Economics!!! check attchments.
nafesbee
lect2_f16_spczn_1.pptxLecture 2 Specialization
f16
Specialization
Technological progress depends on population size, specialization, and extent of trade
Why is specialization important for efficiency and technological progress?
Specialization
Adam Smith’s pin factory
Sources of higher output per worker: Why does specialization increase output per worker?
Adam Smith’s pin factory
Sources of higher output per worker
Practice
Talent: comparative advantage
Set-up costs: economies of scale (use of machinery)
Incentive to train: human capital accumulation
Regional specialization
In the pin factory we are thinking of occupational specialization
Regional specialization refers to countries, regions of countries, or cities, all of which specialize in particular products
Why does regional specialization increase output per worker?
Gains from specialization
Occupational
Practice (Learning by Doing, LBD)
Talent (comp adv)
Econ of scale
Incentive to accumulate human capital
Regional
LBD spillovers (community LBD)
Comp adv(resources)
Econ of scale (external)
Research profits and size of market
Specialization without markets?
Pharoah in Egypt
Emperors in Middle East, India, China, Japan: craftsmen, warriors, peasants, slaves
Feudal manor in Europe: serfs and lords. In 1000 the manor was largely self-sufficient
Specialization without markets
What incentives to work?
For serfs
For overseers
For craftsmen
What incentive for owner-cultivator on his own land selling in a market?
Can slavery be efficient?
Emergence of markets in Europe, 1000-1500
Goods: long-distance trade in silks, jewels, spices, furs, metals, woolens
Credit: loans with interest, despite prohibition by the Church
Wages: labor obligations converted to money payments, but serfs still tied to land
Land: customary rules on crops; commons
Towns: free labor, guild regulations
What markets need
Peace
Property rights
Contract enforcement
Transport technology
Transport infrastructure
In short: INSTITUTIONS! Eurocentric view: markets emerged in Europe
Markets in China, Islam
Long-distance trade from ancient times
Market development in Sung China (960-1260); then some retreat
Market development in Islamic lands
Merchants lacked political power; towns and cities had no autonomy
