EconAir

ADAM SMITH VISITS A PIN FACTORY   Adam Smith’s description of a pin factory is on the first page of  The Wealth of Nations .  (Chapter 1 – “Of the Division of Labour”)  Drawings of pin factories of this period show workers using hand tools. Smith says the process can be broken down into 18 distinct steps, including packaging the pins. Smith mentions that pin factory workers were poorly paid, despite their high productivity.    Adam Smith says he visited a pin factory employing 10 men who produced 48,000 pins per day.  If each of the ten workers had done all the steps themselves, Smith says each worker could produce only 10 or 20 pins per day.  So the pin factory replaces 2,400 to 4,800 pin makers. The increase in labor productivity (output per person per day) is as high as 50 times that of individual pin makers.     This reduction in unit cost or average cost (AC) and the huge increase in quantity produced do not just replace older methods of organization and production.  They increa

Nicola Tesla There has been a debate in economics on whether innovation is exogenous (outside the economy) or endogenous (inside the economy).   This is another one of those dichotomies that obscures explanations of economic processes. This is a stylized narrative of the path of economic innovation, the dynamics of the modern, industrial economic system.   The resulting economic structure is mostly oligopoly, the domination of markets by large corporations. Innovation begins with public knowledge, often scientific or mathematical discoveries that do not seem to have any practical value.   Imaginary numbers, general equations of electromagnetism, the Second Law of Thermodynamics, Brownian motion, E=mc**2, the structure of DNA, the conductivity of solids, etc.   Eventually, scientists and inventors begin to see possible applications of this scientific knowledge.   In the 20 th century, they are often funded by governments that see possible military applications.   A

The Rocket - Famous Steam Locomotive England , more than any country, started the Industrial Revolution in the late 1700s.   And for over 150 years, England continued to discover new products and technologies.   Yet England eventually fell behind the United States and Germany in industrial technology, production efficiency, and economic growth.   What happened? The seeds of England ’s relative economic decline were there right at the beginning. Producing cotton cloth became England's great industry in the 19th Century.   But m illwrights, mechanics with specialized knowledge of how to build wool and cotton mills and their machinery, felt frustrated because they seldom became part owners and couldn’t find financing to start their own mills.   Some illegally emigrated to the United States and France .   Much of the early American textile mill technology was due to English immigrants.   The first cotton spinning mills were designed by an English millwright financ