Multiplication by Division

In economics, one of the less intuitive aspects is why the division of labor leads to a multiplication of wealth.  “Less work is being done!” people cry.  “This means people are poorer!  How can fewer jobs mean more wealth?”  We hear this question in particular with regards to international trade.  The question steams from misunderstanding the very basics of economics: resources are scarce.

Since we do not live in Eden, resources are scarce.  What this means is there simply are not enough resources to satisfy every want and need a person might have.  One of the scarcest resources out there is time.  We’re always running out and we can never get it back.  Division of labor is economizing on time.  A simple example: by dividing necessary labor (in other words, “outsourcing”) to satisfy my wants and needs among other people, I have more free time to spend as I wish.  By not having to worry about growing my own food, making my own clothes, composing my own music, building my own home (but rather outsourcing those jobs to farmers, grocers, tailors, musicians, and carpenters), it frees up my time to work on other things: educating myself, writing a book or blog, etc.  Things that can improve my wealth and/or society.  By dividing labor, we can get more out of the fixed time we have in life.

Division of labor is a good thing, not a bad thing.  Division of labor is what has allowed man to rise above his beginnings as a hunter-gatherer and has nearly eradicated true poverty in the world.  If we want to enrich Americans, to make America great, then we need more division of labor, not less.  We need to maximize our hours on this planet, not minimize them.

 

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