 Let's go on now to the Division of Labor in Social Order. I'd like to start with this quote from Mises, one of the great statements that he makes in Human Action, where he says, human society is an intellectual and spiritual phenomenon. It is the outcome of a purposeful utilization of a universal law determining cosmic becoming, namely the higher productivity of the Division of Labor. As with every instance of action, the recognition of the laws of nature is put into the service of man's effort to improve his conditions. When I first read through Human Action, these sorts of passages really strike you. They grab your attention, and they're inspiring, and so on. I've come to the conclusion that it's for this reason that sometimes neoclassical economists will denounce Mises and the book Human Action as a polemic. I think it's just jealousy. They can't express themselves on these important points in such a magnificent way. But as Tom Woods mentioned last night, this is just a fact. Mises is simply stating a fact here. Imagine what life would be like without the Division of Labor, where we're all just self-sufficient farmers or shepherds or no trade, no greater productivity, no social interaction in the economic sense. Of course, for us to live out our lives as fully human beings to have human life and flourishing, we need the Division of Labor. Tom Woods again pointed out, what sort of life would Mozart have had if he would have lived in self-sufficiency? Einstein, what would he have done had he been just a shepherd and had to live on his own production? Now, in order for us to live our lives as the persons that we are, we need a Division of Labor so that we can concentrate on the things that make us a person and other people can concentrate on the things that we then need to support us in our own endeavors as we become the human person that we have the potential to become. So this is, as Tom Woods pointed out, this is a wonderful thing. It's a marvelous thing. Who could be against the Division of Labor? Well, there are some. And we'll talk about that later in the week. Now, it's also the case I want to point out that economics as an academic discipline arose in the 14th century from the Scholastic movement in recognition of this fact, recognition of the fact that society is a natural order. Society doesn't need to be planned from the top, but that we can all organize into a Division of Labor without central direction, that this is an order. It's not chaotic, or it doesn't fall apart at the least provocation or trouble and so on. In fact, it works better than the collectivized planning system. And you've probably heard already this week, and you'll hear more about this later. When economists talk about the central principle that provides this order, we speak about economizing. So human action is always economizing. That is, we try with our action to attain higher valued ends with the means that we have available to us. And we try to attain each of our ends using a means, the combination of which has lower value in alternative uses to us. Once we recognize that that's a principle of human action, then certain logical implications follow from this. I might point out that this is a different approach. It seems somewhat similar, but you'll see during the week it's a different approach from the neoclassical approach, which makes an assumption of maximization. So they make an assumption of profit maximization for entrepreneurs and utility maximization for the consumers so that they can generate mathematically tractable models to try to explain empirical regularities in the world. Whereas, obviously, Mises has something else in mind here, right? He's not trying to protect empirical regularities here. He's trying to explain what human life is all about, how we live as human beings, and why there are certain differences that we see in the world as the division of labor extends or atrophies. Now, the second step in this discussion about the fundamental of the order of society, I've only said up to this point that there's a certain order for each person's action. It's economizing. And what makes it possible for different persons to come with their different actions in concert with one another is the principle of economic calculation. And this is something, again, you'll have many lectures about that use this idea and explain this idea later in the week. But fundamentally, this is just the, as Tom Woods pointed out last night, the array of prices that are generated through our voluntary exchanges that we use for decision making so that we can effectively buy things. We can know what the opportunity cost is of our purchases. We can make production decisions. We can self-select into different lines of production because we know the wages that are paid in the different lines. And the entrepreneurs can arrange the production for different goods that we would demand as consumers and for the different combinations of the factors of production. And so this is what provides social order, right? Mises writes in an unpublished manuscript that's in the Mises archive at Grove City College. He writes that this relationship of the economic calculation provides a human or humane social system. It's really the only social system that mimics human action itself, right? It's economizing in the same sense that each person's action is economizing, a rather, again, remarkable thing. Now let me just mention something about the division of labor, and then we'll go into some additional logistics of this. We define the division of labor in economics in the following way. It's specialization in production according to efficiency. So there are two aspects to it, right? First, we're not self-sufficient, we're specialized in production, each one of us is producing for the consumptive ends of other people, and then some of our consumptive ends are being met by the production of other people. That's one aspect of the division of labor. And the other aspect is that when we decide who is going to produce what, how each of us will be arranged in the different lines of production, we do this according to efficiency. So the allocation of the different factors of production into the different lines of production is not willy-nilly. It's not specialization for specialization's sake, but it's done with a recognition of replacing inefficient producers with efficient ones. And this is where the gain then comes from the division of labor. Now our friends on the left and the right tend not to see things this way. They tend to ignore or dismiss this principle. Instead, they think of society as the army. And the army is just controlled from the top. And if you need somebody to peel potatoes, you just, the sergeant just says, go Joe, go peel the potatoes. They don't worry whether Joe's a great accountant or would be a good basketball player or an entrepreneur or whatever. And so they have all these different tasks and they're just assigned arbitrarily, we would say, from the perspective of economizing. So the division of labor is more than teamwork. It's more than just getting a bunch of people together to do the tasks together. Again, the division of labor is the assignment of the particular task to the efficient producers. And so it raises the question of how do we ascertain this? How do we discover who is efficient at what? I should also lastly point out in the opening remarks here that we call this the division of labor, but of course it applies to all factors of production. There's a specialization according to efficiency of land sites. There's a specialization according to efficiency of capital goods in the structure of production as well as labor. And the same underlying principles then of discovering efficiency apply in all cases, whether it's a land site or a human labor skill or a capital good. Okay, so let's go on to some of the details here. And if we wanna get at the fundamental principles, it's always best to have an imaginary construct, as we say in economics, a thought experiment if you will, where we simplify a situation of acting to expose the basic principle. And so we don't get distracted by ancillary features of the circumstances that are more complex. And this of course is our famous example of Caruso. So Caruso, a person stranded on the desert island who would have to be self-sufficient of course before he comes in contact with Friday, but once he comes in contact with Friday, it's possible that they can engage in cooperative production. They can engage in a division of labor. They can specialize according to efficiency so that each of them produces for the consumptive ends of the other person, at least partially, and this specialization is to their advantage. It gives them a greater satisfaction of their ends. So I've constructed a simple chart that illustrates the basic principles of production. So we've got Caruso on the left. This is his marginal physical product of labor. And he has two production processes, coconuts in the first column and berries in the second column. And you'll notice as you go down the columns, Caruso would be applying an additional unit of labor in each entry. So if he picks coconuts with the first unit of labor, he would get six coconuts. But then if he applies a second unit of labor to the production of coconuts, he would only get five and then four for the third unit of labor and similarly for berries. Most of you recognize this as the law of returns. Why is there a law of returns? Well, because the natural world is diverse in its productive capability and is economizing actors. Human beings then exploit the most productive production process first. Once they've fully exploited that, if they want even more of that good, they have to go on to less productive possibilities and so on. So Caruso has a coconut grove and on the coconut grove, they're coconuts laying on the ground that he can pick up easily. So he can, it's a lot of production there. And then they're coconuts up in the trees. Well, once he picks the coconuts up off the ground, then he has to climb the trees and he isn't as productive with a given unit of labor, let's say a half hour of his labor effort. And similarly for picking berries, right? So that's a law of the finitude of material life that we see. And we have the same for Friday. We're making an assumption here, this is a thought experiment, so we can make conditions. And the assumption is that the complementary factors of production, the coconut groves and the berry bushes are the same for Caruso and Friday. Caruso's on the west side of the island, Friday's on the east side, but the coconut groves and berry bushes are configured the same way. So the differences in productivity here just due to their labor, that's what we're trying to isolate, right? Now you notice in this chart, we've done the hard case. We've done a case where Caruso is more proficient or has absolute productivity advantage over Friday in both production processes. So that's the hard case. It's easy to see how they would specialize for a productivity gain if Caruso was better at coconut gathering and Friday better in an absolute sense at berry picking. So we've taken the hard case, the difficult case. And this is what we mean by proficiency. So proficiency is just how good are they at producing? How much output can they produce with the application of their labor? Efficiency, of course, refers to cost. What does it cost them to produce? And their costs are also different. So for example, with the first unit of labor, Caruso could either apply it to get six coconuts or two quarts of berries. So if he applies the first unit of labor to get the two quarts of berries, his cost would be six coconuts. That's his opportunity cost. And in a similar fashion for Friday, we could do the calculation for Friday, right? Okay, so that's our setup. Now one last thing, one last assumption, if you will, of this thought experiment. We'll assume, and we do this again for the sake of isolating this particular feature of their differences in productivity. We're gonna make the assumption that their consumptive demands are the same. Because hopefully it's just commonsensical to you that if their consumption demands were radically different, if Caruso really liked coconuts and Friday really liked berries, that they would devote their self-sufficient production to the exploitation of inefficient areas of production there relative to the other person. Who wasn't exploiting the more productive areas that they're not consuming, right? And so there we could also get cooperation and harmonious social order if we just had differences in preferences to begin with. But we're setting that aside as well to see again this more fundamental point. So let's do a calculation. Let's say that Caruso applies three units of his labor, one to coconut gathering, two to berry picking. So in self-sufficiency he gets six coconuts and three and a half quarts of berries. And let's say Friday does the same thing. He applies one unit of his labor to coconut gathering, two to berry picking. He gets five coconuts and one quart of berries. This summarizes their production in self-sufficiency. So their total production if we added it up would be 11 coconuts between the two of them. They get 11 coconuts, six from Caruso, five from Friday and four and a half quarts of berries. However, what we notice is at this point their opportunity cost of production of the berries is radically different. Caruso is in fact much more efficient at berry picking than Friday. Let's go back to the slide and see. So Caruso again is right here and right here. So if he wants to give up that unit of labor and coconut gathering and extend berry picking, he could get one more quart of berries. He'd give up six coconuts. So his cost for the quart of berries is six coconuts. Friday is here and here. So if he gives up the five coconuts he can only get a quarter of a quart of berries. And so his cost is 20 coconuts per quart of berries. Much higher cost. So as we said before, as long as differences like this exist, if we displace the inefficient producer with an efficient producer, we're going to get more output, right? Because we've calculated efficiency here in terms of the physical output of other production processes. We've calculated it as opportunity cost. Okay, so let's do that. Let's move Caruso into the production of berries where he's more efficient. He'll specialize now. And when he does this he gets two for his first unit of labor, one and a half for the second, one for the third, so he gets four and a half quarts of berries. And Friday switches now to coconuts. He gives up berry production because he's less efficient there. And he gets five, four and three, right? If he devotes all three of his units of labor to coconut gathering he gets 12. So now physical output has gone up. With the same inputs we get more physical output. That's the effect of the division of labor. That's what Mises was talking about. Human beings can recognize that with these differences of efficiencies exist they can be exploited in such a way that it's mutually advantageous, that is it's advantageous to all persons who participate in this division of labor. Now this greater specialization than according to efficiency, the greater productivity of this specialization for people to willingly enter into it must generate a production benefit to each person. So how does that happen? Well that happens then through trade, right? And this would be one example of an exchange ratio at which both parties would benefit from, engage physically, they'd have more output by engaging in the division of labor. Caruso could trade one quart of berries to Friday for six coconuts. And if they mutually accept this exchange ratio then Caruso would end up with six and a half coconuts and three and a half quarts of berries, an additional half coconut. And Friday would end up with five and a half coconuts and one quart of berries. That's half a coconut better than he was in self-sufficiency. Now again this is just a stylistic illustration of the principle, right? So obviously in the real world the question is how do we ascertain where these efficiencies lie and how do we then organize the social apparatus to take advantage of these latent differences in efficiency. Now before we go on to that next idea let me make one last point about specialization here at the bottom of the slide. Specialization per se does not raise productivity. In fact you can do the numbers as a homework problem. If in my example if you reverse the specialization pattern so that a Friday moves to berries and a Caruso moves to coconuts you'll see that their output production would go down. So there's nothing inherently great about specialization. Again, this is the mistake the collectivists make about running the army. It doesn't increase productivity to just sort of willy-nilly assign people to different tasks. You have to be able to calculate their efficiency and then assign them accordingly or have a system by which they can self-select which is what the market does, right? They can self-select into their areas of efficiency. So it could be the case that when people specialize that by doing things over and over again they get better at it and they become more efficient. It could be that when they do things over and over again they get bored with the task and their productivity goes down. That's just an empirical question, right? That is not a law of economics. It's not a universal truth. It's just maybe it does maybe it doesn't. Okay. Then the next principle where we get this transition to the question of how we assess these things is the law of association. And the law of association says that each factor of production is efficient in some line of production. Each person is the efficient producer of something. Each land site is the efficient site for the production of something. And the reason why this is so, again we can see in our thought experiment since we strip out all the complexities of social life is that the opportunity cost of producing one of the goods is always in terms of the foregone production of the other good. And so as we did before, if we calculate the opportunity cost of producing more berries, we saw that Caruso's trade-off was six coconuts for one quart of berries and Friday 20 coconuts for one quart of berries. But if we want then to calculate the opportunity cost of producing more coconuts, if we just reverse the calculation, then we see that the ratios are simply reciprocals. So Caruso gives up one quart of berries to produce six coconuts. Friday gives up one quart of berries to produce 20 coconuts. And so obviously if Caruso's more efficient at berry production, Friday's more efficient at coconut production. This must be the case, right? This is a mathematical principle that if we have ratios that are unequal and we invert them, then the inequality sign reverses. This is always the case, no exceptions. So Friday, even though he's less productive in an absolute sense compared to Caruso, can still find a place in the division of labor. He can still find employment in the division of labor. Still to his advantage and to Caruso's if they divide their labor. That's the principle. Now, one last point about this last point on the slide about the law, this law of association. What this means is the implication of this is that employment, as long as we have a social system by which we can discover efficiency and people can enter into their efficient areas, then employment can be indefinitely expanded. The only strict technical limitation to this would be if the human population got so big that given our technology at that time, every square inch of habitable surface area of the earth was taken up in production. And yet we had even more people. If that were the case, then to employ those people, we'd have to displace other people and some people would then be permanently unemployed, right? Again, our lefty friends tend to think of the world this way. They tend to think of the world in terms of fixed production systems that if you have too many people, you can't fit them all into the fixed boxes of where they're going to go. Now, that made some sense. That particular view of the world made some sense, of course, before the Industrial Revolution. It was true, right? It was, you know, you had subsistence farming and herding and so on and very little development of the division of labor. Then if human population would grow, it would lead to excessive people who couldn't be usefully employed given the stagnant system of production. But as we've seen since the Industrial Revolution, we can transcend that limitation, right? That's not a fixed technical limitation. That just depends upon our development of technological improvement and our building of a capital structure that permits greater productivity along with greater employment. Again, we'll get to that basic principle. It will expose the logistics of that basic principle in a minute. But first, let's just run through the categories of the limits that economists have mentioned in the literature on the division of labor then. Now, Adam Smith in his book The Wealth of Nations pointed out that the division of labor is limited by the extent of the market. And by the way, if any Trump minions happen to be watching this, okay, pay very close attention to this. Or, you know, go back even better, go back and read Adam Smith or, you know, Mises or somebody who comprehends this principle. So anyway, in order to have the division of labor develop to extend, we just need to bring these other people who aren't in the division of labor into the trading relationships. And as soon as they come into trading relationships, then it's possible to discover where their areas of efficiency are and then we can employ these people into areas where their efficient production lies. So the market actually integrates, a little left to its own devices, would integrate the entire world into a single order of production, a single division of labor. Yeah, I know it's a big surprise. We don't need, as Tom Woods pointed out last night, we don't need politics to have globalization, right? To have a global economy, big surprise. We can have an international economy, a worldwide economy, just as a natural result of this process of human action. So government intervention in trade retards the division of labor. And if it retards the division of labor, it means that it makes us less physically productive. So that is the actual implication of trade barriers that some people are suggesting we engage in to make America great again. Now the second limitation, though, of the division of labor is the extent of saving and investing, the extent of capital accumulation, which again was a theme of Adam Smith's wealth of nations. So if we don't have a process of ongoing capital accumulation without saving and investing, that's my SNI, without saving and investing in capital accumulation, then the division of labor would not develop extensively enough to employ seven billion people. It would stagnate, right? And we'd have superfluous people, and then we wouldn't have enough production to feed them, and then the human population would sink back again. This again is, as I suggested, how lefties sometimes think about the world. But instead, what happens in the actual world, even though it's limited to some degree by the state, we have had tremendous capital accumulation. And with this, we can extend the division of labor then much further, supporting a much larger human population and even at higher standards of living. So how do we overcome these limits? Well, it's again as fairly obvious and more will be said about this in detail in lectures later in the week. So I'm just providing with sort of categories to think about. We have to eliminate state intervention in trade. We have to have free trade. And here, there are two possibilities, right? The state might prevent some people from engaging in trade. So this is what Trump has been talking quite a bit about. Not to put a barrier so that Americans can't trade with people in China. But it's also the case that the state could forcibly, they could use force to impose trade. So here, it would be done by subsidies or attack structure and so on. So the government here too is moving resources in society when they do this to less efficient areas. So the poster child for this right now, of course, is Tesla. Heavily subsidized electric cars. No, this is just wasting resources. It may be technologically interesting or it may happen in 50 years or something naturally in the market. But right now, by subsidizing this, we're shifting employment away from efficient areas in the US to inefficient. And we're making ourselves worse off than we would have been otherwise. So we need to get rid of these impositions. And then, of course, to eliminate state officials that make decisions over production. We know that this, and again, you'll have lots of opportunities to think about this with lectures later in the week about how entrepreneurs engage in this process of economizing. But suffice it to say at this point, entrepreneurs, unlike government officials, can appeal to profit and loss for making production decisions. They earn the profit from anticipating what consumers will demand and then arranging factors of production, bearing the cost, paying for these inputs and then selling the output at revenue generating levels that are greater than their costs. And then they, of course, avoid loss producing lines of, or at least they attempt, as best they can to avoid loss producing lines. And the same thing with investment. So entrepreneurs know what to invest in because they can test their investment decisions by looking at the market and making appraisements of the market value of their capital. Whether the Tesla giga battery factory is really worth it or not. The answer is no. Again, maybe someday, but not now. How do we know this? Because it's heavily subsidized in order to make it viable. Okay, so we need to get the government officials out of making decisions like this, capital investment decisions, leave these again to the entrepreneurs and then have the open process of self-selection of people into the different lines of production. So we all, that, as Tom Woods pointed out last night, this is one of the beauties of the market, one of the true aesthetic benefits of the market, right? That we can all live with freedom, self-selecting into this division of labor and yet cooperate with one another. Okay, now the last thing that I have on that, sorry if you can't see the bottom of this, but that last line says that people themselves, in society, can choose whether or not to overcome what I've called here for the, just for the pedagogical purposes, natural barriers. There might be natural barriers as opposed to the artificial barriers of the state to that can be overcome or not overcome according to people's choice. So this is things like culture. So it might be the two different people and two different areas of the world just culturally don't want to interact with each other, even though there would be material benefit from their interaction, but they just choose not to. They just don't want to come into society with these other people. That's of course their business, right? That's just a matter of their own choice to do or not to do. But if these barriers can be eliminated, then bringing more people into the common division of labor would raise productivity. This is the material cost of their choice not to integrate. And then there could also be just physical objective features of the world that would limit, by choice, people would limit the degree to which they engage in a division of labor. These are things like transportation costs of goods. They could be just too high for certain people in certain parts of the world to integrate fully in their production with other people in other parts of the world. And then maybe in the future, again, technology would improve and transportation costs could be reduced and this integration could occur. This is a nice chart of, well, as it says, the world economy. It's GDP per capita in Western Europe and China. This is from a book called the World Economy and Millennial Perspective by Angus Madison, that was published in 2001. And you can see two interesting things that we'll just dwell on briefly. So the red line is Western Europe, the estimate of Western Europe standard of living, as you would say. And the blue line is China. And you'll notice that for the first millennium of after Christ, the Chinese standards of living were marginally higher than standards of living in Western Europe. And then about 1000 AD, or maybe a little late, a couple of centuries later, the high middle ages, 1200 AD or so, we start to see this steady upward progress. And standards of living are much higher by the Industrial Revolution. And then with the Industrial Revolution, they spike up in Western Europe. By the way, it's pretty easy to see what this is. This is a correction of the official statistics after the opening up of China to the West. So actually, their official statistic, their standards of living were actually down here. The same thing happened in Russia, right, after the collapse of the Soviet Union. We found out then in the West that their standards of living were actually much lower than they'd been saying all these years. So that's that little downward blip. And then the upward blip, of course, is market reform, right? The period, the last 30 years or so, market reform. We've seen the same kind of process of overcoming these limits to the division of labor in China that we saw happen more than a century earlier in the Western world. Madison estimates that since 1000 AD, population in the world has increased 22-fold. GDP, however, has increased 300-fold. And so GDP per person has increased 13-fold since 1000 AD. And you can see a large portion of that is post 1800, just in the last couple hundred years. Okay, so how does the economist account for this? Well, through the process I've alluded to of capital accumulation. And capital accumulation occurs in the following logical sequence. And again, there are many lectures later in the week that flesh this out. So if this just seems like an outline, yes it is, to provide you with a framework for thinking about this later. So people have lower time preferences, which means they're less eager to have present gratification. They're more willing to delay their present gratification into the future, so they save and invest more. When they save and invest more, they can build up a capital structure. And this is the other thing that we wanna mention logistically about the basic principles. We'll get to that in just a minute. So they build up a capital structure production. They mine ores out of the ground. They have mining operations and then this gets shipped to factories and things are fabricated and made and so on, right? We have this capital structure. Improving technology gets integrated into the capital goods over time and greater productivity as a result. And so standards of living rise. So these rising standards of living are due to the unleashing of this process. And again, the unleashing of this process has been the overcoming of these limits that we mentioned already. Now, what's the employment effect of all this? Well, I culled out some interesting statistics from a paper called The Occupational Changes during the 20th Century. This was written by Ian Wyatt and Daniel Hecker. And as I point out in the parenthesis, it's published by the Bureau of Labor Statistics. So this is a very mainstream, you know, conventional, you know, I'm not presenting some cranky, you know, one-off view, right? This is well-accepted in the mainstream. This paper was published in March of 2006 and it documents, as the title indicates, occupational changes in the U.S. economy. And here in the first block, I've got farming employment, 1910, this is in the U.S. in 2000, so there were almost 13 million people employed in farming in the U.S. in 1910. And in 2001.6 million, shock and horror, right? We're being displaced, where are jobs going? Isn't this horrible? How are we, where are these people going? Isn't this just create 10 million unemployed? And not only did this happen, but productivity, this, by the way, is the percent of total employment in farming, 33, and now it's 1.2. Farming production has increased roughly three-fold in this time. So the first column is wheat production in bushels and the second column is corn production. So we have a fraction of the people working in farming that we had in 1910. And we have three and a half times the output. That's what capital accumulation does, right? That's the natural process of the market. That's what's being reflected in Angus Madison's chart. Now, what about manufacturing? What Trump is worried about? All those great manufacturing jobs going overseas, yeah, terrible, right? Well, here are the statistics. This is employment in production and operatives. So this is the closest category of manufacturing employment in this paper. 1910, 4.3 million people is 11% of the workforce. It peaked in 1950, 8.8 million at 15, and now it's again at 11, but you'll notice the total employment's larger. Total employment's still going up. In fact, total employment peaked in 1980 at about 11 million. And since then it's fallen to 9.4. Should we be worried about this? Should people in the 20th century have been worried about this? Did this create Armageddon? Did it create mass unemployment? No. No, this is just the natural progress of the market economy. Engineers is even better, right? They're also tend to be in manufacturing endeavors. 0.2% in 1910, 1% in 1950, now it's doubled as a percent. So there's no crisis here, right? There's nothing in particular to worry about. Okay, so now let's talk about this fundamental principle that we want to expose again for your own, just to get you introduced to it so you can learn about it more fully in other lectures. And this is to go back to Caruso and capital accumulation just to see the basic principles involved. So let's say Caruso finds that they're fishing a stream on his island, but he can't catch them without the aid of capital. So he thinks of a technological innovation. He thinks of making a net. He could do something more primitive, like just making a spear on the end of a stick or something. But he thinks, oh, I can make a net with the materials that exist on the island. And so he starts to go through stages of production. First he extracts the raw materials out of nature, vine and twines. And then he takes them back to his hut and he wheezes together the net. And then he takes the net and he fishes with it. And his fishing with the net then would generate marginal physical product. He'd be able to catch some fish. He'd apply a half hour of his labor to fishing with the net. He'd get five fish with the first unit of labor and then four and three, right? The diminishing returns would set in, the law of returns. So you see that Caruso will, even outside of society, Caruso will begin to extend the capital structure and more of his employment will go to the higher stages. It'll simply be shifted from the lower to the higher stages. Always finding employment wherever he sees the greatest value, right? He doesn't have any unemployed labor. And neither do we in society. We're just moving it around according to its efficiency as we develop new production processes and so on. At least as long as we have a market economy. Now, what about the decision to produce the net? What would this depend upon? And again, later in the week, you'll, we'll elaborate quite a bit on this. But it's a matter of the capital value, as we say of the net, the present value of the future fish that will be caught by the net. Or as we say technically the sum of the discounted marginal value products. The sum of the value today to Caruso of the future fish that he thinks he can catch with the net. And then he'll compare that to the cost of the factors he uses to produce the net in other goods that he has to forego. Just as we did our discussion before about coconuts and berries. So it's on that basis that all investment, saving and investment decisions are made, even again in the market, except in the market there are prices and appraisement. But fundamentally it's the same process as going on. Now, let me emphasize one point and then we'll go to the conclusion. Caruso, when Caruso improves his productivity by using the net in production, he's gone through these logical steps of first gaining knowledge about production that might be possible to him. He's developed technology. And then he's embodied this technology through production into a capital good. He thinks I can make a net. From the materials on the island and then I can use the net to catch fish and boy, that would be great. That'd be very valuable, much better than eating berries. So there's a certain logical structure here. Caruso invests in the technology itself, right? He would spend time exploring the island, finding out what the production possibilities are. And the same with us in our world too. We need a market where technology is open to the application of resources that the entrepreneurs would devote to technological improvement, to research and development. That's how we can economize then resources in the development of technology itself. But the technology, the ideas themselves don't raise our productivity in and of themselves. They have to be embodied in capital goods. Okay, so now let's go to the end because I wanna integrate one last principle. In society, we can do what Caruso cannot do. We can specialize, as we pointed out before in production. We have Caruso on Friday. But in our world, we can even specialize further, right? We can specialize the activities of saving and investing. Because not everybody with low time preference who's good at saving has the good foresight of knowing what the best investment lines are. It might be that those skills are disparate across different people. But if they can get together in the market, if we can have a division of labor, well, we can improve this process. And some people think that the big spike that we looked at in the Madison graph after 1800 was due in large part to the democratization of financial markets. So that becomes a big issue, right? That's a very important issue for us to talk about during the week. What's the role of financial markets in fostering real production processes and greater productivity? So I offer that for your consideration. Then the other point, the middle point here, economic calculation then would continuously reveal changing patterns of preferences the consumer has and integrating new ideas in production and so on. The world is constantly changing with respect to the economizing allocation of things. And entrepreneurs in the market can adapt to this in the efficient way. And so with this, as we suggested before, we get this indefinite expansion of the division of labor so that human population can rise in an unprecedented way as it has in the past couple hundred years. And yet our standards of living are almost imaginably higher as well. All right, at this point I'll stop. Thank you.