 Today, I am going to be talking about the Division of Labor and the social order. If you're interested in reading further afield on this, I'm going to be drawing on some of the relevant literature Plato in his Republic talked about the Division of Labor, actually. Adam Smith's The Wealth of Nations is sort of very famous talking about the Division of Labor. David Ricardo's Principles of Taxation, Ludovan Mises's Human Action has an excellent discussion of the importance of Division of Labor for the social order. And then Maria Rothbard's essay, Freedom, Inequality, Primitivism, and the Division of Labor is a tour de force that everyone should read. If you haven't read it, you should read it. If you've already read it, you should read it again. It's an essay that bears increased reading and always going back to the well. The reason that Mises and Rothbard, in addition to Smith and Ricardo, and Plato to a certain extent, are important is it helps us navigate sort of conflicting views on the Division of Labor. I have two of them here in front of you. One is from Herb Thompson, a professor of economics at Murdoch University in Perth, Australia. At least he was at the time of when he wrote this in an essay, Conflict and the Social Relations of Capitalism. And he says, quote, rather than seeing conflict as an anomaly, it is concluded that conflict is an essential and an inherent component of the social relations found in capitalism. So if you just want to sort of summarize that, capitalism bad because it promotes conflict. The relations in capitalism are always in conflict. Whereas Ludovan Mises, in his book Socialism, had a different view of things. He says, the greater productivity of work under the Division of Labor is a unifying influence. It leads men to regard each other as comrades in a joint struggle for welfare rather than as competitors in a struggle for existence. It makes friends out of enemies, peace out of war, society out of individuals. And I'm not sure if he was sort of rhetorically trying to refute the communists when he uses the word comrade there. But I thought it was just a nice touch. Now to understand how the Division of Labor contributes to society and not to social conflict and how it contributes to social order and not social chaos, we need to understand the structure or I'm sure to say the nature of production. What is production? Well we know, as you've already seen today, production is action. It's applying means according to ideas to achieve an end. All human laws, all laws of human action then apply to production. So why do people act? They act to attain their ends. Why do producers produce? Producers produce to attain their end. And their end is economic profit. So producers produce to make a profit. And in order to do so, producers must seek to economize, just as consumers do. Consumers economize on their budget when they buy bread and milk and butter and fireless chocolate cake. I wasn't going to mention that until tomorrow but I'm going to just get it in there now. Just as consumers economize, producers economize in how they utilize the land, labor and capital goods they are able to obtain and or rent. And so they want to economize. So they want to engage in the type of production that is most efficient, that is most productive for them and thereby helping them to achieve their end most efficiently. Now at the outset, it's important to recognize that the division of labor is not the only game in town. There is at least two modes of production and I didn't have this in my list of literature but Milton Shapiro in his book The Foundations of Market Analysis or something like that has a very good discussion about the two modes of production. And one mode is a direct use production. Direct use production is when none of the production is exchanged in the market. In other words, people are producing for themselves. It's production for self-sufficiency. And people then produce goods because they want to consume them. So there's a direct correspondence between what people produce and what people consume. People grow a garden, why? To eat the vegetables that they grow in the garden. People build a hut so that they can live in it. People raise a cow so that they can milk the cow and consume the milk. People make a few pieces of clothing so that they can wear the clothing. People raise a steer so they can butcher it and eat it. And so that's direct use production. People are producing goods so that they can use them directly. Now this mode of production was common throughout a lot of human history but it was found mainly and is still found mainly in poorer, less developed countries. And it is found mainly in poorer, less developed societies because direct use production in general is less efficient. You get less output totally and in terms of both quantity and quality and variety, you get less output than we get with the alternative mode of production and that is production for exchange. Production for exchange as the name implies is producing goods that you hope to exchange. You hope to trade. In other words, production is not oriented to the consumption of the producer but production is oriented to the market, what can be sold in the market. People produce goods not because they want to consume them but because they think they can trade them for other things that they want more. Now production for exchange is production in the market division of labor. The market division of labor is a production for exchange society. And this mode of production, production for exchange, production in the market division of labor is the primary mode of production in more developed, wealthier societies. And so it's production in the division of labor. Well what do we mean then by the division of labor? The division of labor is important for the development of prosperity, it's important for the development even of civilization. We might want to know what it is. So division of labor, we can define it this way. Specialization of production according to efficiency. Specialization of production according to efficiency. And in this definition there are two important words. Specialization of production according to efficiency, one important word is specialization and the other is efficiency. So what do we mean by specialization? Specialization means that each person produces a particular good or set of goods in excess of his personal consumption. I'm here lecturing on the market division of labor in the social order. I've done it a number of times. I know pretty much what I'm going to say and while I enjoy doing it, I don't really feel like I need to do it again and again and again to learn from it. I'm not really consuming this in some ways. I'm doing it because I've been asked to do this as part of an exchange relationship. And I'm also doing it because I do enjoy teaching people and educating people for sure. But the point is, I am specializing in doing this. I have not made any of the clothes that I'm wearing, for which I'm very thankful because it would not be a good scene if I was wearing clothes only that I produced. Somebody else produced the clothes that I am wearing. Somebody specialized according to efficiency to produce these clothes. The specialization means that each person produces a particular good or set of goods in excess of his personal consumption. My favorite example, I've used it before. I'm going to use them again, James P. Snee, who's the CEO of Hormel Corporation. My uncle, my father and my uncle, they were twin brothers. They both worked in the meat packing. They both worked in the meat packing industry. My dad and my uncle spent about 20 years with one company and then that firm closed. And then my uncle went to work for Hormel. And Hormel's is known somewhat for bacon, but the flagship product is spam. And spam is the kind of processed meat product that everybody cringes at so much that everybody eats it. They estimate that 12.8 cans of spam are eaten every second somewhere in this world. That is a lot of spam. If you do the math, that's about 403 million cans of spam a year, which seems unbelievably high, but their numbers are such. If you calculate this, they just reached a record plateau of selling a total of 9 billion cans of spam total about a year ago. Two years before that, they sold the 8 billionth can of spam. About three years before that, that's 7 billion. So it's like exponential growth in spam consumption. I don't know what that means for the world. But anyway, I report you decide. So James P. Snee is making 403 cans of spam, 403 million cans of spam a year. Why? Is he doing it because he wants to consume it? Does he want to eat 403 millions of cans of spam every year? I would suggest no. I would suggest he's not doing that. Why? Because he's still alive for one thing. If he ate that much spam, he would have died of a stroke a long time ago. No. So that's not the goal. What he is doing, he is specialized in producing spam because other people want to eat it. A lot of people want to eat it, it turns out. It's the number one, I think the number one process food product in Hawaii and also, I believe, Guam and other places. And that's why he's doing it. Other people want to eat it. At the same time, his consumptive ends, the ends that James P. Snee has for consumption, those ends are met by other people as he exchanges his excess product, his excess spam for money, and then he uses that money to buy whatever consumer goods he wants to buy. So that is specialization. Each person producing a particular good or set of goods in excess of his own or her own personal consumption. But as I noted, the Division of Labor is not just specialization of production. The market division of labor is specialization of production according to efficiency. So who produces what within the Division of Labor is determined by efficiency. The different tasks are taken up by the efficient producers. And the efficient producer is the producer with the lowest opportunity cost of production. The person who is the low cost producer at producing spam, that makes him efficient at spam production. The person that is the low cost producer of winning economics lectures has a comparative advantage or is efficient at producing economics lectures. Now, while economists call this principle the Division of Labor, it actually applies to all factors of production. In other words, there's a division of capital goods according to efficiency. And there's a division of land used according to efficiency. So in some sense, as this seems like often the case, terms are identified almost accidentally and so that you're stuck with it. The Division of Labor, it could almost be, almost better to call it the Division of Production, right? The Division of Production. But we call it the Division of Labor because that's the way we called it way back when and we don't want to change now. Now, so that's what the Division of Labor is. Specialization according to, specialization in production according to efficiency. Mises in his work, Human Action, you could find it on page 157 if you're that way. Mises in Human Action refers to the Division of Labor as the fundamental social phenomenon. The fundamental social phenomenon. The fundamental social phenomenon. The fundamental social phenomenon. And the fundamental social phenomenon, he said, is the Division of Labor and human cooperation, right? And the Division of Labor then, the Division of Labor is the great impetus for social cooperation. And I think we can look at it as socially fundamental in two senses. It's fundamental in the sense that it seems to be something that humans do, right? It's kind of like the old Geico commercials. Well, why did the chicken cross the road? Because that's what chickens do. It's not to get to the other side, this is what they do. Why do people participate in the market of the Division of Labor? What's what we do, right? But at the same time, and that's actually in a way, that's sort of what Smith sort of implied. So we had this instinct, if you will, to truck, barter, and exchange. Like you're just sort of walking along, you know, Glasgow and you hear this bing, oh, must trade, must trade, must truck, barter, and exchange. You start salivating like a dog owned by a Russian guy named Pavlov. Anyway, so Smith sort of talked about that in one part of his book, a little bit like that. Another part of his book, he made it a little more, shall we say, rational. So it does seem to be what humans do. It's something we've done going clear back to human history. As far back as we have written history, we find evidence of at least some Division of Labor in the ancient Near East, in Mesopotamia, in ancient Greece. Plato writes about it in the Republic, for instance. In ancient Rome, we find evidence of the Division of Labor. In the biblical literature, the earliest chapters of Genesis, we have the first humans mentioned identified by specific tasks, right? Cain was a tiller of the ground, Abel was a keeper of sheep. We, most people know what, that didn't really work out really well between the two of them. The first family was also the first dysfunctional family. And the descendants of Cain also were identified according to specific lines of production. Jable had cattle, Jubal was a musician. And they had one of Cain's descendants who was a metal smith, they called Tubal Cain, right? Which always thought it'd be great for a speed metal man, you know, that'd be, sounds heavy metal to me anyway. But I find it interesting, they could have described these people, a host of different ways, but how do they describe them? According to some particular trade or enterprise that they're engaged in. To me that says, the Division of Labor has been with us for a long, long, long time. Additionally, and this is what Mises meant, the Division of Labor is socially fundamental because it is the great impetus for the formation of society. The reason people participate in society, the people, the reason people form communities and move to certain communities is so that they can integrate with a region's Division of Labor. So they can participate in a Division of Labor. Society, Mises argues, in fact is only possible because of the greater productivity of the Division of Labor. The greater productivity of production for exchange. The Market Division of Labor is a great incentive and impetus for people to participate in it and form societies. But then Mises goes one step further and says society is possible because of the greater productivity of the Division of Labor. But also people's recognition of this fact, right? I mean, it's possible, right? It's conceivably possible to think that, yes, production for exchange and Market Division of Labor, specialization according to efficiency could have been always, always, always more productive than production for use, direct use of production. But if people didn't see that, they didn't pick up on this fact. It could have been true, but it could have been something that's true that we just, we were ignorant of. And so for generations we just participate eating hand to mouth, living hand to mouth, not trading, but being very self-sufficient and very poor and it's sort of a barbaric struggle for existence. And so society happens because of the greater productivity of the Division of Labor. But then also people's recognition that, ah, this is a better way to do it. This is more productive, so I want to participate in it. So how do people participate in it? How do people find their way in the Market Division of Labor? People find it in their interest to specializing in making goods at which, as I mentioned before, they are most efficient. So let's take a look at some production possibilities. And this is just an example. I've got two good friends of mine, Groucho and Harpo. And Groucho and Harpo, let's say, a very primitive two-person society, if you will, producing two different goods, mangoes and beef. Mangoes, individual unit and beef in pounds. And let us suppose that Groucho and Harpo, if you look at there, are not identical, right? They're not the same. They're all different. Groucho, if he specializes in mango production, if he takes all of his land lame or capital goods and his time for a whole week and produces nothing but mangoes, he can produce 300 mangoes a week. Groucho, on the other hand, can produce 600 pounds of beef a week if, instead of producing mangoes, he puts all of his land lame or capital goods and time into beef production. So we can produce either 300 bushels of mangoes or 600 pounds of beef or some combination in between. Harpo, on the other hand, is a little different. Harpo, if he takes all of his land lame or capital goods and his time and does only mango production for a week, he can produce 100 mangoes a week. If he does the same thing only specializes in nothing but beef production, so he takes all of his land lame or capital goods in his time and puts it into beef production, he can produce 400 pounds of beef per week. So now we have these two different people. We will find that they have two different relative efficiencies. Groucho can either produce 300 mangoes a week or 600 pounds of beef a week. Harpo can produce 100 mangoes a day or a week or 400 pounds of beef. What are the relative efficiencies? Well, the one thing that should jump out of us, if we can say, well, who's better at what? Well, seems like Groucho is more proficient in the production of both goods. Proficiency is what economists often call absolute advantage. Absolute advantage. It's advantage that's vodka-like, I guess, if you know absolutely. Anyway, he's better at producing both. So for instance, who can produce more mangoes? Well, Groucho can produce 300 a week. Harpo can produce 100. And even in the new math, I think 300 is greater than 100. And so Groucho has an absolute advantage. What about on beef? Well, Groucho can produce 600 pounds of beef. Harpo can produce 400 pounds of beef. Well, 600 is greater than 400. So he's got an absolute advantage there, too. Now, is Adam Smith in Wealth of Nations made the case that it seems obvious, like if Groucho had an absolute advantage in mango production and Harpo had an absolute advantage in beef production, well, it seems that clearly the case is there that, well, they should specialize in what they have an absolute advantage in producing and then trade their surplus and they'd be both better off and be more productive. And that's clear. That's true. But then some of the mercantilists said, well, people are against international trade, so well, okay, okay, all right, fine, fine, fine. But what if you have a country or a particular person who has an absolute advantage in both goods? A recent proponent of this view, by the way, would be, say, Paul Craig Roberts. He sort of makes a similar argument. What then? If you have an absolute advantage in both goods, what then? Well, it turns out that even if one party, like Groucho here, has an absolute advantage in both goods, there is still a benefit to specialize according to efficiency, not proficiency, but now efficiency. What we call comparative advantage, comparative advantage. Now, okay, so it makes sense for people to produce and specialize in the good at which they're most efficient. Okay, maybe I'll buy that, maybe I won't. How do we decide this? What do we mean by this? Well, who is the most efficient producer at what? How do we know? Well, as I mentioned, efficiency is determined by the opportunity cost of production. So you find out who is the least cost producer. And so if we look at this chart, right, if we want to look at mangoes, to produce one mango, how much does, how many pounds of beef does Groucho have to give up? Well, if in order to specialize in mango production, he produced 300 mangoes, he gives up the opportunity to produce 600 pounds of beef. So that's an opportunity cost of two pounds of beef for every mango. Harpo, on the other hand, if he produces 100 mangoes, he gives up the opportunity of producing 400 pounds of beef. So that costs him four pounds of beef for every mango he produces. So it seems pretty clear then that the lower opportunity cost producer is Groucho. Groucho is the lowest opportunity cost producer of mangoes. That is where his efficiency lies. What about beef? What about beef? Well, to produce one pound of beef, if we look at the numbers, to produce one pounds of beef, it's going to cost Groucho a half a mango. If he specialized in producing 600 pounds of beef, Groucho has to give up the opportunity of producing 300 mangoes. So that's equivalent of a half a mango per pound of beef. Harpo, on the other hand, if he specializes in beef production, he produces 400 pounds of beef, but he gives up the opportunity of producing 100 mangoes. So that would be one fourth of a mango per pound of beef. And so, who has the lower opportunity cost producing beef? Well, it's Harpo. That is where his efficiency lies. And so if both parties would specialize in producing the good at which they have the comparative advantage, Groucho would specialize relatively in mango production and Harpo would specialize relatively in beef production. And we'll see that that makes sense because there are tremendous benefits. Both parties will benefit from this specialization. So let's take a look at the case. There's sort of a comparison here. What were things like before or without specialization? Let's say that both parties, they sort of like both mangoes and beef. They like mangoes and beef. And so they will divide their time in half to producing some beef and some mangoes because they're not going to trade. All they have to consume is what they produce. So they both spend their time, half their time in the resource of producing each good. If they do this, what do we find? We find that Groucho then produces 150 mangoes and he produces 300 pounds of beef. Harpo produces 50 mangoes and 200 pounds of beef. So we look at total production here. And this is just total production not consciously together. They're just two different people that are producing things. But if you look at total production, you add up the mangoes, 150 plus 50 is 200 mangoes totally produced. And then 500 pounds of beef are produced totally. So that's a total amount of beef and mangoes would be produced in a direct use production society without any exchange. But we find that specialization in production increases total output. We get more of the goods. Harpo is in a situation where it makes sense for him to completely specialize in beef production. He should completely specialize in beef production. Groucho, on the other hand, we find it is helpful for him to partially specialize. Say spending three-fourths of a time in his resources producing mangoes and only one-fourth time in resource producing beef. If we do that, if we do it that way, Harpo would produce no mangoes but 400 pounds of beef because that's what he's specializing in. Groucho relatively specializes in mango production and produces 225 mangoes but then also 150 pounds of beef. It's not complete specialization, but it's partial specialization. But the point is, as you organize production this way, what happens to total output between the two people? Well, mango production increases by 25. So instead of producing 200 mangoes together totally, he now produces 225. Beef production increases from 500 to 550. So there's a 25 mango gain and a 50 pound of beef gain from specialization according to efficiency. So that's all good. That's all good. We produce more. But of course the point of production is what? Consumption. And the good news is, when there's increased productivity and specialization in the market of division of labor, of course it allows people together to produce more but it also allows them to consume more. Because Groucho and Harpo can produce more mangoes and beef together, they can then negotiate and find an acceptable exchange ratio that allows them to consume more mangoes and beef if they desire. If they desire both to consume more mangoes and beef, they can come to an arrangement where they establish an exchange ratio that would allow them to trade the right amount of mangoes for beef so that both could consume more mangoes and more beef. And it's this increased productivity and opportunities to achieve more ends to the market division of labor and to participate in society. That's why people participate in society. That's why people participate in the market division of labor. They don't participate in the market division of labor because they like exploitation. They participate in the market division of labor because everybody who participates in it benefits from it. And by the way, it's important to note that this increased productivity is not merely the result of specialization per se. There are some people out there and James Buchanan is one. Russ Roberts is another who was sort of emphasizing this, what he calls a Smithian productivity or Smithian production or Smithian division of labor versus Ricardian. And emphasizes Smith, the point that Smith is, as long as you specialize, there are productivity gains from specialization willy-nilly. And so if you want society to move forward, just specialize somehow and somehow then everything, the increased productivity takes care of itself. Well, we can see that this isn't actually completely the story. If we think about what would happen in our context if Groucho specialized in beef production and Margo specialized in producing mangoes. In other words, if people specialized in their comparative disadvantage, if they did that, total output would fall and everybody would be worse off. And so the gains from the market division of labor, as an impetus for participating society, is not merely specialization per se. The specialization will change things down the road, but specialization per se is not it. It's specialization according to efficiency. It's differences in efficiency that drives these things. Well, what accounts for these differences in relative cost of production for different people? Well, turns out it's the variety we find in both humans and in nature. It turns out that people are not exactly equal. They're not cookie-cutters. We're not clones, if you will, of one another. We're not identical. We're different. There are differences in the suitability of natural resources. You don't find a lot of king crab harvesting going on in the sandhills of western Nebraska. Primarily because there are no king crabs in any waterway in the sandhills of Nebraska. At the same time, you find lots of cattle being grazed on wide-open, rolling grassland hills. Way more than you do in Alaska. And so the differences in the suitability of natural resources in different places helps explain why some people are more efficient at cattle ranching in certain places and king crab harvesting in other places. Secondly, the differences in given capital endowments. If someone was willed through an inheritance, they inherited a bunch of tools suitable for ranching. They inherited the land, large trucks of land. They inherited the cattle water tanks and the windmills and the auto gates and the fencing material and the pickup trucks and the branding apparatus and all the things you need for cattle ranching, you inherit that. That's going to make you more suitable as a cattle rancher than, say, a king crab harvester. On the other hand, if you live in Alaska and your father willed you his crab harvesting equipment, that would make it more likely that you're more efficient in that line of production. An important third determinant of comparative advantage is the differences in skills and desirability of labor. The differences in the skills and desirability of labor. Different people are better at different things and even people that are worse, that are absolutely worse at everything, they are least worse at something. They're not absolutely horrible in everything. Think of, you may have heard of Michael Jordan. I don't know if you've heard of Michael Jordan. He was in all the papers a few years back. He was this basketball player. He also was a baseball player. A lot of people don't know this, right? He actually made it into the majors as a baseball player because his dad always wanted to play baseball and so he retired from basketball to play baseball. Now if you ask a lot of people say, oh, he was horrible at playing baseball. He wasn't horrible. I mean, he made it into, he was in the majors. He was certainly in the minor leagues and he got put up to the major now. Of course, there may have been a, you know, a Michael Jordan name effect to get him to sell some tickets in the majors, but he still made it, right? The vast majority of people in this country have never made it even to the minor leagues, right? So it's not as if he's horrible. He was just a whole lot better at playing basketball, right? So he had an absolute, I'll just admit it, he had an absolute advantage over me playing basketball and baseball, it turns out. But he had a comparative advantage in playing basketball, right? So the differences in skills and the desirability of labor will also affect who is efficient at what. And it's important to note then that these inequalities are the incentive for the participation in the division of labor. That's an important thing you want to keep in mind here. Let me think, okay, we have the division of labor, it's more productive and it's more productive when people specialize according to efficiency. What is it that determines these relative efficiencies? It's the differences that people have. The fact that we are unequal in talent, we are unequal in capital endowment, we are unequal in our natural resources, right? Not claiming we're unequal in any moral sense, but I'm just talking about in certain human traits, we are unequal. And those inequalities then create the relative efficiencies and then then create a niche for everybody to be able to participate in the market division of labor and give us an incentive to participate in the market division of labor and hence form society and then after society civilization. And so it's the inequalities, the human inequalities that are in the incentive for the participation of the division of labor and hence the formation of society and the development of civilization. And therefore, as Murray Rothbard notes in that essay that I mentioned, and Guido Hulsman also noted this in this very lecture about 10 years ago, any attempt to force equality upon a society is necessarily unsocial. The market division of labor is what produces society. So if we try to stamp out inequality, we are stamping out the incentive and the benefit of participating in the market division of labor. So we are stamping out one of the great incentives for society to emerge. So the push for universal equality is a move that's fundamentally unsocial. Now, the example that I gave with Groucho and Harpo benefiting according to production, specialization according to efficiency is an illustration of the law of association. The law of association is, shall we say, a development of Mises, I would say, from Ricardo. Ricardo develops a law of comparative advantage. Mises takes this and in some sense universalizes it, noting that each factor of production is efficient in some kind of production. And he notes, Mises does, that this law of association applies not just to nations, but to each person. It's not just that if the French specialize in wine production and the British specialize in wine production on a blood pudding production. Typically, you want to specialize in things that are actually kind of goods, but value is subjective. We've already found that out today, right? So if we can imagine a case where it's not just if the French specialize in one thing and the British specialize in another thing, then the nations will be better. No, as each person within a society specializes in what they're relatively efficient at. That benefits each person, right? And as I already noted, it doesn't apply only to labor, but it also applies to land and capital goods. And as each factor then, as each piece of land, each particular capital good, each person's labor is specialized and utilized according to efficiency. People will reap the most output for the resources utilized. They will, in some sense, what we can say maximize our output given our scarce factors of production. And one implication of the law of association is that employment can expand indefinitely. There's been a lot of talk recently about the automation of society, especially with AI and chat, GPT and other things, that okay, now we have all these machines are going to take up and do all of this labor. We won't have any unemployment. Well, the law of association tells us that as long as land is relatively abundant, as long as land is relatively abundant, in other words, we're not using up every square inch of land. There's always a place in the market division of labor for a willing person. There's always something for people to do. Something else for people to do. The point is not we always have to do the same thing. It's something else. A machine makes some menial task a task that no longer has to be done by humans. That human then is free to do something that's a little less menial. And so as long as land is relatively abundant, there will be a place in the market division of labor for a willing person. Now, as a division of labor develops, there are social effects. In other words, a division of labor doesn't only impact the individual people, but it produces society and you have wider social effects. For instance, as people specialize in production according to efficiency, what happens? The initial differences that contribute to comparative advantages do become even more pronounced. And here is sort of, I would say, that the kernel, if you want to call it that, is in Russ Roberts' view of Smithian specialization. That as people specialize in something, they do become better at that if they have certain capabilities. I tell a story about my dad who, when he had to switch to a different meatpacking plant, he went from a beef plant which was not on a production chain to a pork plant which was on a production chain, which means the pork carcasses went through at a certain pace. And he got to a new plant and if you know anything about union seniority jobs, he was a low man on the totem pole so he got the low totem pole job which was tongue trimming. And his job was then to trim the spit glands off the pork tongues that came down to him one tongue every four and a half seconds. He's standing at a table and this pork tongue comes down to shoot and he has to take essentially two glands off one side and two glands off the other. Well, when he first got the job, he wasn't the most proficient person at this task and there would be a tongue backup if you will. Not as bad as sewer backup, of course, but still backup. And when the whistle blew and it was time for everybody else to go on break, he couldn't go on break because he had a pile of tongues that he had to work through on break and so he would have to maybe have an extra minute and a half everybody else is getting their coffee and he's still working like crazy trimming these tongues. Well, over time, he said he got so good at it because that was the only thing that he did eight hours a day trimming tongues he got so good at it that he didn't have tongue backup ever except when he wanted to. And so he would go on break and then when the whistle would sound everybody has to go back to work a minute and a half to finish this coffee and then go back and the tongues were there coming down the chute and the tongues were piling up but he was so proficient that by the end of the day the tongue backup was gone. So that is sort of what Smith talked about a little bit when Smith was saying yes, when people specialize they become better and better their dexterity improves and so that does happen when people participate in the Division of Labor. Specialization of the Division of Labor also alters a geography as people of different regions recognize the comparative advantages they have as a result of natural resource and natural labor endowments they begin investing in capital goods that are suitable for the tasks at which they are more efficient and so they begin to make changes to the land that makes it even more likely that people will be better at cattle ranching in certain areas or king crab harvesting in certain areas or steel production in certain areas. Specialization also increases the inequality of labor skills over time. Increased productivity also results from the Market Division of Labor or increased productivity that results from the Market Division of Labor is the key factor that allowed mankind to escape a Darwinian struggle for survival. Because in the Market Division of Labor when you think about it it's a fundamental statement that claimed by Herb Thompson that in capitalism which is a system in which we have the Market Division of Labor in capitalism conflict is essential and an inherent component of the social relations. Well in fact, if we understand the Market Division of Labor we see that it is Market Division of Labor that allows us not to be in perpetual social conflict. It allows us not to always be fighting over that little you know half pound of beef or that last mango. We don't have to fight one another to the death over our last hut or our last piece of clothing. Why? Because participating in the Market Division of Labor peacefully through exchange allows us to be more productive because in the Market Division of Labor think about this, who serves who in the Market Division of Labor. Each person serves his neighbor and each person is served by his neighbor. That's the beauty of the Market Division of Labor. The market economy does not produce atomistic individualism. It actually promotes community. It promotes production in society. And so the greater productivity of work under the Division of Labor is a unifying influence. This is what Mises says. It leads men to regard each other as comrades in a joint struggle for welfare rather than as competitors in a struggle for existence. It makes friends out of enemies peace out of war in society out of individuals. And now what that then further implies is that the Division of Labor integrates the world into an economic order. This Market Division of Labor is not chaos. It's an economic order that everybody in society can participate in just by jumping in. Just by diving in and participating in it. And it doesn't have to stop at the border. We can have international social cooperation. And we can have international social cooperation that does not need to be forced upon us by the state. It's not as if we can only participate in the Market Division of Labor with people in Japan and Canada and yes, even France because the government forces us to. No, we participate in the same Division of Labor that they do because it's beneficial to all of us. So this global Division of Labor to the extent that it exists, a global Division of Labor is not artificial. It doesn't exist only because of the right subsidy. It wouldn't need any subsidies to exist. It's a natural result of human action. It's a natural result of human action. There are, however, a number of limits to the Market Division of Labor. A number of limits to the Market Division of Labor. But we're going to save that for other people to talk about later this week. Thank you.