Monday, November 30, 2009

Coconut-Crusted Salmon will be Served in the First Class Cabin

Amid the constant moaning and wailing, Joe Public may be forgiven for failing to notice the astounding changes he has seen in his standard of living over the last forty years. No, he doesn't have a yacht and the proletariat revolution has left him still working 40+ hours per week, but he has traded in his plaid pants and 8-track tapes for more comfortable digs.

Steven Horwitz has the numbers:



[L]ife for the average American is better today than 35 years ago, life for poor Americans is much better than it was 35 years ago, and poor Americans today largely live better than the average American did 35 years ago. Hard to square with a narrative of economic stagnation or decline.
Mark Perry took Horwitz's description of what has happened and started us down the path to explaining why that has happened. Using a similar basket of household appliances, Perry expressed their cost in terms of labor hours:



Now, cautions abound at jumping to conclusions that the data quality doesn't support. But, in terms of this selected basket of common household appliances coupled with the BLS wage statistics, saying nothing about the quality of the appliances listed, we can safely observe an astounding increase in average American worker productivity over the last 36 years.

This runs counter to the narratives describing Americans as fat and lazy, and declaring that “Americans don't make anything anymore.” However, the increase in productivity is absolutely unsurprising given the advances in technology, materials science, and industrial processes over the same period. In other words, with better capital goods and factors, workers (all workers, not just American) can make more in less time and with less effort.

But, it is not right to say that the increase in productivity and advances in production methods are a product of the last forty years. It is not correct to attribute exponential growth in human productivity to the last few seconds of human history, nor to the actions of any person, group, or even all humanity alive during that period.

Rather, the seeds that allowed that growth to happen were sowed thousands of years ago with a simple, evolutionary discovery that has led man on a path from precarious existence to jetting over the oceans at 45,000 feet as a matter of course.

Specialization

We don't know what day Ug and Ur made their discovery, nor do we know the circumstances that led to it, because they were too busy living another day to properly document it for us. But, we can be relatively sure it started with a few seconds of rest and relaxation. Since their cave is about as far as we can get from iPods and nanotechnology, please forgive me a few moments of poetic license in imagining how those few seconds of R&R led to millions of man hours of R&D.One day, Ug and Ur followed their normal routine of catching fish in the morning and foraging for coconuts in the afternoon. Ug noticed that he caught three fish faster than Ur. But, even with that extra time, he lagged behind Ur in coconut-finding. That night, with his head on a rock pillow, in the moments before falling asleep Ug hit upon a wild idea.

The next day, using a series of grunts and gestures, Ug convinced Ur to spend the entire day collecting coconuts while Ug spent the day catching fish. At the end of the day, he reasoned, they could share the fish and coconuts.

But, an amazing thing happened when they got back to the cave. Instead of the usual six fish and six coconuts, Ug and Ur counted seven fish and seven coconuts. That night, Ug and Ur feasted on their unexpected windfall.

They continued their pattern of specialization and feasting for a few days when Ur came up with a great idea of his own. Rather than eating the extra coconut, he would store it in the cave for the time of year when coconuts were scarce. After a few weeks, the cave was overflowing with coconuts and Ur had to limit the number of coconuts he brought back every day.

Ug was extremely jealous of Ur's new found leisure time, so he persuaded Ur to use that time to build a pen in the water so they could stockpile fish, too. When the pen was completed, Ur built himself a ladder to help his coconut collection. Once the pen was full, Ug used his leisure time to weave a net.

This trend continued for years. With each iteration, fishing and foraging consumed less time and took less effort, moving Ug and Ur further from living precariously on the day's labor and giving them more leisure time. In turn, they used some of their food savings and extra time to develop better and better capital goods, making their labor ever more productive.

At some point, Ug and Ur became so productive that they could feed the rest of the population. Freed from the necessity of hunting, fishing, and foraging, those people spent their time producing other capital and consumer goods like mud huts, clay pots, ovens, and forges. Over thousands of years, productivity increased to the point where some people's entire productive lives were spent producing R&D on better materials, processes, and products but never actually building anything.

And so, we can see that 747s are just a hop, skip, and a jump from an extra coconut per day.


Division of Labor
Tool use almost certainly preceded the regular division of labor, but it is impossible to get from stone hammers to today's tools without the division of labor. By specializing in the area of their comparative advantage, Ug, Ur, and early humans like them carved the foundations of human existence a few extra seconds at a time.

In the story above, Ug and Ur had absolute advantages in their respective specialties, but that is not necessary. As long as Ug and Ur do not have the exact same production capabilities, each specializing in the area of their comparative advantage results in greater total production than the sum of their individual efforts at being self-sufficient, even if Ur is less productive than Ug at both specialties.

And, then, Came the Non-Productive
It is worth noting that, in some parts of the world, existence today is more on the scale of Ug and Ur than the average (or even poorest) American household. One has to wonder why, if Ug's discovery of the division of labor is so incredible, all of humanity hasn't benefited from it equally (or at least similarly). The simple explanation is that one consequence of the wealth delivered by the division of labor is the ability of an unproductive class to exist that actively and violently prevents what should be a natural spread of wealth through human interaction.

Actually, to label this class unproductive is charitable as unproductive puts them on par with infants and the infirm. This class is negatively productive, destroying the production of other people in their day-to-day actions. For lack of a better term, we group this class under the name “government”.

In the tables created by Horwitz and Perry, we can see that the vast majority of American households choose to partake in the quality of life increases available to them. However, even those that choose a simpler lifestyle have a buffer between them and death due to famine, disease, or other disaster. This is because the negatively-productive government class has not enjoyed the same trust or commanded the same fear in the populations of Europe and the Americas as it has in some other parts of the world.

It is no coincidence that populations who have benefited least from the division of labor are the populations most plagued by the government class' negative productivity.

It would be a simple, and very economic, process to provide these workers with the latest capital goods and technology; as in America, the vast majority of them would intelligently cry, “exploit me! Please!” In fact, the only thing that could possibly stop the spread of wealth and productive capacity is physical violence. And, the only people with the time to violently restrict that spread are those living off the production of others: the government class.

It's a shame that Ug and Ur didn't use some of their leisure time to beat the snot out of the first person to come along (probably named Richard) and demand a portion of their labor at the point of a sharpened stick. Hopefully we can do that in the next human evolution.

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2 Comments:

Anonymous doug nusbaum said...

Figures do not lie, but liars figure. I joined the Libertarian Party in 1978. You do the cause of liberty no good by being a clever liar. people read your post about how cheap things are and think that there must be something wrong. Of course there is. The main cost to a household is not TV's or cell phones (None of which, by the way are made in the US), but food and rent. Both of which have gone up by 8 to 10 fold or more since 1973.

IE in the US version of capitalism that you tout, people work harder for less.

1:24 AM  
Blogger BloodyMaryBreakfast said...

@doug_nusbaum:

Usual caveats, etc. about using Fed indexes.

From 1973 to 1983, both food(1) and housing(2) prices doubled. So did wages(3).

From 1983 to 2009, both food and housing prices doubled. So did wages.

People roughly work the same for same (disregarding quality) as far as food and housing.

Does that run contra the article's assertions? Not really.

Demand for the consumer durables in the article is different for that of food and housing. Food and housing demand is much less price-sensitive than that of, say, a dishwasher.

And, although price/calorie does affect caloric consumption, there's an upper limit to that demand at any given period, so supply over and above that limit results in spoilage.

So, you make a good point in that food and housing don't follow the same trends as consumer durables, but working the same for same is not surprising in those two categories.

1) http://research.stlouisfed.org/fred2/data/CPIUFDNS.txt
2) http://research.stlouisfed.org/fred2/data/CPIHOSNS.txt
3) http://research.stlouisfed.org/fred2/data/AHETPI.txt

9:09 AM  

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