An Inquiry into the Nature and Causes of the
WEALTH OF NATIONS
WEALTH OF NATIONS
By Adam Smith
1776
I find this a very interesting (and, for me, inspiring) video. In reviewing it, I think that the dissection of this video could be approached from various angles. I will not attempt a comprehensive discussion of Video#1 at this point since it is meant to be simply an icebreaker, but I plan to return to this video from time to time in future posts as we Review Wealth of Nations and learn more about those aforementioned different angles, and see how they might be manifest in this young man's project. I don't know the young man from this video, but may I send a shout-out to him, and thank him for his efforts.
For this post, I'll focus on this: Video#1 highlights the work necessary to produce a single product, even a simple one like a sandwich, if left to one's own exclusive strength. I acknowledge that the young man did set limits as to what he was willing to do even for this project, as he did not raise the cow that he milked, not did he raise the chicken that he killed, but I think that 6 months and $1500 makes the point clear enough for this post that the project was expensive in time and money. And after all that work, the sandwich was 'not bad,' in which the young man seemed very disappointed. "Six months of my life for ... not bad," he said, head in his arms on the table.
This highlights a certain principle: There are many products and services that many people, if not all people, are capable physically of performing, such as growing grain, making butter, and pickling cucumbers, like this young man demonstrated. But being capable to do something yourself does not always mean that it is either prudential or most productive to do that something yourself. In this case, given the long check list, most people could produce a sandwich in the same way as the young man in Video#1. But knowing that it could take about 6 months and cost $1500, who would be willing to commit the time and money when you can buy a foot-long sandwich of expectedly higher quality at Subway or Togo's or Quizno's or any other similar build-your-own sandwich shop for $7-12, in only about 5 minutes? This idea of seeking the 'most productive' use of something/anything is key when discussing economics -- We'll return to that idea in future posts. In addition, how is it that the cost of the sandwich (a complicated composite of costs to make yourself, as we've seen), let's say originally $1500 (only affordable to some), decreased to the point of affordable to just about everyone at $8-12? This phenomenon is one of the things we'll explore as we discuss the free market.
As stated before, Video#1 highlights the work necessary to produce a single product, even a simple one like a sandwich, on one's own. Video#2 looks at what I would call a similarly simple product (the #2 pencil) and explains the dazzling network of people from many different continents necessary to produce it, and how the pencil was ultimately achieved without government coordination, without force or coercion, but solely on the seemingly simple, local, immediate principle of voluntary exchange. Adam Smith has his own #2 pencil type of story in Wealth of Nations, but we will get to that later.
Expanding on the idea of the pencil, it is amazing how many goods and services are available to us, the vast majority of which we did not produce ourselves. In fact, I daresay that, if anything, only a small percentage of the things we own are things which we produced with our our hands. There are of course exceptions -- Some people bake their own bread, many do not; some people make their own computers, most do not; some people build their own house for their family, most do not; and so on -- but for most people, the majority of what they own was not produced by their own hands, and yet they enjoy a higher standard of living than any one of them could produce on his or her exclusive strength. It is important to note that people will ofttimes buy something for the very reason that they are confident that they themselves could not produce it as good or better, as fast or faster, than the person from who they purchase it -- again, I think of the sandwich.
Before starting to review the text, I found two videos which I thought would be a good icebreakers for discussing economics and economic freedom.
Video#1 -- How to Make a $1500 Sandwich in Only 6 Months
A college-age man decided that he would make himself a sandwich. To make it a project, he decided that he would make or produce the different ingredients of the sandwich himself, including the ingredients to make the ingredients (for example, he would grow and grind his own wheat into flour for the bread he would make). He wanted to record the cost of the project, and the time necessary to complete it. The title of the video gives away the results. I hope you enjoy it.
Video#1 -- How to Make a $1500 Sandwich in Only 6 Months
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Value of Video#1
For this post, I'll focus on this: Video#1 highlights the work necessary to produce a single product, even a simple one like a sandwich, if left to one's own exclusive strength. I acknowledge that the young man did set limits as to what he was willing to do even for this project, as he did not raise the cow that he milked, not did he raise the chicken that he killed, but I think that 6 months and $1500 makes the point clear enough for this post that the project was expensive in time and money. And after all that work, the sandwich was 'not bad,' in which the young man seemed very disappointed. "Six months of my life for ... not bad," he said, head in his arms on the table.
This highlights a certain principle: There are many products and services that many people, if not all people, are capable physically of performing, such as growing grain, making butter, and pickling cucumbers, like this young man demonstrated. But being capable to do something yourself does not always mean that it is either prudential or most productive to do that something yourself. In this case, given the long check list, most people could produce a sandwich in the same way as the young man in Video#1. But knowing that it could take about 6 months and cost $1500, who would be willing to commit the time and money when you can buy a foot-long sandwich of expectedly higher quality at Subway or Togo's or Quizno's or any other similar build-your-own sandwich shop for $7-12, in only about 5 minutes? This idea of seeking the 'most productive' use of something/anything is key when discussing economics -- We'll return to that idea in future posts. In addition, how is it that the cost of the sandwich (a complicated composite of costs to make yourself, as we've seen), let's say originally $1500 (only affordable to some), decreased to the point of affordable to just about everyone at $8-12? This phenomenon is one of the things we'll explore as we discuss the free market.
Video#2 Milton Friedman -- The Lesson of the Pencil
Milton Friedman (1912-2006) was an American economist and winner of the 1976 Nobel Prize in Economics. In additional to his professional achievements, he was one of the most articulate statesman in favor of the free market I have yet encountered. It was while listening to his lecture series (entitled Milton Friedman Speaks on Youtube, I'm not sure if that's the original title) that I first encountered a quality explanation of the intimate relationship of economics and freedom. He frequently quoted or cited Smith's Wealth of Nations in his work, and it was from listening/reading Friedman's work that originally inspired me to read Wealth of Nations in the first place.
In this video, Dr. Friedman recounts a story from a famous essay by Leonard Reed written in 1958 describing the free market from the point of view of one of its then most common products, the #2 pencil. This was one of the first stories that conveyed to me the beauty that is the free market, highlighting the preservation of human freedom through voluntary exchange, the promotion human cooperation, and the uncoordinated order (with government coordination) on a global scale. I hope you enjoy this one as well.
Value of Video#2
Expanding on the idea of the pencil, it is amazing how many goods and services are available to us, the vast majority of which we did not produce ourselves. In fact, I daresay that, if anything, only a small percentage of the things we own are things which we produced with our our hands. There are of course exceptions -- Some people bake their own bread, many do not; some people make their own computers, most do not; some people build their own house for their family, most do not; and so on -- but for most people, the majority of what they own was not produced by their own hands, and yet they enjoy a higher standard of living than any one of them could produce on his or her exclusive strength. It is important to note that people will ofttimes buy something for the very reason that they are confident that they themselves could not produce it as good or better, as fast or faster, than the person from who they purchase it -- again, I think of the sandwich.
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