EconAir

Adam Smith - Our Founding Father INTRODUCTION   This essay on Adam Smith and his famous example of a pin factory also serves as an introduction to some of the themes in the over 100 essays in this blog.   Adam Smith wrote the  Wealth of Nations  during the beginning of the Industrial Revolution. It was published in 1776. The dynamics of the Industrial Revolution continue to be a disruptive force; because of AI, it might be even more disruptive in the future.   ADAM SMITH’S 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 empl...

                 Nicola Tesla INTRODUCTION The main topic of economics should be economic growth and development, “the nature and causes of the wealth of nations.” (Adam Smith) The main questions are: How do capitalist economies grow? What is the relationship between economic growth and economic development? What is innovation and its relationship to economic development? ECONOMIC GROWTH Economic growth is the growth rate of total output, usually measured by real Gross Domestic Product (GDP). Total output is not measured directly. Sales (nominal GDP) are added up and the growth rate calculated. The inflation rate is calculated separately and subtracted from the growth rate of nominal GDP. What remains is the growth rate of real GDP. Between 1950 and 2000, the U.S. economy (real GDP) grew at about 3.5% per year. Since 2000, with two recessions, the growth rate has been around 2.0% per year. Even the recovery from the 2008-2009 recession h...

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 market and 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 sometimes do not seem to have any practical value.  Some examples are i maginary numbers, general equations of electromagnetism, the Second Law of Thermodynamics, Brownian motion, E=mc**2, the structure of DNA, the conductivity of solids, quantum superposition.   Some scientists and inventors begin to see possible applications of this scientific knowledge.    In the 20 th century, t...