Division of Labor: Burgers and Ships

A simple example of hamburgers being made at home versus at a restaurant can help illuminate the explosion of prosperity since the Industrial Revolution. The story of the division of labor and development of specialized tools is not a new one — Adam Smith began The Wealth of Nations with this concept. Yet it still has tremendous explanatory power about the world we inhabit.


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 for you 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 and fries 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 increases 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 of specialized technology that dramatically increased the 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, or 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. 


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