Today we come to the topic @EconTalker has called one of the more underemphasized lessons from #AdamSmith: That the Division of Labor is limited by the Extent of the Market. a.k.a Book 1 Chapter 3. #WealthOfTweets #SmithTweets
We love ya, Smith, but we see why people don't dwell on this chapter. Unless they are really into the navigable waterways of the late 18th century. (I.iii.3–8) #WealthOfTweets #SmithTweets #RiverEnthusiastsRejoice
The first two paragraphs of this chapter are the meatiest. Then things get a little...#WealthOfTweets #SmithTweets
The more people there are to trade with, the more labor can be divided. Wealth of the people included in the market increases disproportionately as the division of labor progresses. Because division of labor is special sauce. (I.iii.1-2)#WealthOfTweets #SmithTweets
This seems like common sense. No one to trade with? You won't produce stuff for trade. Instead you'll produce the things you need, and because you need many things you won't specialize. No specialization, no division of labor. (I.iii.1–2) #WealthOfTweets #SmithTweets
So WHY, oh why!, do we spend so much time on ships and carts and rivers and oceans? Because the potholes of the North American Midwest and Northeast have got NOTHING on the roads of the 18th century. (I.iii.3–8) #WealthOfTweets #SmithTweets #WeeBabyPotholesDontStopTrade
Many of us are fortunate to live where we can take for granted the ability to travel over land. In other places and times, travel was and is so hard people can't even reach potential trading partners. (I.iii.3–8) #WealthOfTweets #SmithTweets
The technology that allows us to overcome distance—shipping containers, airplanes, reliable roads—is so embedded in our lives and easy to overlook that it can be hard to remember why Smith spends time on it at all. (I.iii.3–8) #WealthOfTweets #SmithTweets
(Not to mention the fact that trade in services has become much more important and many services can be delivered electronically regardless of distance!) (I.iii.3–8) #WealthOfTweets #SmithTweets
This really, really matters. Wealth can also collapse more quickly with the division of labor. A funny/not-funny example was the disappearance of Cool Ranch Doritos from Canada during the 2020 pandemic.… #WealthOfTweets #SmithTweets
Under economic lockdown, restaurants (cooks, dishwashers, hosts, servers, managers, accountants, delivery, distribution, etc.) disappeared, leaving grocery stores, prepared foods, and home cooks. Far fewer players at work! #WealthOfTweets #SmithTweets
Reduced chip and Kraft Dinner flavors is trivial—Canada is rich. Getting a bit poorer isn't devastating. But it should alarm us how quickly the reduction in division of labor translated to noticable changes to the market even for the rich. #WealthOfTweets #SmithTweets
This is the backbone of Smith's case for trade/markets. When, e.g., infant mortality rates are horribly high in economically undeveloped regions (like 18thC Scottish highlands), you need economic growth to get people wealthier and healthier ASAP. #WealthOfTweets #SmithTweets
When you're rich, the extent of the market affects chip flavors at the margins. When you're poor, it's food and medicine. Not trivial stuff. #WealthOfTweets #SmithTweets
The bigger picture for Smith: incorporating as many of us as possible into the division of labor increases and democratizes wealth, health, and quality of life. In a modern world, atomistic people aren't an option. (I.iii.1–8) #WeAreAllConnected #WealthOfTweets #SmithTweets

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More from @adamsmithworks

7 Jan
#DivisionOfLAbor, we love it! Except it *does* make it a lot harder to provide for our own wants directly. We live by exchanging and cooperating with others. (I.iv.1) #WealthOfTweets #SmithTweets
#AdamSmith is too smart to think all this exchanging and cooperating got worked out easily from the very beginning. There must have been bumps in the road. (I.iv.2) #WealthOfTweets #SmithTweets
Butchers could have so much meat to trade with bakers/brewers that they could end up with an unusable surplus of bread/beer. That stalls trade. Smart people would work to have a supply of an always-useful trade item on hand. (I.iv.2) #WealthOfTweets #SmithTweets
Read 15 tweets
5 Jan
#WealthOfNations I.ii is all about the secret sauce origin story: why does the division of labor happen in the first place? #AdamSmith illustrates (in part) with doggos to hold our attention. (I.ii.2,5) 🐶 #WealthOfTweets #SmithTweets #DoggosDontTrade
Divsion of labor, Smith said yesterday, is responsible for a whole heckuva lot. But who thought of it? Nobody! It's "not originally the effect of any human wisdom, which foresees and intends that general opulence to which it gives occasion." (I.ii.1) #WealthOfTweets #SmithTweets
There's no mastermind behind economic exchange, our "propensity to truck, barter, and exchange one thing for another" (I.ii.1) arises out of our natural tendency to persuade one another and better our condition. #WealthOfTweets #SmithTweets
Read 17 tweets
4 Jan
We have to pause now, because we have to have a whole new tweet thread on #AdamSmith and “savage nations,” because he’s going to keep using this kind of phrase, so we need to talk about it. #WealthOfTweets #SmithTweets
Please know that your friendly SmithTweeters give heavy side-eye to Smith’s use of phrases like “savage nations” and “naked savages” and so on. They are obviously shocking to the modern ear, and they should be. #WealthOfTweets #SmithTweets
“Well, it’s the 18th century, what do you expect?” just isn't a sufficient explanation. #WealthOfTweets #SmithTweets
Read 10 tweets
4 Jan
Here we go! Tweeting our way through #WealthOfNations! It’s a marathon, not a sprint, so be sure to stretch, stay hydrated, and keep a steady pace. #WealthOfTweets #SmithTweets
That’s one heck of a first sentence, Dr. Smith. No dithering here. The division of labor is the secret sauce that increases productivity. (I.i.1) #WealthOfTweets #SmithTweets
We always forget the pin factory comes this early and that Smith looks at it not because pins are important (though they are!) but because it’s a small industry that you can look at all at once.(I.i.3) #WealthOfTweets #SmithTweets
Read 12 tweets
1 Jan
Happy New Year! On Monday, we start tweeting about #AdamSmith 's whole #WealthOfNations at the rate of about a chapter a day! Don’t miss it! #WealthOfTweets #SmithTweets
Today, we’re looking at “The Introduction and Plan of the Work” because although it is New Year’s Day, we, the SmithTweeters, are still Very Serious Smith Scholars. #WealthOfTweets #SmithTweets
TFW you start reading “The Introduction and Plan of the Work” and realize that elevator speeches were invented before elevators. #WealthOfTweets #SmithTweets
Read 9 tweets

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