Wednesday, March 5, 2014

Everyone Has A Place

"Those who were adept and brave fellows I have made military commanders. Those who were quick and nimble I have made herders of horses. Those who were not adept I have given a small whip and sent to be shepherds."

Genghis Khan (1162 – 1227)

Of course, not thinking economic principles at all, Genghis Khan was merely trying to create a conquering army that was more efficient in every regard.

And the economic principle would be?  The division of labor.

Everyone in his army had a place.  And a place that suited him and his abilities.  An army is made up of many component parts, each with its own function and contribution.

Many centuries later, in 1776, the Scottish economist Adam Smith published his famous book The Wealth of Nations.

One of the many concepts the book treats is the division of labor.  Smith, of course, related it to economic growth.  The division of labor implies the assignment of jobs to each person in a company or factory that best suit him.  We all have our proclivities, skills and abilities.  Smith's proposition was that each person's strengths get best utilized.  As the labor is divided into smaller parts each working person becomes more expert in his job, his efficiency would improve and his productivity would increase.

Smith realized that the possible downfall of division of labor was in people being stultified mentally, eventually getting bored and dissatisfied.  To him, for labor to be productive, it had to fulfill two goals:

1.  it had to "lead to the production of tangible objects," and
2.  it had to "create a surplus that could be reinvested into future production."

His thinking was employed by businesses, however, and factories in the Victorian Era of Europe grew in size and productivity, and they propelled economic growth.  Standards of living improved generally.

Apparently everyone in the Khan army enjoyed his contribution.  Although no new surplus was created, there were tangible rewards to the ransacking, but only for the Mongols!  Conquering comes with built-in benefits.  But only for the conquerors.  For everyone else we are talking about the broken window fallacy.

Genghis Khan was obviously not entirely on board with the division of labor concept, thinking that some jobs should not be delegated out or divided into smaller parts.  A National Geographic study on DNA determined in 2003 that some 8% of the 4 billion Asians share the Genghis Khan y chromosome.  It was determined that he has some 16 million male descendants!  If his army was divided up into everyone's most important contribution, that y chromosome progeny is quite an individual contribution!


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