I thought it would be fun to try to give a visual interpretation.<\/p>\n

So, start with the pencil:<\/p>\n

\"pencil\"<\/a><\/p>\n

nice, simple, no moving parts.\u00a0 And it is easy to build one of these, right? All one needs is wood, some graphite for the \u2018lead\u2019, a bucket of paint, some rubber for the eraser, and a bit of metal to hold it on the end.<\/p>\n

\"pencil_parts\"<\/a><\/p>\n

But wait!\u00a0 How does one put all these components together?\u00a0 One needs a factory.\u00a0 And how does one get the components to the factory?\u00a0 One needs a truck, and the roads upon which to drive, and fuel to power the engine.<\/p>\n

\"pencil_factory\"<\/a><\/p>\n

And how does one get the truck?\u00a0 Well\u2026, a truck is made of steel, iron, glass, copper, rubber, and so on.\u00a0 So one needs all these materials; a means to transport these materials from the factories that made them to the factory that builds the truck; fuel to power each factory and the trucks used to transport them (yep \u2013 you need trucks to build trucks). The number of linkages is truly mindbogglingly complex and intricate.\u00a0 And we actually haven\u2019t even touched upon the services side of things, like operating a distribution network, running a store, or marketing and advertising.<\/p>\n

Even abstracting the pictures of the objects away until nothing is left besides labels and links doesn\u2019t help in the final analysis.\u00a0 The following image is an attempt to capture only some (the barest few) of the most superficial connections, and it is already hopelessly complicated.\u00a0 The web-work of the economy is truly beyond the understanding of any human or group of humans.<\/p>\n

\"pencil_connected_economy\"<\/a><\/p>\n

 <\/p>\n

And yet, there are some who think that the central planning can be done by a core group of wise and intelligent bureaucrats who are smarter than their fellow citizens.\u00a0 Those who think this way are not intelligent or honest enough to look at the interconnectedness of the economy and realize that it is beyond the scope of human understanding. \u00a0\u00a0As for me, I\u2019ll continue to trust in the Invisible Hand and be thankful for it.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

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