EconAir

Adam Smith - Our Founding Father 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 i...

  INTRODUCTION   Japan gets special consideration because it is further along the demographics declining population curve than any other large country. Unless there are major changes in healthcare technology, immigration, public policy, and birth rates, most industrialized countries will follow Japan down the path of declining and aging populations, and smaller labor forces.    PROJECTIONS   Japan’s current (2024) population is around 122 million people. This is the 15 th  year of population decline, down from a high of 128 million. The yearly decreases so far have been small, both in numbers and as a percent of the total. This is expected to continue until 2030. Then population decreases are expected to accelerate to a population of 104 million in 2050 and 87 million in 2070. At the end of the century, Japan’s population is projected to be 60-65 million people, about half its current size.   The high dependency ratio (the number of elderly divided by ...

    Overview China has been a spectacular economic success story. After the death of Mao in 1976, a more pragmatic group of Communist leaders seized power and began to change China. Their model was Singapore, whose population was mostly Chinese. Singapore’s economic growth model was that the dominant political party would direct economic growth. It invested in infrastructure, including condos for most of its population. It directed investment. It invited foreign companies to invest in the country. It became part of the global economy. China did much of the same but since it was much larger, it had to go further. It liberalized agriculture, going from huge communes to allowing individual farmers to rent land. That doubled food production. Then it concentrated on manufacturing, with favorable laws on taxation. Foreign companies were invited in but they had to partner with a Chinese company, which accelerated China’s absorption of foreign technology and management. After catching...