Tuesday, September 04, 2007

Some basic economics

I knew an old godly famer who told me a story that demonstrates a basic economic principle.

This famer once acted as a financial partner to a man who started a business sawing wood. This man once suggested that he could cut down his own logs. My friend told him:

While I am your partner, you will do that over my dead body!


The fact is the man's idea was silly. If he were to cut down his own logs, during that time he could be sawing them. He could never cut down logs with the same efficency as a person who was logging for a living. Plus he would have to invest more time and money on transport.

Division of labour is essential to economic efficency. A man who practices every trade will be a master of none of them.

5 comments:

Rose~ said...

That makes such perfect sense. Very basic.

Rose~ said...

Isn't that called "specialization of labor"?

Dyspraxic Fundamentalist said...

I suppose so.

Palm boy said...

One of the foundations in Adam Smith's Wealth of Nations.
I think Rose has it right too.

Dyspraxic Fundamentalist said...

Everyone should read Adam Smith's Wealth of Nations.