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.