$1,500 Sandwich Illustrates How Exchange Raises Living Standards

“Man stands at all times in need of the cooperation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons… Man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in their favour…
     It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest. We address ourselves not to their humanity but to their self-love…
…[B]y directing that industry in such a manner as its produce may be of greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention….
…. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.” [Emphasis mine]
~Adam Smith, from The Wealth of Nations

"Here is a worker whose daily wages is four francs. With two of them, he can purchase a pair of stockings. If he alone had to manufacture those stockings completely—from the growing of the cotton to the transporting of it to the factory and to the spinning of the threads into material of the proper quality and shape—I suspect that he would never accomplish the task in a lifetime."
~ Frederic Bastiat, from his Economic Harmonies

$1,500 Sandwich Illustrates How Exchange Raises Living Standards
Guest post by Chelsea German

What would life be like without exchange or trade? Recently, a man decided to make a sandwich from scratch. He grew the vegetables, gathered salt from seawater, milked a cow, turned the milk into cheese, pickled a cucumber in a jar, ground his own flour from wheat to make the bread, collected his own honey, and personally killed a chicken for its meat. This month, he published the results of his endeavour in an enlightening video: making a sandwich entirely by himself cost him 6 months of his life and set him back $1,500.

(It should be noted that he used air transportation to get to the ocean to gather salt. If he had taken it upon himself to learn to build and fly a plane, then his endeavour would have proved impossible).

The inefficiency of making even something as humble as a sandwich by oneself, without the benefits of market exchange, is simply mind-boggling. There was a time when everyone grew their own food and made their own clothes.  It was a time of unimaginable poverty and labour without rest.

The greater the number of people involved in exchange, the more beneficial the process becomes. This morning, thanks to international trade, I am drinking coffee grown in Latin America, viewing a computer screen with eyeglasses made in Europe, and typing this blog post on a keyboard made in Asia. Fortunately, freedom to trade internationally has improved, on average, around the world. Increased trade has helped raise living standards and decrease global poverty.

However, the recent trend in the United States is less positive. If trade protectionist politicians, like Bernie Sanders on the left and Donald Trump on the right, have their way, then U.S. freedom to trade internationally may deteriorate further. They put down trade by claiming that it harms the U.S. economy and destroys jobs. Yet, there is a widespread agreement among economists that free trade is key to prosperity. (Learn more about the relationship between increased trade and jobs here).

This morning, as you drink your coffee, take a moment to consider where it comes from. You probably would not be drinking it right now if it were not for trade. This video elegantly draws attention to the myriad ways in which the exchange of goods and services across national borders touches lives and helps raise living standards. Almost everything you use is the product of a complex web of human cooperation, often extending beyond your country. Even something as simple as a bag of groceries or a pencil is the end result of a “symphony of human activity that spans the globe.”

---

Chelsea German is the managing editor of HumanProgress.org, and a researcher at the Cato Institute.

Follow her on Twitter.

Her post was reposted from the Cato at Liberty blog.

The Great Job-Creating Machine

As robots begin to do more and more of what humans did, cries are heard again from luddites that “machines are taking our jobs”—another “lump of labour” fallacy that just never seems to die.
The latest outburst comes as McDonalds workers lose jobs to robots; blowback it seems from unions making McDonalds a particular target in their campaign for a much-higher minimum wage, but the job replacement leading to more ludditery.
Guest poster Chelsea German looks at what the luddites don’t know about machines and jobs and the Great Job-Creating Machine …

---

As the Guardian recently reported, technology has created more jobs than it has destroyed, and the new jobs it has created have been of higher quality. Technology eliminated many difficult, tedious, and dangerous jobs, but this has been more than offset by a rise in the caring professions and in creative and knowledge-intensive jobs, resulting in a net increase in jobs.  The sectors to lose the most jobs have been agriculture and manufacturing, which are both difficult and dangerous, while work opportunities in medicine, education, welfare, and professional services have become more abundant. (For example, there are more teachers per student, improving student-teacher ratios, and there are also more physicians per person than in the past).

In 1980, almost a quarter of the world’s employment was still in agriculture. Now, only around 15% of the world’s workers are engaged in agricultural labour. Yet we are feeding more people, undernourishment is at an all-time low, and food is becoming less expensive.

Technological advances liberated humanity from toiling in fields by mechanizing many processes and boosting productivity, allowing more food to be produced per hectare of land, and freeing hundreds of millions of people to pursue less gruelling work.

The elimination of so many unsafe jobs in manufacturing and agriculture means fewer worker deaths. According to data from the International Labour Organization, from 2003 to 2013, the number of work fatalities in the world decreased by 61% (i.e., over 20,500 fewer deaths). This occurred even as the world population grew by over 700 million over the same time period.

If the most dangerous thing you have to face at work is the threat of a paper cut, you quite possibly have technological innovation to thank for that.

Even if in the future robots steal some jobs, advancing technology will likely make several higher-quality jobs available for every job lost. As the Guardian article cited earlier says, technology has proven to be a “great job-creating machine,” eliminating toilsome work but bringing into existence more—and better—opportunities than it takes away.

But note that behind every machine, there lurks human ingenuity. As Matt Ridley wrote in his book The Rational Optimist:

It is my proposition that the human race has become a collective problem-solving machine and it solves problems by changing its ways. It does so through innovation driven often by the market.

Learn more about what market-driven technological innovation has done to improve the state of humanity at HumanProgress.org.

---

Chelsea German is the managing editor of HumanProgress.org, and a researcher at the Cato Institute.

Follow her on Twitter.

Her post was reposted from the Cato at Liberty blog.

Capitalism Defused the Population Bomb

Guest post by Chelsea German

Capitalism Defused the Population Bomb

Food production is booming

Journalists know that alarmism attracts readers. An article in the British newspaper the Independent titled, “Have we reached ‘peak food’? Shortages loom as global production rates slow” claimed humanity will soon face mass starvation.

Just as Paul Ehrlich’s 1968 bestseller The Population Bomb  predicted that millions would die due to food shortages in the 1970s and 1980s, the article in 2015 tries to capture readers’ interest through unfounded fear. Let’s take a look at the actual state of global food production.

The alarmists cite statistics showing that while we continue to produce more and more food every year, the rate of acceleration is slowing down slightly. The article then presumes that if the rate of food production growth slows, then widespread starvation is inevitable.

This is misleading. Let us take a look at the global trend in net food production, per person, measured in 2004-2006 international dollars. Here you can see that even taking population growth into account, food production per person is actually increasing:

Food is becoming cheaper, too. As K.O. Fuglie and S. L. Wang showed in their 2012 article “New Evidence Points to Robust but Uneven Productivity Growth in Global Agriculture,” food prices have been declining for over a century, in spite of a recent uptick:

In fact, people are better nourished today than they ever have been, even in poor countries. Consider how caloric consumption in India increased despite population growth:

Given that food is more plentiful than ever, what perpetuates the mistaken idea that mass hunger is looming? The failure to realize that human innovation, through advancing technology and the free market, will continue to rise to meet the challenges of growing food demand.

In the words of HumanProgress.org Advisory Board member Matt Ridley, “If 6.7 billion people continue to keep specialising and exchanging and innovating, there’s no reason at all why we can’t overcome whatever problems face us.”

---

Chelsea German is the managing editor of HumanProgress.org, and a researcher at the Cato Institute.
Follow her on Twitter.
Her post was reposted from FEE.