Friday, April 29, 2005

Some corrections and conclusions of the last two posts

In the first post in this beginnings of economies series Tom of Pooklefur (sorry if I spelled it wrong) pointed out an error I had in my info. I said that the improved technology would lead to more unemployment. Well, we had an exchange of a few comments and this is what I have to conclude with. Better technology can lead to more efficient industry, this means that people would look into this industry seeing that it can now be more profitable. They then start to invest in it and so the industry grows because of technology. My conclusion is that technology could mean more investment which would lead to industry expanding quickly. Well, in my example, there was no real investment. In the vilage I talked about there are many things needed to do for the people to survive.

Let's say there is a new innovation that allows 1 person to handle a horse-drawn plough instead of 4. Now, in the modern world this would mean that people would invest in farming so that the profits could be maximized from the invention. The invention and the enlargement of the industry would lead to a demand for skilled workers and ordinary laborers respectively. In an ancient village, this would not be possible. There was not a real labor pool where people can just hire from. Almost everybody was hard at work already at other jobs and since the population was not big and mortality rates would be high, you couldn't rely on drawing from the younger generation to get enough workers. Therefore, only one thing could be done, to use the invention in the first place the skilled workers would be first priority. This would take time to hire and train workers. Therefore most of the effort would be to just use the technology, the size of the industry, in here farming, would stay more or less the same. Even though the invention reduced labor need in one area, it was not enough.


Tom said...

Investment is not only monetary. Investment occurs wherever an individual spends a portion of his time creating something that will allow him to later satisfy his wants. The creation of a flint chip to make other flint chips, is an investment.

Tom said...

Also, you are looking at profits as monetary. Money allows the measurement of the valuation of wants of individuals- it becomes possible to say more than just, "I like A more than B." And it becomes possible to measure the satisfaction of one's wants through monetary profit. But profit exists even without a monetary system- it just does not admit of economic calculation. All that can be said, is that the actor has made his environment less imperfect.

Now, who would experience this psychic profit? In the short-run, it is the man with the plough. He can now support a larger family, feed them better, bring in more food through barter.

In the slightly longer run, the people with whom he barters will benefit from his innovation: the time he has saved. He has shortened the time it would take them to achieve their goals. Every minute and drop of sweat he has saved, means that much less that they will have to labor for their goals. They are now incrementally farther away from scratching at bare ground with their hands. His innovation has literally given them time.

In the slightly longer run, they will have children, and they will have more children because the man with the plough has been able to liberate enough energy from the earth to support more humans. These children will be incrementally closer to their goals, and push off toward their goals from a point farthered by the man with the plough: the time he has saved has been inherited by them. His effort has made the effort they must expend, less than that which they would have had to expend without his effort. And they will have children unto children, each inheriting the capital accumulated, each inheriting the random minutes their forefathers spared them through their innovations.

Look at yourself now. If you had to make everything you possess now, it would take you centuries. You don't have to spend 20 years building an maintaining mines, foundries, farms, and workrooms, in order to acquire the barest fundamentals of your life. Each innovation has chipped off some more time for you.