The division of labour is limited by the extent of the market. Adam Smith Adam Smith gave the famous example of pins. He asserted that ten workers could produce 48,000 pins per day if each of eighteen specialized tasks was assigned to particular workers. Average productivity: 4,800 pins per worker per day. But absent the division of labor, a worker would be lucky to produce even one pin per day. (
What do you think about the future of the west? Do you think that countries (Like the US and UK) that have greatly benefited from the surplus of highly skilled, talented and educated people that migrate to the west due to geopolitical, economical, political, and lack of resources and jobs available to them would begin to suffer in part due to 'evening out' of labor pools?
The west has greatly benefited by taking resources from other countries (which include talented labor) and with the division of labor, would it be safe to assume that many talented people from these developing countries that would have originally sought to migrate to the west, would now stay in their respective countries as remote work and higher wages seem likely to be distributed worldwide. This may have consequences as the countries in the west became innovative and wealthy due to the influx of the best talent immigrating to their countries.
Do you also see a greater increase in competition in labor forces in the US and UK, especially non specialized and non skilled labor driving down the middle and lower income class? I think when most people see this scenario they think that the labor force would evenly distribute across the world with better wages for all like a good happy ending.
But that seems unlikely without an explosion of demand and increase in scarcity. More companies would need to stay afloat having to capitalize on margin. Which means possibly reshaping the supply chain with the removal of inefficiencies and middlemen (similar to manufacturers cutting out the distributor and retailer and selling straight to the customer; like how Amazon let factories sell direct). This would effectively eliminate many companies that cannot compete with the resources major conglomerates have, efficiently pricing them out (similar to how walmart did mom and pops); leading to the rich getting richer and poor getting poorer with only a handful of companies controlling the majority stake.
I see you have done a lot of research on this topic. What would you say would be a good field to look into and research before the 'revolution'. And what sectors do you see benefiting from this besides the typical home office.
I feel like this statistic "car factories need only 14 hours of work to make a car,"" is quite misleading because it does not include all the labor to make all the parts, many of which come partially assembled.
But the prospect because of "teleportation" of a complete globalisation and casualisation of the labour markets "works well" as to increasing output per wage dollars only because there is a large global surplus of workers, and would result in lower wages overall (losses by workers in some countries bigger than gains of workers in other countries), and rising profits.
If it was jobs that were more abundant than workers, then complete globalisation and casualisation of jobs would result in rising wages overall and lower profits, and therefore central banks would deem it "inflationary" and trigger recessions to reduce the surplus of jobs.
So "teleportation" is not merely "change", it is change that would have a significant distributional impact.
What our blogger is actually describing is not a return to "putting out" piecework to cottage based "entrepreneurs" using pettyfoggers (e.g. Deliveroo, Uber, Fiverr, ...) as intermediaries, where every worker is an individual by-the-minute contractor, but the complete casualisation of work, as in a return to business owners having queues of unemployed outside the factory gates and hiring some for an hour and some for a day.
Because if with instant, cheap teleportation the obvious thing to do for business owner is to teleport workers to the factory, from Angola or Bangladesh to Texas, to cut out of the market "lazy, overpaid" american workers while still retaining complete in-one-place control of production and workers.
That would however completely upend several capital markets, in particular that for real estate.
The interests of business owners in having an Amazon-like supply of workers might conflict with other asset owners interests.
«Now imagine that we had cheap teleportation; things disappear from one spot and immediately appear somewhere else on the globe.»
There is a big thing missing from this story, and it is the impact of delays: the key word here is not “cheap” but “immediately”.If teleportation were cheap but took 2 weeks, things would be very different. Indeed a lot of stuff happens near to the customer because the customer needs it done quickly.
When delays don't matter, with container ships we already have pretty much cheap teleportation, as production lines cross oceans, sometimes several times, mostly to take advantage of labour arbitrage (e.g. shipping liquid soap and toiletries, which are mostly water, from China to the USA and empty container ships coming back).
«Factories are dramatic examples of scale economies»
Economies of scale are not that big, the economies that matter are all of specialization, and not just labour, but capital, and most people get the wrong impression because they don't know how production actually works.
A big important example I usually make is making car body parts, like car doors:
* You can take a sheet of metal and work it with hammer and pincers on an anvil and shape it, and have 10 people do it in stages, but that does not buy you a lot of improvement.
* The big improvement comes instead from having giant presses with moulds, that take a metal ingot and stamps it in one go into the desired shape. There is no economy of scale there: to double output you need two presses, and the efficiency does not increase at all (up to a limit going from a small press to a larger press *might* improve efficiency, but a lot less than simply using a specialized press).
The entire improvement, from one point of view, comes from the fact that the press is much more specialized than hammer and pincers. Indeed often just to make the mould can take weeks, and to change the mould is not an easy process.
BTW the enormously higher productivity of the press does not even mostly come from it being specialized: it comes from cheap fuel to power the engine that operates the press. If it was powered by hay as fuel for oxen it would be much, much more expensive to operate. Specialization makes a big difference, but cheap fuel makes a much bigger difference (even if usually only if there is specialization).
Actually the relationship is the opposite: the economies of specialization are the result of scale, that is it is scale of the *demand* that justifies the sunk costs of the investment into specialization of the *production*. This of course can result in a virtuous feedback look in which the economies of specialization give lower prices resulting in even greater scale of the demand, but that's a secondary phenomenon.
«When you break up a large task into many small tasks, each to be repeated many times by a specialist, then you can do those tasks much faster and cheaper.»
That works but in a limited way. That accounts for a small percentage of the improvement in living standards, most of it is due to cheap, energy-dense fuels enabling economies of specialization in production.
Your point and reasoning about greater specialization via remote work is convincing and the teleportation metaphor makes it vivid. I would like to see this promulgated more widely and hope the idea catches on.
Note: "...a mile from your hope" -> "..a mile from your home"?
This sounds like it could greatly reduce international income inequality. It could achieve many of the economic goals of open borders.
In that vein, low skilled workers in rich countries would face even more labour market competition than they currently do from international trade. I wonder whether people would therefore oppose "teleportation lite" similarly to the way many oppose immigration, e.g. worry about foreigners taking their jobs? But perhaps it's a very limited way of letting people in, and the xenophobia would not be enough to persuade rich country governments to forgo the economic benefits.
Remote work will be a kick in the butt for lazy Western firms & workers, who now face more global competition.
What do you think about the future of the west? Do you think that countries (Like the US and UK) that have greatly benefited from the surplus of highly skilled, talented and educated people that migrate to the west due to geopolitical, economical, political, and lack of resources and jobs available to them would begin to suffer in part due to 'evening out' of labor pools?
The west has greatly benefited by taking resources from other countries (which include talented labor) and with the division of labor, would it be safe to assume that many talented people from these developing countries that would have originally sought to migrate to the west, would now stay in their respective countries as remote work and higher wages seem likely to be distributed worldwide. This may have consequences as the countries in the west became innovative and wealthy due to the influx of the best talent immigrating to their countries.
Do you also see a greater increase in competition in labor forces in the US and UK, especially non specialized and non skilled labor driving down the middle and lower income class? I think when most people see this scenario they think that the labor force would evenly distribute across the world with better wages for all like a good happy ending.
But that seems unlikely without an explosion of demand and increase in scarcity. More companies would need to stay afloat having to capitalize on margin. Which means possibly reshaping the supply chain with the removal of inefficiencies and middlemen (similar to manufacturers cutting out the distributor and retailer and selling straight to the customer; like how Amazon let factories sell direct). This would effectively eliminate many companies that cannot compete with the resources major conglomerates have, efficiently pricing them out (similar to how walmart did mom and pops); leading to the rich getting richer and poor getting poorer with only a handful of companies controlling the majority stake.
I see you have done a lot of research on this topic. What would you say would be a good field to look into and research before the 'revolution'. And what sectors do you see benefiting from this besides the typical home office.
I feel like this statistic "car factories need only 14 hours of work to make a car,"" is quite misleading because it does not include all the labor to make all the parts, many of which come partially assembled.
Again, you don't understand supply and demand.
You seem to think market competition always benefits buyers. That's not how supply and demand works.
Scale allowed specialization, which allows special tools as well as special processes. Yes energy helps, but it isn't the main thing.
But the prospect because of "teleportation" of a complete globalisation and casualisation of the labour markets "works well" as to increasing output per wage dollars only because there is a large global surplus of workers, and would result in lower wages overall (losses by workers in some countries bigger than gains of workers in other countries), and rising profits.
If it was jobs that were more abundant than workers, then complete globalisation and casualisation of jobs would result in rising wages overall and lower profits, and therefore central banks would deem it "inflationary" and trigger recessions to reduce the surplus of jobs.
So "teleportation" is not merely "change", it is change that would have a significant distributional impact.
What our blogger is actually describing is not a return to "putting out" piecework to cottage based "entrepreneurs" using pettyfoggers (e.g. Deliveroo, Uber, Fiverr, ...) as intermediaries, where every worker is an individual by-the-minute contractor, but the complete casualisation of work, as in a return to business owners having queues of unemployed outside the factory gates and hiring some for an hour and some for a day.
Because if with instant, cheap teleportation the obvious thing to do for business owner is to teleport workers to the factory, from Angola or Bangladesh to Texas, to cut out of the market "lazy, overpaid" american workers while still retaining complete in-one-place control of production and workers.
That would however completely upend several capital markets, in particular that for real estate.
The interests of business owners in having an Amazon-like supply of workers might conflict with other asset owners interests.
«Now imagine that we had cheap teleportation; things disappear from one spot and immediately appear somewhere else on the globe.»
There is a big thing missing from this story, and it is the impact of delays: the key word here is not “cheap” but “immediately”.If teleportation were cheap but took 2 weeks, things would be very different. Indeed a lot of stuff happens near to the customer because the customer needs it done quickly.
When delays don't matter, with container ships we already have pretty much cheap teleportation, as production lines cross oceans, sometimes several times, mostly to take advantage of labour arbitrage (e.g. shipping liquid soap and toiletries, which are mostly water, from China to the USA and empty container ships coming back).
«Factories are dramatic examples of scale economies»
Economies of scale are not that big, the economies that matter are all of specialization, and not just labour, but capital, and most people get the wrong impression because they don't know how production actually works.
A big important example I usually make is making car body parts, like car doors:
* You can take a sheet of metal and work it with hammer and pincers on an anvil and shape it, and have 10 people do it in stages, but that does not buy you a lot of improvement.
* The big improvement comes instead from having giant presses with moulds, that take a metal ingot and stamps it in one go into the desired shape. There is no economy of scale there: to double output you need two presses, and the efficiency does not increase at all (up to a limit going from a small press to a larger press *might* improve efficiency, but a lot less than simply using a specialized press).
The entire improvement, from one point of view, comes from the fact that the press is much more specialized than hammer and pincers. Indeed often just to make the mould can take weeks, and to change the mould is not an easy process.
BTW the enormously higher productivity of the press does not even mostly come from it being specialized: it comes from cheap fuel to power the engine that operates the press. If it was powered by hay as fuel for oxen it would be much, much more expensive to operate. Specialization makes a big difference, but cheap fuel makes a much bigger difference (even if usually only if there is specialization).
https://oll.libertyfund.org...https://voxeu.org/article/i...
«resulting from specialization.»
Actually the relationship is the opposite: the economies of specialization are the result of scale, that is it is scale of the *demand* that justifies the sunk costs of the investment into specialization of the *production*. This of course can result in a virtuous feedback look in which the economies of specialization give lower prices resulting in even greater scale of the demand, but that's a secondary phenomenon.
«When you break up a large task into many small tasks, each to be repeated many times by a specialist, then you can do those tasks much faster and cheaper.»
That works but in a limited way. That accounts for a small percentage of the improvement in living standards, most of it is due to cheap, energy-dense fuels enabling economies of specialization in production.
Your point and reasoning about greater specialization via remote work is convincing and the teleportation metaphor makes it vivid. I would like to see this promulgated more widely and hope the idea catches on.
Note: "...a mile from your hope" -> "..a mile from your home"?
People oppose just about all proposed changes, and a big % of the status quo. So of course some will oppose.
This sounds like it could greatly reduce international income inequality. It could achieve many of the economic goals of open borders.
In that vein, low skilled workers in rich countries would face even more labour market competition than they currently do from international trade. I wonder whether people would therefore oppose "teleportation lite" similarly to the way many oppose immigration, e.g. worry about foreigners taking their jobs? But perhaps it's a very limited way of letting people in, and the xenophobia would not be enough to persuade rich country governments to forgo the economic benefits.
Just got it, will watch now.
May I recommend the Spanish-language movie Sleep Dealer? The premise involves a world transformed by remote work...
Oil changes have been factory-ized, too.