The Division of Labor and Social Order | Carmen Dorobăț

I had planned on starting with a joke and then I realized you had a bookstore tour with dr. Gordon so right now you're up to date with all the best jokes so I'll just leave that aside our topic for this session this afternoon is division of labor and social order or Society and my aim will be to show you how the process of division of labor is connected to that of Social Development how the two are actually con generic processes how they develop at the same time how they underpin each other how their sides of the same coin if you want they're part of the same fundamental process of a monetary market economy so here's a brief overview of what we will talk today so first I'll give you an idea about division of labor series in the history of economic thought just so you can appreciate the history of the concept then we'll talk about a few fundamental concepts and terms that we will use in the lecture today such as the definition of the division of labor and money and things like that and the core of our lecture today our points three and four we will enjoy together a few numerical examples about the David Carter's comparative advantage and then I will present to you what I think are the salient characteristics of Mises law of association and why I think Mises laws of Association is actually deeper and richer than the principle of comparative advantage that David Ricardo means that belong to David Ricardo and finally we will conclude with some implications of Mises as law of Association for trade society and social order so um the topic of the division of labor began to be studied properly in the 13th and 14th century the seeds of this had actually been planted earlier on by some Greek philosophers such as Plato and Aristotle and some Chinese philosophers as well but it was with the Latin scholastic movement that the topic of the division of labor actually began to be looked at in a little bit more detail albeit in this case it was mingled with philosophical and moral questions and it was not actually studied from an economic point of view it was in the 18th century and with the Scottish enlightenment and what we call today classical economics that the question regarding division of labor and Social Development became one more economic in tone and the question that they asked was how does the separation of employment among persons their important social and economic consequences so it was at this time in the 18th century that actually emerged what we call a political economy of the division of labor and of international trade thereafter the more prominent definition of division of labor from this time I'm sure you know it's the invisible hand Adam Smith's invisible hand the invisible hand that organizes production and exchange at a social scale the Pitts however of Smith's analysis that I want to draw your attention to today was the fact that according to Smith's production exchange and social order happen in society in sort of a spontaneous way society is propelled by some of the an instinctual propensity of people to exchange so the social order emerges somewhat unplanned from their individual actions this was more piffle e-up expressed by Adam Ferguson as you can see here on the slides which says nations stumble upon establishments which are indeed the result of human action but not the execution of any human design now so society happens spontaneously unplanned people are not aware what their individual actions actually boil up to this idea of the unplanned and spontaneous social order was actually what influenced Marx and other socialist writers who came up with the idea that society has is propelled solely by its material condition yeah and goes through subsequent epochs and each efforts leads to its own downfall and finally to the advent of communism and socialism obviously we don't have time to go to details about that today I'll just let you draw your own conclusions about that in the 18th and 19th century so somewhat contemporary is someone contemporaries with with the classical economist the French liberal school also developed a body of work on the division of labor and a lot of modern commentators will tell you that the French liberals actually just popularized some of Smith's ideas yeah and that they had no original insight doctor Salerno has and Murray Rothbard is well done a great job at exploding that fallacy as Mises liked to say you know what I would like to say as far as division of labor is concerned so on the one hand you have here the name of a rj Torgo turgot had a treatise published in 1770 that was called reflections on the formation and distribution of wealth which a lot of people consider to contain the same ideas that were later contained in Adam Smith's Wealth of Nations the two were personally acquainted they had correspondence so of course there's a bit of a controversy as to who actually originated the idea of the invisible hand however the more important point that I would like to make that as far as my reading of the French liberal goes my see my impression is that the French liberals actually put a different emphasis as to how society and division of labour emerged and develop than the classical economics so for the French liberals the point in the way in which they were superior in their analysis is the fact that they emphasized the rationality and the purposefulness of division of labor and social development and this core of their analysis which was what became the salient characteristic of how Austrian economics looks at this process for Mises and before him for calm anger and after him for murray rothbard division of labor is an intellectual process not an instinctual one now people are aware of what their actions build up to at a social level yeah division of labor is according to Mises the outcome of a purposeful utilization of the universal law determining cosmyk becoming the higher productivity of the division of labour now I'll go into a little bit of detail as we as we go along but if you want a good source for seeing the differences between Mises and whatever came before him you know there's a professor salerno's article muses of social rationals I'll have it on the last slide among further readings so now on to a few definitions I've acquired this habit of starting the lecture with definitions from my PhD adviser dr. Guido Hillsman which some of you might may actually have seen giving the leg of this lecture before I graduated a few years back but I I'm still afraid of disobeying him so Chuck talk about a persuasive advisor I thought what if he watches it I mean who knows I'm going to get a phone call so decision of Labor most economists you see here the definition from the new Palgrave dictionary of economics most economists will define it as a division of a process of employment in two parts each of which is carried out by a separate person there are a few problems with the definition though and the main problem is that is very narrow yeah and I will explain why is it narrow by looking at a different definition the next one which I consider much better which I have shamelessly borrowed from Professor herb nur and preparing for this lecture professor urban are also gave this lecture in previous years yeah division of labor can be better defined as a purposeful specialization in production according to efficiency you know what this definition allows you to do is to understand just how far raging and pervasive division of labor actually is you know there's there's a key word here which is purposeful yeah and there's another keyword which is efficiency now so if we refer to something as purposeful it means that we refer to individuals yeah because only individuals act and individuals can be purposeful it refers to individuals in the market economy not only as solitary producers therefore but in the market economy as entrepreneurs so it refers also to the specialization of entrepreneurs in production it also refers to the specialization of the firms that these entrepreneurs bring together yeah and it also refers to the specialization of land or capital goods which individuals purposefully use them in a specific way yet and therefore apply specialization to them so not just to human labor now at the same time because we are talking about purposefulness we can eliminate from the beginning the more widely used but the rather incorrect unit of analysis of a nation yeah in most economics textbooks if you're going to see a discussion about comparative advantage you will be the comparative advantage of nation yeah but we know from Mises human action that nations do not act nations are not purposeful yeah so it's only a figure of speech when we say the u.s. specializes in car production or France specializes in mind production yeah and in economic figures of speech because economists are not poets figures of speech tend to actually detract from economic truths a lot of economists will use figures of speech actually cloud the issue at hand so remember as we go along that only individuals act only individuals specialize never Nations as such yeah now where do the benefits of division of labor come from there are two main causes for the benefits of the division of labor one is the inequality of human beings I've said the word inequality yeah which means some are stronger than others some are more analytical some are better singers the more bit of painters some wish they would have made it into Hollywood but can yeah I'll come back to the Hollywood example don't worry and the other aspect is the inequality of factors of production the unequal distribution of factors of production across the world I originally come from Romania we have a great climate for vineyards fruit trees grow very well in Romania on the other hand I currently live in the UK the UK has a lot of well rain and on top of that it has you know better pastures the cattle and yes the Industrial Revolution happened there and so on the core point of the idea of the benefits of the division of labour can be summarized as the fact that human labour in society and in the division of labour is more productive that human effort in isolation yeah but the point that I would like to further make again is that this is not true this is true regardless but individuals are also able to grasp this yeah this is a rational intellectual process individuals are able to perceive the fact that human effort in isolation is less productive than human effort in cooperation with other fellow human beings and they purposely use the knowledge of this fact in order to improve their welfare and in order to collaborate with other humans in society one thing that division of labour is not it is not teamwork yeah so we all love teamwork yeah but it's teamwork required implies that it would be simple collaboration you know specialization and division of labour require that people separate the tasks according to efficiency which is not what happens in teamwork yeah finally you're a tough crowd finally a specialization does not automatically guarantee as such in and of itself an increase in productivity yeah so there it's a necessary condition that we specialize in order to be more productive but it's not a sufficient condition specialization must be followed by exchange free trade I put free in parentheses because that's not what happens today yes but it must be complemented by exchange like the two people that specialize must be able to exchange the goods that they thereafter produce in order to enjoy both Goods and it must be accomplished according to market signals yeah what do I mean by market signals according to efficiency and we'll see in a little minute what those market signals actually are so to give you an example if I told you the Hollywood example will come back again if I decide to become an actress tomorrow and Meryl Streep decides that she wants to teach of economics we would have specialized yeah I would have specialized in acting and she would have specialized in teaching but that may not be what the market wants I mean who wants Meryl Streep to teach economics come on right so to wrap up the fundamental concepts in terms of actually I'm actually going to spend just a little bit of time on this because you've had the lecture with Professor urban ER this morning who talked about subjective value of market prices now how do we know what are the market signals that we look at in order to know that what we are deciding to produce when we specialize is actually worthwhile producing for the market and for ourselves in a bargain barter economy you might have needed to meet with your neighbor and have a little chitchat about yeah what you're good at producing and the things that you could make but in a monetary market economy we have money which is a generally accepted medium and commonly used medium of exchange I see dr. Engelhart not so happy I sold the definition from his lecture afterwards now and you have money prices yeah so once you have a generally accepted medium of exchange you know you have money prices and what these money prices do is they indicates to you of the person who's trying to specialize the monetary gain to be obtained when you produce a particular product or service yeah and the fact that this will lead to an improvement in your economic condition and finally as we go along let me just brighten up your day by recalling to mind the definition of government intervention because whether we want it or not we will have to talk about it beyond government intervention can be briefly defined as restricting the use of a person's body and/or property and establishing restricting or forbidding a relationship between two economic actors whether it's the state and another economic actor is just two economic actors in the market yeah and under this umbrella fall things like taxation regulation prohibition and price controls oh yeah it's a nice cartoon right now we're ready to begin our first numerical example you can tell I was hungry when I was making the slides I went for pies and coffees rather than wine and cloth which is the more traditional example so first we will look at an example of physical productivity which is the original way in which Ricardo formulated his again Ricardo formulated in in terms of Nations what we said that we do not analyze things in terms of Nations we would rather look at individuals so we have here the the physical output of two people Katherine who owns a coffee shop I'm all for women entrepreneurs and she is considering hiring James yeah to help her around the coffee shop and we know that Katherine is able to make 40 coffees in an hour or bake two pies now so she can either use an hour of her labor to make 40 coffees or to bake two pies James on the other hand he's trying to make it into Hollywood as well so this is a temporary employment for him as well he can only make 10 coffees in an hour or bake one pie now so if you look at this it is obvious that Katherine is more productive in terms of physical output than James in both tasks yeah both in making coffee and in making pies so we can say that catherine has an absolute advantage in both tasks and james has an absolute disadvantage yeah so we may look at a first glance that Catherine doesn't actually need James's help at all however we did say previously that specialization yes according to efficiency more importantly it's according to relative efficiency yeah so you need to look at the relative superiority of Catherine compared to James not at the absolute superiority in order to do that we need to look at their opportunity cost the opportunity cost of Catherine baking one pie is 20 coffees and she needs to forego making 20 coffees in order to employ her time baking one pie yeah James on the other hand in order to bake one pie needs only to forego 10 coffees yeah so it is more expensive for Catherine to employ her time baking pies conversely in order for Catherine to make one coffee she only needs to forego about a 20th of a pie while James we would need to forego a tenth of a pie yeah so it's more expensive for James to make coffee than it is for Catherine we can sum this up by saying Catherine has a comparative advantage in making coffee while James has a comparative advantage in making pies this is true regardless of who Catherine and James are whether it's coffee or pies or wine and cloth whether they live in Romania or the UK or America and so on yeah there is no individual in the world that doesn't have a comparative advantage and something now because it's all about relative efficiency so now the idea here is that if Catherine hires James to help her around the store they will both benefit from that specialization so let's see how this will play out so let's assume that Catherine and James both worked for about 10 hours a day this is obviously not a coffee shop in France where the working about four and a half hours so they work they work a decent to ten hours a day and we can see here that before specialization Catherine employed five of her labor hours to make coffee and five to bake pies whilst James was doing the same thing yeah and in total at the end of the day together they were able to produce 250 coffees and 15 pies yeah they were not specializing they were both just dividing their day in half and doing both tasks equally however if Catherine decides to hire James solely as a baker then he will employ ten hours of labor in baking pies and Catherine will now be free to change her schedule of work and spend more time doing what she has a comparative advantage in yeah so she will spend seven hours making coffees in only three hours helping poor James bake pies in total after specialization they will be able to produce 280 coffees a day and 16 pies so 30 coffees and one pie more than before now so total output increases and therefore the welfare of Catherine and James which is in this example as our proxy for society increases no again this is in terms of physical output now I would like to add a little bit of a touch of realism to our example obviously Catherine and James do not make coffees and pies in order to exchange them and eat them themselves they have a coffee shop so they're trying to make a monetary income out of that so if we look at this in monetary terms let's say a coffee cost about three dollars that's right that right and a pie well I went I went keeper on the pies I told you I was hungry five dollars yeah for a pie before specialization yeah they were able to produce eight hundred and twenty-five dollars together after specialization they're making nine hundred and twenty dollars and after tax they're left with about 20 yeah now while I like doing this just putting a monetary value on that physical output is because it allows me to convey something to you so why is specialization more productive we said the causes are the inequality of men and the unequal distribution of factors of production across the globe you can you can phrase that in a different way people have different natural aptitudes yeah Catherine is just naturally better at making coffee and James is just naturally better at baking pies but also people have acquired aptitudes maybe catherine has been making coffee for 10 years yeah and James used to bake pies with his grandmother that's he's what why he's a little less why he's a little more productive and making pies and baking pies and making coffees yeah and obviously there's less time switching between the tasks yeah so you gain productivity from that however here again in the monetary example it's easier to see that specialization becomes more productive also because we can look once we divide the tasks once we separate the employment at hand into my new tasks we can look at automating it now we can look at employing capital goods in order to boost human productivity so again just hypothetically after she hires Jane Catherine decides to buy a new coffee machine an extra oven in a coffee shop yeah that will boost both their productivities so I give you just some numbers here yeah they will make be able to make 350 coffees and 25 pies so about $1,200 and monetary income yep right so let's sum up the last few slides about comparative advantage yeah we can define comparative advantage as occurring when a person has a relative superiority in a particular task when taking all of the tasks into account we have seen on the very last slide that money prices are what provides the signals yeah and the monetary incentives for individuals and entrepreneurs to choose the most efficient or productive specialization of a to them now for the individuals intends to be their monetary income in a month or a year for the entrepreneurs it will be the profit and loss that they can make in a particular production process now I will have to say the pattern of specialization like where your comparative advantage lies were James whose comparative advantage lies and so on may not be exactly what James wants yeah we did say that he's trying to make it into Hollywood rather than doing this the market will tend to assign people to think that maybe they don't enjoy doing you know but people don't just perform monetary calculations so this James does not want to work in Catherine's shop because he wants to still give it a shot you know becoming an actor he is allowed to do that yeah and the market and the market prices will change based on James's preferences as well conversely consumers will also have an input into what James and Catherine do if people decide they don't want to buy coffee anymore or pies I mean what world would that be but let's say that they decide to do that yeah then there will be no line of specialization such as having a coffee shop yeah and maybe customers want Fairtrade coffee right you've heard of that it's on all the coffee cups yeah then they will pay more for Freight trade coffee and therefore Catherine may decide okay then it's not profitable for for me to bake pies anymore I'm just going to do coffee because then I'm going to do Fairtrade coffee the point that I'm trying to make here is that through money prices customers and producers and everyone are able to transmit to each other these kind of signals they're able to hold each other accountable for ethical values for what they desire for what they want to pay and so on no one needs to interfere to make sure that these things actually happen you know especially not government whenever governments interfere when they perceive a deviation from what they think the pattern of specialization should be they only actually just tamper yeah the the money prices from reflecting the underlying consumer preferences yeah now I know we have a big Beatles fan in the room I myself of a big deal if you have attended professor salerno's lecture this morning you saw how much he paid for a Pullman carton concert this I think is the best example of how comparative advantage work this is an interview of Paul McCartney and John Lennon where a reporter is asking John I think if Ringo if we don't know Ringo Ringo was the drummer in the Beatle if Ringo is the best drummer in the world you know and John replies Ringo isn't even the best drummer in the Beatles the idea is you don't have to be the best drummer in the world to play in the Beatles you have to however meet Paul McCartney who's a much better singer than he is a drummer John Lennon who's a much better composer than he is a drummer and therefore you'll be able to be their drummer and specialize where your comparative advantage lies yeah you may be an adaptable disadvantage in terms of drumming but you will have a comparative advantage or a relative efficiency will be higher there now before we move on to talk about the implications of comparative advantage over trade and society I would like to talk to you a little bit about music's law of association in effect you will find if you read human action that means is didn't actually call his law of association Mises his law of association he called it he called it Ricardo's law of association but Mises was very modest he was my feeling is he was very modest in his everyday life but he was really very modest when it came to his own contribution in his works he really downplayed the contributions he made to the idea of division of labour and social development and really overweight those of Smith and Ricardo if you want a very good source is an essay of Murray Rothbard which is called freedom and equality primitivism in the division of labour where Rob R himself admits that he overweight the contributions of smithy Ricardo and downplayed those of Mises now Mises makes two contributions in human action as far as this topic is concerned and they can be both illustrated by the place that the chapter of the law of Association has in the treatise and I'm actually indebted to this point to Professor Salerno a few years back the chapter on the law of Association is in the part on human society Jesus didn't include it in a part about the wealth of nations that international trade about international economic relations and anything law of Association is under human society so unlike Ricardo who actually just wanted to expose a particular trade relation between two nations that was his purpose Mises saw on the principle of comparative advantage i named economic truth that explains the universality and the permanence of social cooperation yeah so for me there's the law of comparative advantage division of labour encompasses individuals and firms across the globe both in their economic relationships girls or in their social relationships you know the need people have for one another on the basis of comparative advantage was it needed as you would create strengthens and brings people together in communities now would make some come into relation with one another in the first place unlike Ricardo and unlike mainstream economics as well who often argued that Ricardo's law of comparative advantage is not true anymore because it was formulated in terms of the labor theory of value Mises saw that this is true regardless of what theory of value underpins it however he did not stop there he explained that when we give the theoretical example of physical productivity that's not a sufficient or realistic approximation of what happens in the market economy in the market economy it's all about money prices yeah you can see Mises saying here we must not fall prey to the illusion that a comparison between the expenditure of factors of production the various kinds in the output of products of various kinds that is the way we judge whether a process of production is profitable or whether how we specialize in employ and use our labor is actually rentable can be achieved without the aid of money calculation yeah this was me the second contribution and I was mentioning the place of the chapter in human action the chapter on the law of Association is actually before Mises even gets to talk about money however he does announce monetary calculation here just to point out how closely connected the two things our division of labor does not happen without monetary calculation and when people do monetary calculation they automatically lead to the process of division of labor yeah so with what this means is unlike the way you will understand comparative advantage in a classical economics textbook comparative advantage is not something that's given yeah it's not something that we're born with we're born unequal but we're our comparative advantage lies is not something that we'll know we'll just we'll figure it out somehow we need to calculate it I mean we calculated in the market we figure it out by being in the market which means that comparative advantage cannot be figured out from outside of the market yeah it's only workers entrepreneurs landowners yeah that are able to discover what the best pad in the specialization in is that can never be done by the bureaucrats yeah governments can never divine what should America export and import what should America produce who to subsidize and so on because comparative advantage is something that needs to be discovered through monetary calculation and monetary calculation can be accomplished only in the market you know and if you understand that you also understand how the division of labor can grow yeah it can grow extensively encompassing more and more people if we can calculate and realize where to employ those people I need to grow intensively and dividing the stat these tasks only if we can calculate to see what task would be a rentable to automate sorry yeah we're we should use capital goods and so on yeah so if you I hope you can see if you understand comparative advantage and division of labor through this lens you're able to draw a few very interesting implication as far as first international trading is concerned and we'll see about society in a minute now a few traits of comparative advantage which not only will they lack for your from your economics textbook but they will be presented as actually being a shortcoming of comparative advantage actually being aspects that make the law of comparative advantage no longer valid or no longer relevant for how international traders today now comparative advantage is dynamic first and foremost which means that it can very very easily change and shift in time even in the short term yeah this again is revealed by the fact that comparative advantage is discovered through economic calculation so going back to our example if Katherine looks at her business tomorrow and realizes that she would be much more profitable opening the gym then she will just now use whatever factors of production like the place that she has she will transform that in the gym fire James yeah she will become a receptionist or something yes her comparative advantage in making coffee does not stay put for the rest of it I mean he can but it doesn't have to yeah comparative advantage changes all the time you know and it especially changes with technological development now you have here an example you see a lot of employment just disappearing with technological development I don't know if you some of you may be too young well I I am too young to know this but before electric lives are not that old as a before electric lights and a streetlights used to be kept lap so though obviously there was someone it looks quite romantic doesn't it they used to laughing you know they have matches and they would climb but a long ladder and like the lamp obviously once electricity came along these people had a comparative advantage in lighting gas lamps industry at the time but this disappeared you know and this is a good way of thinking of a lot of jobs that disappear today and a lot of jobs that appear as well due to technological development another characteristic of comparative advantage is the fact that is located at an individual level I mean we've talked about that and I want to insist on it what I want to insist on is the idea of the market level of detail now again in economics textbooks you will cheer things like us has the comparative advantage of in car production but you can also hear things like I have a comparative advantage in fashion yeah that is too general as for the market as far as the market is concerned yeah the market what consumers perceive as product differentiation that's where comparative advantage is going to be located the best example I can give you you've seen these shops pop up now that do one thing and one thing only such as like outrageous milkshakes or wonderful wonderful burgers seafood is a theme through this presentation yeah but they do one thing only they only do milkshakes oh they only do Donuts yeah there's no such like wide category of like I don't know fast food or desserts or something yeah the those people producing those notions have a comparative advantage in producing outrageous milkshakes yeah the market decides where your comparative advantage is yeah another interesting implication is the fact that international trade is nothing else but the international division of labor yeah there is no difference between domestic trade and international trade yeah international trade is simply the extension of domestic trade to a regional and global level whether it happens within or across national borders which we all know are just arbitrarily drawn in the first place anyway this is perhaps I think the best argument for free trade yeah because if exchange is indeed beneficial for two individuals and you would be hard-pressed finding an economist who denies that then simply by extension it means that economic exchange voluntary economic exchange I have to say voluntary economic exchange will be beneficial whether the two individuals are in the same city in the same County or in different countries or in the United States or in Europe and so on now now division of labour has some limits yeah on the one hand which is the one on one that's very easy to understand it that it is limited by the extent of the whole world yeah that's as far as division of labor can go as far the world as we know it right now I mean yeah that is as far as it can expand however there's another limit that I think it's a little bit more interesting to look at and I would like to draw your attention to it so you can think of this whilst you listened to Professor Englehart and professor Garrison's lecture in a this afternoon division of labor will be limited by the extent of savings and investment yeah we said that capital goods do a great boost human productivity to a tremendous extent capital goods allow us to automate tasks capital goods allow us to divide tasks further yeah in order for us to have capital goods the society needs to save and invest yeah the level of savings and investments will therefore have a tremendous impact on the division of labor and as you will see on society and social relationships as well now finally a little bit about barriers to specialization trade and cooperation they're obviously natural barriers to it people can choose not to cooperate with each other because of their preferences or cultural differences or things like that I mean I use professor Solano as an example a few times in dislike charity me decide that's not very funny I decide to forego all the benefits of our copse cooperation in the future he's allowed to do that yeah it will be reflected in market prices the market would kick okay the market will cater to this but obviously this is a very small proportion in terms of barriers to specialization and trade yeah most barriers are artificial barriers which are brought about by government interventions here there's a plethora of these type of barriers from barriers that are put in front of domestic businesses yeah and domestic transactions everything from taxation and regulations to specific international trade barriers tariffs quotas red tape barriers and so on I looked up for you the NAFTA agreement who is supposed to offer free trade it's seventeen hundred pages long it has 741 pages for the treaty itself 348 pages for annexes and only 619 pages for footnotes and explanations obviously you need to explain a lot what free trade is in this right and this is we've come to the to the last important part of the lecture which is right on time the implications for society of the division of labor and phenomenon now we said that the structure of money prices the division of labor and the social connections that individuals make are accomplished as one process yeah when people calculate to find where this specialization is they actually calculate who to associate with yeah who to enter in economic relations with who to enter in social bonds with yeah they're so they're sides of the same coin so now we can understand why Mises called decision of Labor as the essence of society and the fundamental social phenomenon you know based on this you can define society as the complex network of it's quite a mouthful I'll try again the complex network of entertainment relationships which result from the purposeful recognition of the mutual benefit of it like cooperation you know so what the law of association tells us is that we create social bonds by voluntarily integrating ourselves in the economic division of labour now how do we strengthen how do we develop those bonds well first of all society develops objectively yeah enlarging the aims of its activities yeah we do more and more things we allow division of labour allow tasks to be differentiated to a level that they haven't been before it is due to the development of the division of labour that we have things as I was saying before like 3d printers MRI machines yeah YouTube virtual supermarket yeah it is due to this development that were allowed today to work as vloggers and neurosurgeons programmers and so on but division of labour is also a factor that brings about differentiation yeah division of labour also begins with us being unequal and makes us even more unequal I have a great quote for Mises here that says division of labour makes some areas urban others rural it locates manufacturing mining and agriculture in different places still more important it intensifies the innate inequality of men vocational types emerge people become specialists you know the point I'm trying to make here is that the more specialized people become the more we need our fellow men to provide us with the goods and services that we don't produce for ourselves the more specialized we become the more fellow men we need to provide us with a wider range of products and services that we can no longer produce for ourselves now all of this intensifies and strengthens our social bonds so a further implication is that the progressive intensification of division of labour and cooperation domestic and international are the surest way to offset any sort of antisocial initiatives now Mises argued that people have an essential instinctual propensity to conflict that's debatable but that's not important what he argued was that people their rationality supersedes these innate urges yes as anti-socialist as they may be and people are able to understand that cooperation is more beneficial than conflict and they're able to forego the illusory gain of conflict now the implication here is that a more and more integrated division of labor would lead to less conflict and fewer Wars the reason we're not there yet the reason were actually gone back a little bit in time from the level we were before the First World War is that we are not at a level of domestic freedom and international freedom that would allow the international division of labor to make these conflicts indeed unprofitable you know the culprit for this is obviously the state apparatus yeah all government intervention all it does is sort division of labor all taxation price controls any kind of intervention all that does is not allow the division of labor in the pattern of specialization to cater to people's preferences yeah and this leads to a diminished level of welfare in society you know usually it's combined with capital consumption economic crisis unemployment and so on yeah most importantly and I'll end on that is once you understand the connection between division of labor and social development and once you then it becomes quite easy and somewhat disheartening to understand the impact of government intervention on society through this link of the division of labor now I cannot recall who said that the state is the ultimate embodiment of all human vices but I do find that looking at the consequences of government intervention on society is perhaps the best proof that whoever said it yet was right so thank you for listening and I look forward to your questions in the office hours this afternoon you

Channel: misesmedia

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Keywords: Division, Labor, Social, Order, Mises, Austrian School, Economics

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Length: 45min 43sec (2743 seconds)

Published: Tue Jul 25 2017