No Free Lunch: Economics for a Fallen World: Third Edition, Revised

Chapter Two: Fundamentals of Economic Behavior 50 beneficial aspects of coordination are dependent upon the institutional context—if we don’t allow the institutions to function, or make arbitrary changes, we should not expect a good result. To see the beauty of this emergent order at work, watch the following video: INCREASED PRODUCTION FROM THE DIVISION OF LABOR Prior to the industrial revolution, it was common for the production of goods and services to be just sufficient to keep civilization going. Famines were relatively common with large loss of life when drought or floods arose. Yet today, modern famines over the last 50 years or so were arranged (or at least allowed) by political leadership to punish opposition. What has changed? The industrial revolution sped up the application of a central economic principal for growth: the division of labor . The division of labor allows a worker to specialize in a given task. To illustrate, just think of SUBWAY’s sandwich shop (or you burrito lovers can imagine Chipotle to the same effect). If you go into the store to order a ham sandwich, and there is only one person behind the counter, she will have to do all these tasks (at least) to make your sandwich: 1. Take your order 2. Put on new plastic gloves 3. Get out the bread 4. Lay down the meat and cheese 5. Add veggies and dressings 6. Fold/wrap the sandwich 7. Take off gloves 8. Take your money 9. Wash hands Then the worker moves all the way back and does it again for the next customer. If, instead, you go in and find three workers, the first might do steps 1, 3, and 4, the second worker may just do steps 5 and 6, and the final worker might do step 8. Steps 2 and 9 are not needed since the person taking the money won’t have to handle food. division of labor: division of production tasks between laborers such that each worker will specialize in a few tasks that are part of an overall production process It’s a Wonderful Loaf