The benefits of voluntary trade are
obvious.
Suppose this guy has bananas and this
guy
has oranges. He needs oranges for marmalade
and this guy needs bananas for banana bread.
They swap-- they exchange. Each guy is
made better off
through trade. In our last video though we saw
that a key fact about the modern world
involves more than simple exchange.
More than merely moving existing things
around. We grew rich by also producing
more stuff per person. Say you're cooking
hamburgers and fries for your family. It
might take an hour to
prepare the meal because you
individually do everything. You
start the grill you cook burger chop the fries slice the vegetables--
on and on and on. Now look at how a burger joint
makes hamburgers.
Each worker has a specific job in the
chain of production that serves
burgers to its customers. Each worker
is specialized.
This specialization, what Adam Smith
called the division of labor,
makes individual workers more productive. No more lost time switching between
tasks.
Plus as a worker concentrates his effort
he gets
better at doing the task at hand. But
it's not just the specialization of workers
that increase output.
It's also the development of specialized
tools
that modern workers use. The burger joint
has tools to slice potatoes
to cook burgers and to fry the fries. That's
just specialization 101.
I'm sure you've seen one of these around.
The container: they're everywhere! Cargo
transported by ship used to be stored in
barrels,
in sacks, in wooden crates, and off-loaded
by hand.
The invention of the container though created
more than just a metal box to put stuff in
With it came a wave specialized
technology that dramatically increased
productivity of shipping
and offloading. Ships themselves evolved, dwarfing their predecessors
with the ability to stack containers
below and on the deck. Ports changed too,
dredging deep waters and providing
specialized pilots and gantry cranes
to quickly park and unload ships.
Driverless yard tractors
magically whisk containers away. The
containers are put on trucks
and trains built specifically to hold them.
Workers today are superhuman compared to
their brethren of yesteryear.
We went from carrying bags on our backs to
lifting the equivalent of
two school buses with mere flicks of our
wrists. To make specialization worthwhile
you need to make a lot stuff. For example
there is no point specializing in hamburgers
if you plan to cook only one burger a
week
for buying a forklift or crane simply to unload
weekly groceries from the family car.
Trade provides a market big enough to make it
worthwhile to invest in specialization
and the bigger the market the more we
specialize and hence
the more we can produce. Specialization
doesn't stop there
in our next video, we'll explore the
specialization of the most productive
engine known to humankind:
The human mind. What about the videos after that?
Well you decide. You tell us what topics we
should cover.
Here's the current leader board of
questions from our viewers.