 I had planned on starting with a joke, and then I realized you had a bookstore tour with Dr. Gordon. So right now you're up to date with all the best jokes, so I'll just leave that aside. Our topic for this session this afternoon is division of labor in social order or society. And my aim will be to show you how the process of division of labor is connected to that of social development, how the two are actually congenering processes, how they develop at the same time, how they underpin each other, how they're sides of the same coin if you want. They're part of the same fundamental process of a monetary market economy. So here's a brief overview of what we will talk today. So first I'll give you an idea about division of labor theories and the history of economic thought, just so you can appreciate the history of the concept. Then we'll talk about a few fundamental concepts in terms that we will use in the lecture today, such as the definition of the division of labor money and things like that. And the core of our lecture today are points three and four. We will enjoy together a few numerical examples about the David Ricardo's comparative advantage. And then I will present to you what I think are the salient characteristics of Mises' law of association and why I think Mises' laws of association is actually deeper and richer than the principle of comparative advantage that belongs to David Ricardo. And finally, we will conclude with some implications of Mises' law of association for trade, society, and social order. So the topic of the division of labor began to be studied properly in the 13th and 14th century. The seeds of this had actually been planted earlier on by some Greek philosophers, such as Plato and Aristotle and some Chinese philosophers as well. But it was with the Latin scholastic movement that the topic of the division of labor actually began to be looked at in a little bit more detail. Albeit, in this case, it was mingled with philosophical and moral questions, and it was not actually studied from an economic point of view. It was in the 18th century and with the Scottish Enlightenment and what we call today classical economics, that the question regarding division of labor and social development became one more economic in tone. And the question that they asked was, how does the separation of employment about persons bear important social and economic consequences? So it was at this time in the 18th century that actually emerged what we call a political economy of the division of labor and of international trade thereafter. The more prominent definition of division of labor from this time, I'm sure you know, it's the invisible hand, Adam Smith's invisible hand, the invisible hand that organizes production and exchange at a social scale. The pit, however, of Smith's analysis that I wanna draw your attention to today was the fact that according to Smith, production, exchange, and social order happened in society in sort of a spontaneous way. Society is propelled by somewhat an instinctual propensity of people to exchange. So the social order emerges somewhat unplanned from their individual actions. This was more pithily expressed by Adam Ferguson, as you can see here on the slides, which says, nations stumble upon establishments, which are indeed the result of human action but not the execution of any human design. So society happens spontaneously unplanned, people are not aware what their individual actions actually boil up to. This idea of the unplanned and spontaneous social order was actually what influenced Marx and other socialist writers, who came up with the idea that society is propelled solely by its material conditions, and goes through subsequent epochs and each epoch leads to its own downfall and finally to the advent of communism and socialism. Obviously we don't have time to go into detail about that today, I'll just let you draw your own conclusions about that. In the 18th and 19th century, so somewhat contemporaries with the classical economists, the French liberal school also developed a body of work on the division of labor. And a lot of modern commentators will tell you that the French liberals actually just popularized some of Smith's ideas and that they had no original insight. Dr. Solerna and Murray Rothbard as well, they've done a great job at exploding that fallacy as Mises liked to say. What I would like to say as far as division of labor is concerned, so on the one hand you have here the name of ARJ Turgo. Turgo had a treatise published in 1770 that was called Reflections on the Formation and Distribution of Wealth, which a lot of people consider to contain the same ideas that were later contained in Adam Smith's Wealth of Nations. The two were personally acquainted, they had correspondence, so of course there's a bit of a controversy as to who actually originated the idea of the invisible hand. However, the more important point that I would like to make is that as far as my reading of the French liberal goes, my impression is that the French liberals actually put a different emphasis as to how society and division of labor emerge and develop than the classical economics. So for the French liberals, the point of the way in which they were superior in their analysis is the fact that they emphasize the rationality and the purposefulness of division of labor and social development. And this core of their analysis which was what became the salient characteristic of how Austrian economics looks at this process. For Mises and before him for Karl Manger and after him for Murray Rothbard, division of labor is an intellectual process, not an instinctual one. People are aware of what their actions build up to at a social level. Division of labor is according to Mises, the outcome of a purposeful utilization of the universal law determining cosmic, becoming the higher productivity of the division of labor. I'll go into a little bit of detail as we go along, but if you want a good source for seeing the differences between Mises and whatever came before him, there's a Professor Solerner's article, Mises as Social Rationalist, I'll have it on the last slide among further readings. So now on to a few definitions. I've acquired this habit of starting a lecture and definitions from my PhD advisor, Dr. Guido Hulsman, which some of you may actually have seen giving this lecture before. I graduated a few years back, but I'm still afraid of disobeying him, so talk about a persuasive advisor. I thought, what if he watches it? I mean, who knows? I'm gonna get a phone call. So division of labor, most economists, you see here the definition from the new Paul Grave Dictionary of Economics. Most economists will define it as the division of a process of employment into parts, each of which is carried out by a separate person. There are a few problems with the definition, though, and the main problem is that it's very narrow, yeah? And I'll explain why is it narrow by looking at a different definition, the next one, which I consider much better, which I have shamelessly borrowed from Professor Herbner in preparing for this lecture. Professor Herbner also gave this lecture in previous years. Division of labor can be better defined as a purposeful specialization in production according to efficiency. What this definition allows you to do is to understand just how far-raging and pervasive division of labor actually is. There's a keyword here, which is purposeful, and there's another keyword, which is efficiency. So if we refer to something as purposeful, it means that we refer to individuals, yeah? Because only individuals act and individuals can be purposeful, yeah? It refers to individuals in the market economy, not only as solitary producers, therefore, but in the market economy as entrepreneurs. So it refers also to the specialization of entrepreneurs in production. It also refers to the specialization of the firms that these entrepreneurs bring together, yeah? And it also refers to the specialization of land or capital goods, which individuals purposefully use them in a specific way, yeah, and therefore apply specialization to them. So not just to human labor, yeah? At the same time, because we are talking about purposefulness, we can eliminate from the beginning the more widely used but the rather incorrect unit of analysis of a nation, yeah? In most economics textbooks, if you're gonna see a discussion about comparative advantage, you will be the comparative advantage of nations, yeah? But we know from Mises's human action that nations do not act. Nations are not purposeful, yeah? So it's only a figure of speech when we say the US specializes in car production or France specializes in wine production, yeah? And in economics, figures of speech because economists are not poets, figures of speech tend to actually detract from economic truths, a lot of economists will use figures of speech to actually cloud the issue at hand. So remember as we go along that only individuals act, only individuals specialize, never nations as such, yeah? Now, where do the benefits of division of labor come from? There are two main causes for the benefits of the division of labor. One is the inequality of human beings. I've said the word inequality, yeah? Which means some are stronger than others, some are more analytical, some are better singers, some are better painters, some wish they would have made it into Hollywood but can't, yeah? I'll come back to the Hollywood example, don't worry. And the other aspect is the inequality of factors of production, the unequal distribution of factors of production across the world. I originally come from Romania, we have a great climate for vineyards, fruit trees grow very well in Romania. On the other hand, I currently live in the UK, the UK has a lot of well, rain and on top of that it has better pastures for cattle and yeah, the industrial revolution happened there and so on. The core point of the idea of the benefits of the division of labor can be summarized as the fact that human labor in society and in the division of labor is more productive that human effort and isolation, yeah? But the point that I would like to further make again is that this is not true, this is true regardless but individuals are also able to grasp this, yeah? This is a rational intellectual process. Individuals are able to perceive the fact that human effort and isolation is less productive than human effort in cooperation with other fellow human beings and they purposefully use the knowledge of this fact in order to improve their welfare and in order to collaborate with other humans in society. One thing that division of labor is not, it is not teamwork, yeah? Don't we all love teamwork, yeah? But teamwork implies that it would be simple collaboration, yeah? Specialization and division of labor require that people separate the tasks according to efficiency, which is not what happens in teamwork. Yeah, finally, you're a tough crowd. Finally, specialization does not automatically guarantee as such in and of itself an increase in productivity, yeah? So it's a necessary condition that we specialize in order to be more productive but it's not a sufficient condition. Specialization must be followed by exchange, free trade. I put free in parentheses because that's not what happens today, yeah? But it must be complimented by exchange, like the two people that specialize must be able to exchange the goods that they thereafter produce in order to enjoy both goods and it must be accomplished according to market signals, yeah? What do I mean by market signals? According to efficiency, and we'll see in a little minute what those market signals actually are. So to give you an example, if I told you the Hollywood example will come back again, if I decide to become an actress tomorrow and Meryl Streep decides that she wants to teach economics, we would have specialized, yeah? I would have specialized in acting and she would have specialized in teaching but that may not be what the market wants. I mean, who wants Meryl Streep to teach economics? Come on. Right. So to wrap up the fundamental concepts of terms, I'm actually gonna spend just a little bit of time on this because you've had the lecture with Professor Herbner this morning who talked about subjective value and market prices. Now, how do we know what are the market signals that we look at in order to know that what we are deciding to produce when we specialize is actually worthwhile producing for the market and for ourselves? In a bargain barter economy, you might have needed to meet with your neighbor and have a little chit chat about what you're good at producing and the things that you could make. But in a monetary market economy, we have money which is a generally accepted medium, commonly used medium of exchange. I see Dr. Engelhardt not so happy. I stole the definition from his lecture afterwards, yeah? And you have money prices. So once you have a generally accepted medium of exchange, you have money prices. And what these money prices do is they indicate to you as the person who's trying to specialize, the monetary gain to be obtained when you produce a particular product or service, yeah? And the fact that this will lead to an improvement in your economic condition, yeah? And finally, as we go along, let me just brighten up your day by recalling to mind the definition of government intervention because whether we want it or not, we will have to talk about it. Government intervention can be briefly defined as restricting the use of a person's body and or property and establishing, restricting or forbidding a relationship between two economic actors, whether it's the state and another economic actor is just two economic actors in the market, yeah? And under this umbrella fall, things like taxation, regulation, prohibition and price controls. Oh yeah, it's a nice cartoon, right? Now we're ready to begin our first numerical example. You can tell I was hungry when I was making the slides. I went for pies and coffees rather than wine and cloth, which is the more traditional example. So first we will look at an example of physical productivity, which is the original way in which Ricardo formulated his. Again, Ricardo formulated it in terms of nations, but we said that we do not analyze things in terms of nations. We would rather look at individuals. So we have here the physical output of two people, Catherine, who owns a coffee shop. I'm all for women entrepreneurs. And she is considering hiring James to help her around the coffee shop. And we know that Catherine is able to make 40 coffees in an hour or bake two pies. So she can either use an hour of her labor to make 40 coffees or to bake two pies. James, on the other hand, he's trying to make it into Hollywood as well. So this is a temporary employment for him as well. He can only make 10 coffees in an hour or bake one pie. So if you look at this, it is obvious that Catherine is more productive in terms of physical output than James in both tasks, both in making coffee and in making pies. So we can say that Catherine has an absolute advantage in both tasks and James has an absolute disadvantage. So we may look at a first glance that Catherine doesn't actually need James's help at all. However, we did say previously that specialization, yeah, it's according to efficiency. More importantly, it's according to relative efficiency. So you need to look at the relative superiority of Catherine compared to James, not at the absolute superiority. In order to do that, we need to look at their opportunity cost. The opportunity cost of Catherine baking one pie is 20 coffees. That is, she needs to forego making 20 coffees in order to employ her time baking one pie. James, on the other hand, in order to bake one pie, needs only to forego 10 coffees. So it is more expensive for Catherine to employ her time baking pies. Conversely, in order for Catherine to make one coffee, she only needs to forego about a 20th of a pie while James would need to forego a 10th of a pie. So it's more expensive for James to make coffee than it is for Catherine. So we can sum this up by saying Catherine has a comparative advantage in making coffee while James has a comparative advantage in making pies. This is true regardless of who Catherine and James are, whether it's coffee or pies or wine and cloth, whether they live in Romania or the UK or America and so on. There is no individual in the world that doesn't have a comparative advantage in something because it's all about relative efficiency. So now the idea here is that if Catherine hires James to help her around the store, they will both benefit from that specialization. So let's see how this will play out. So let's assume that Catherine and James both work for about 10 hours a day. This is obviously not a coffee shop in France where the working day is about four and a half hours. So they work a decent 10 hours a day. And we can see here that before specialization, Catherine employed five of her labor hours to make coffee and five to bake pies whilst James was doing the same thing. And in total, at the end of the day, together, they were able to produce 250 coffees and 15 pies. They were not specializing. They were both just dividing their day and half and doing both tasks equally. However, if Catherine decides to hire James solely as a baker, then he will employ 10 hours of labor in baking pies and Catherine will now be free to change her schedule of work and spend more time doing what she has a comparative advantage in. So she will spend seven hours making coffees and only three hours helping pour James baked pies. In total, after specialization, they will be able to produce 280 coffees a day and 16 pies. So 30 coffees and one pie more than before. So total output increases and therefore the welfare of Catherine and James, which is in this example, is our proxy for society, increases. Again, this is in terms of physical output. Now, I would like to add a little bit of a touch of realism to our example. Obviously, Catherine and James do not make coffees and pies in order to exchange them and eat them themselves. They have a coffee shop, so they're trying to make a monetary income out of that. So if we look at this in monetary terms, let's say a coffee costs about $3, that's right. Is that right? And a pie, well, I went cheaper on the pies. I told you I was hungry, $5, yeah, for a pie. Before specialization, yeah, they were able to produce $825 together. After specialization, they're making $920. And after tax, they're left with about 20. Yeah. Now, why I like doing this, just putting a monetary value on that physical output is because it allows me to convey something to you. So why is specialization more productive? We said the causes are the inequality of men and the unequal distribution of factors of production across the globe. You can phrase that in a different way. People have different natural aptitudes, yeah? Catherine is just naturally better at making coffee and James is just naturally better at baking pies. But also people have acquired aptitudes. Maybe Catherine has been making coffee for 10 years, yeah? And James used to bake pies with his grandmother. That's why he's a little less, he's a little more productive in making pies and baking pies and making coffees, yeah? And obviously there's less time switching between the tasks, yeah? So you gain productivity from that. However, here, again, in the monetary example, it's easier to see that specialization becomes more productive also because we can look, once we divide the tasks, once we separate the employment at hand into minute tasks, we can look at automating it, yeah? And we can look at employing capital goods in order to boost human productivity. So again, just hypothetically, after she hires James, Catherine decides to buy a new coffee machine and extra oven in a coffee shop, yeah? That will boost both their productivities. So I give you just some numbers here. Yeah, they will be able to make 350 coffees and 25 pies. So about $1,200 in monetary income, yeah? Right, so let's sum up the last few slides about comparative advantage. Yeah, we can define comparative advantage as occurring when a person has a relative superiority in a particular task when taking all other tasks into account. We have seen on the very last slide that money prices are what provide the signals, yeah? The monetary incentives for individuals and entrepreneurs to choose the most efficient or productive specialization available to them. Yeah, for the individuals, it intends to be their monetary income in a month or in a year. For the entrepreneurs, it will be the profit and loss that they can make in a particular production process. Now, I will have to say the pattern of specialization, like where your comparative advantage lies, where James's comparative advantage lies and so on, may not be exactly what James wants, yeah? We did say that he's trying to make it into Hollywood rather than doing this. The market will tend to assign people to things that maybe they don't enjoy doing, yeah? But people don't just perform monetary calculations. So if James does not want to work in Catherine's shop because he wants to still give it a shot, you know, becoming an actor, he is allowed to do that, yeah? And the market and the market prices will change based on James's preferences as well. Conversely, consumers will also have an input into what James and Catherine do. If people decide they don't want to buy coffee anymore, or pies, I mean, what world would that be? But let's say that they decide to do that, yeah? Then there will be no line of specializations such as having a coffee shop, yeah? And maybe customers want fair trade coffee, right? You've heard of that. It's on all the coffee cops, yeah? Then they will pay more for fair trade coffee and therefore Catherine may decide, okay, then it's not profitable for me to bake pies anymore. I'm just gonna do coffee because then I'm gonna do fair trade coffee. The point that I'm trying to make here is that through money prices, customers and producers and everyone are able to transmit to each other these kind of signals. They're able to hold each other accountable for ethical values, for what they desire, for what they wanna pay and so on. No one needs to interfere to make sure that these things actually happen, yeah? Especially not governments. Whenever governments interfere, when they perceive a deviation from what they think the pattern of specializations should be, they only actually just hamper, yeah? The money prices from reflecting the underlying consumer preferences, yeah? Now, I know we have a Big Beatles fan in the room. I myself am a Big Beat. If you've attended Professor Salerno's lecture this morning, you saw how much he paid for a Paul McCartney concert. This, I think, is the best example of how comparative advantage work. This is an interview of Paul McCartney and John Lennon, where a reporter is asking John, I think, if Ringo, if you don't know Ringo, or Ringo was the drummer in the Beatles, if Ringo was the best drummer in the world, yeah? And John replies, Ringo isn't even the best drummer in the Beatles. The idea is you don't have to be the best drummer in the world to play in the Beatles. You have to, however, meet Paul McCartney, who's a much better singer than he is a drummer, John Lennon, who's a much better composer than he is a drummer, and therefore, you'll be able to be their drummer and specialize where your comparative advantage lies, yeah? You may be an absolute disadvantage in terms of drumming, but you will have a comparative advantage, and your relative efficiency will be higher there. Now, before we move on to talk about the implications of comparative advantage over trade and society, I would like to talk to you a little bit about Mises' Law of Association. In effect, you will find, if you read human action, that Mises didn't actually call his Law of Association, Mises' Law of Association, he called it, he called it Ricardo's Law of Association. But Mises was very modest, he was, my feeling, his view was very modest in his everyday life, but he was really very modest when he came to his own contribution in his works. He really downplayed the contributions he made to the idea of division of labor and social development, and really overweight those of Smith and Ricardo. If you want, a very good source is an essay of Murray Rothbard, which is called Freedom and Equality Primitivism in the Division of Labor, where Rothbard himself admits that he overweight the contributions of Smith and Ricardo and downplayed those of Mises. Now, Mises makes two contributions in human action as far as this topic is concerned, and they can be both illustrated by the place that the chapter of the Law of Association has in the treatise. And I'm actually indebted to this point, to Professor Solerno a few years back. The chapter on the Law of Association is in the part on human society. Mises didn't include it in a part about the wealth of nations, about international trade, about international economic relations or anything. Law of Association is under human society. So unlike Ricardo, who actually just wanted to expose a particular trade relation between two nations, that was his purpose, Mises saw in the principle of comparative advantage, an economic truth that explains the universality and the permanence of social cooperation. So for Mises, the Law of Comparative Advantage, Division of Labor encompasses individuals and firms across the globe, both in their economic relationships, but also in their social relationships. The need people have for one another on the basis of comparative advantage was in Mises's view what creates, strengthens and brings people together in communities. Yeah, what makes them come into relation with one another in the first place. Unlike Ricardo and unlike mainstream economics as well, who often argued that Ricardo's Law of Comparative Advantage is not true anymore because it was formulated in terms of the labor theory of value, Mises saw that this is true regardless of what theory of value underpins it. However, he did not stop there. He explained that when we give the theoretical example of physical productivity, that's not a sufficient or realistic approximation of what happens in the market economy. In the market economy, it's all about money prices. Yeah, you can see Mises saying here, we must not fall prey to the illusion that a comparison between the expenditure of factors of production of various kinds and the output of products of various kinds, that is the way we judge whether a process of production is profitable or whether how we specialize and employ and use our labor is actually rentable can be achieved without the aid of money calculation. This was Mises's second contribution and I was mentioning the place of this chapter in human action. The chapter on the Law of Association is actually before Mises even gets to talk about money. However, he does announce monetary calculation here just to point out how closely connected the two things are. Division of labor does not happen without monetary calculation and when people do monetary calculation, they automatically lead to the process of division of labor, yeah? So what this means is, unlike the way you will understand comparative advantage in a classical economics textbook, comparative advantage is not something that's given. Yeah, it's not something that we're born with. We're born unequal, but where our comparative advantage lies is not something that we'll know, we'll just, we'll figure it out somehow. We need to calculate it. I mean, we calculate it in the market, we figure it out by being in the market, which means that comparative advantage cannot be figured out from outside the market, yeah? It's only workers, entrepreneurs, landowners, yeah, that are able to discover what the best pattern of specialization in is. That can never be done by the bureaucrats, yeah? Governments can never divine what should America export and import, what should America produce, who to subsidize and so on. Because comparative advantage is something that needs to be discovered through monetary calculation and monetary calculation can be accomplished only in the market, yeah? And if you understand that, you also understand how the division of labor can grow, yeah? It can grow extensively, encompassing more and more people if we can calculate and realize where to employ those people. And it can grow intensively in dividing these tasks only if we can calculate to see what task would be, ooh, rentable to automate, sorry, yeah? Where we should use capital goods and so on, yeah? So if you, I hope you can see, if you understand comparative advantage and division of labor through this lens, you're able to draw a few very interesting implications as far as First International Trading is concerned and we'll see about society in a minute. Now, a few traits of comparative advantage, which not only will they lack from your economics textbook, but they will be presented as actually being a shortcoming of comparative advantage, actually being aspects that make the law of comparative advantage no longer valid or no longer relevant for how international trade is today. Now comparative advantage is dynamic, first and foremost, which means that it can very easily change and shift in time, even in the short term, yeah? This, again, is revealed by the fact that comparative advantages discover through economic calculation. So going back to our example, if Catherine looks at her business tomorrow and realizes that she would be much more profitable opening a gym, then she will just, yeah, use whatever factors of production like the place that she has, she will transform that in a gym, fire James, yeah, she will become a receptionist or something. Yeah, so her comparative advantage in making coffee does not stay put for the rest of, I mean, it can, but it doesn't have to, yeah? Comparative advantage changes all the time, yeah? And it especially changes with technological development. Yeah, you have here an example and you see a lot of employment's just disappearing with technological development. I don't know if you, some of you may be too young, well, I am too young to know this, but before electric lights, I'm not that old, I was, yeah, before electric lights, street lights used to be, yes, lamps. So though obviously there was someone, it looks quite romantic, doesn't it? They used to, you know, they had matches and they would climb on a long ladder and light the lamps. Obviously once electricity came along, these people had a comparative advantage in lighting gas lamps in the street at the time, but this disappeared, yeah? And this is a good way of thinking of a lot of jobs that disappear today and a lot of jobs that appear as well due to technological development. Another characteristic of comparative advantage is the fact that it is located at an individual level. I mean, we've talked about that and I won't insist on it. What I wanna insist on is the idea of the market level of detail. Now again, in economics textbooks, you will hear things like US has a comparative advantage of car production, but you can also hear things like, I have a comparative advantage in fashion. That is too general as far as the market is concerned. The market, what consumers perceive as product differentiation, that's where comparative advantage is gonna be located. The best example I can give you, you've seen these shops pop up now that do one thing and one thing only, such as outrageous milkshakes or wonderful, wonderful burgers. See, food is a theme through this presentation, yeah? But they do one thing only. They only do milkshakes or they only do donuts, yeah? There's no such like wide category of like, I don't know, fast food or desserts or something, yeah? Those people producing those milkshakes have a comparative advantage in producing outrageous milkshakes, yeah? The market decides where your comparative advantage is, yeah? Another interesting implication is the fact that international trade is nothing else but the international division of labor, yeah? There is no difference between domestic trade and international trade, yeah? International trade is simply the extension of domestic trade to a regional and global level, whether it happens within or across national borders, which we all know are just arbitrarily drawn in the first place anyway. This is perhaps, I think, the best argument for free trade, yeah? Because if exchange is indeed beneficial for two individuals and you would be hard pressed finding an economist who denies that, then simply by extension, it means that economic exchange, voluntary economic exchange, I have to say voluntary economic exchange will be beneficial whether the two individuals are in the same city, in the same county or in different countries or in the United States or in Europe and so on, yeah? Now, division of labor has some limits, yeah? On the one hand, which is the one, the one that's very easy to understand is that it is limited by the extent of the whole world, yeah? That's as far as division of labor can go. As far, the world as we know it right now, I mean, yeah. That is as far as it can extend. However, there's another limit that I think it's a little bit more interesting to look at and I would like to draw your attention to it so you can think of this while still listen to Professor Engelhardt and Professor Garrison's lecture in this afternoon. Division of labor will be limited by the extent of savings and investment, yeah? We said that capital goods do a great, boost human productivity to a tremendous extent. Capital goods allow us to automate tasks. Capital goods allow us to divide tasks further, yeah? In order for us to have capital goods, the society needs to save and invest, yeah? The level of savings and investment will therefore have a tremendous impact on the division of labor and as you will see on society and social relationships as well. Now, finally, a little bit about barriers to specialization, trade and cooperation. There are obviously natural barriers to it. People can choose not to cooperate with each other because of their preferences or cultural differences or things like that. I mean, I use Professor Solano as an example a few times in this lecture. He may decide that's not very funny and decide to forego all the benefits of our cooperation in the future. He's allowed to do that, yeah? It will be reflected in market prices. The market would, okay. The market will cater to this. But obviously, this is a very small proportion in terms of barriers to specialization and trade, yeah? Most barriers are artificial barriers. Which are brought about by government intervention. Here there's a plethora of these type of barriers. From barriers that are put in front of domestic businesses, yeah, and domestic transactions, everything from taxation and regulations to specific international trade barriers, tariffs, quotas, red tape barriers and so on. I looked up for you the NAFTA agreement. It was supposed to offer free trade. It's 1700 pages long. It has 741 pages for the treaty itself, 348 pages for annexes, and only 619 pages for footnotes and explanations. Yeah. Obviously, you need to explain a lot what free trade is in there. Right, and this is, we've come to the last important part of the lecture, which is right on time, the implications for society of the division of labor and phenomenon. Now, we said that the structure of money price is the division of labor and the social connections that individuals make are accomplished as one process, yeah? When people calculate to find where their specialization is, they actually calculate who to associate with, yeah? Who to enter in economic relations with, who to enter in social bonds with, yeah? So they're size of the same coin. So now we can understand why Mises called division of labor as the essence of society and the fundamental social phenomenon, yeah? Based on this, you can define society as the complex network of, it's quite a mouthful and I'll try again, the complex network of inter-human relationships which result from the purposeful recognition of the mutual benefits of economic cooperation, yeah? So what the Law of Association tells us is that we create social bonds by voluntarily integrating ourselves in the economic division of labor. Now, how do we strengthen, how do we develop those bonds? Well, first of all, society develops objectively, yeah? Enlarging the aims of its activities, yeah? We do more and more things. We allow division of labor allow tasks to be differentiated to a level that they haven't been before. It is due to the development of the division of labor that we have things, as I was saying before, like 3D printers, MRI machines, yeah? YouTube, virtual supermarkets, yeah? It is due to this development that we're allowed today to work as vloggers and neurosurgeons and programmers and so on. But division of labor is also a factor that brings about differentiation, yeah? Division of labor also begins with us being unequal and makes us even more unequal. I have a great quote from Mises here that says, division of labor makes some areas urban, others rural, it locates manufacturing, mining and agriculture in different places, still more important, it intensifies the innate inequality of men. Vocational types emerge, people become specialists, yeah? The point that I'm trying to make here is that the more specialized people become, the more we need our fellow men to provide us with the goods and services that we don't produce for ourselves. The more specialized we become, the more fellow men we need to provide us with a wider range of products and services that we can no longer produce for ourselves, yeah? All of this intensifies and strengthen our social bonds. So, a further implication is that the progressive intensification of division of labor and cooperation domestic and international are the surest way to have set any sort of antisocial initiatives. Now, Mises argued that people have an instinctual propensity to conflict that's debatable, but that's not important. What he argued was that people, their rationality supersedes these innate urges, yes? As antisocial as they may be, and people are able to understand that cooperation is more beneficial than conflict and they're able to forego the illusory gains of conflict. Now, the implication here is that a more and more integrated division of labor would lead to less conflict and fewer wars. The reason we're not there yet, the reason we're actually gone back a little bit in time from the level we were before the First World War is that we are not at a level of domestic freedom and international freedom that would allow the international division of labor to make these conflicts indeed unprofitable, yeah? The culprit for this is obviously the state apparatus, yeah? All government intervention, all it does is thwart division of labor. All taxation, price controls, any kind of intervention, all that does is not allow the division of labor in the pattern of specialization to cater to people's preferences, yeah? And this leads to a diminished level of welfare in society, yeah? Usually it's combined with capital consumption, economic crisis, unemployment, and so on, yeah? Most importantly, and I'll end on that, is once you understand the connection between division of labor and social development, and once you, then it becomes quite easy and somewhat disheartening to understand the impact of government intervention on society through this link of the division of labor. Now I cannot recall who said that the state is the ultimate embodiment of all human vices, but I do find that looking at the consequences of government intervention on society is perhaps the best proof that whoever said it, yeah, was right. So thank you for listening, and I look forward to your questions in the office hours this afternoon. Thank you.