Tuesday, January 13, 2026

Exchange and rational economics

 

Exchange!! It was the invention of collective intelligence through exchange and specialisation that made the difference enabling human beings suddenly to enrich and enlighten themselves despite not change in brain volume. Here's an extract from the Rational Optimist: ‘In civilized society,’ wrote Adam Smith, an individual ‘stands at all times in need of the co-operation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons.’ In Leonard Read’s classic 1958 essay ‘I, Pencil’, an ordinary pencil describes how it came to be made by millions of people, from loggers in Oregon and graphite miners in Sri Lanka to coffee bean growers in Brazil (who supplied the coffee drunk by the loggers). ‘There isn’t a single person in all these millions,’ the pencil concludes, ‘including the president of the pencil company, who contributes more than a tiny, infinitesimal bit of know-how.’ The pencil stands amazed at ‘the absence of a master mind, of anyone dictating or forcibly directing these countless actions which bring me into being.’ This is what I mean by the collective brain. As Friedrich Hayek first clearly saw, knowledge ‘never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess’. The multiplication of labour You are not just consuming the labour and resources of others. You are consuming others’ inventions, too. A thousand entrepreneurs and scientists devised the intricate dance of photons and electrons by which your television works. The cotton you wear was spun and woven by machines of a type whose original inventors are long-dead heroes of the industrial revolution. The bread you eat was first cross-bred by a Neolithic Mesopotamian and baked in a way that was first invented by a Mesolithic hunter-gatherer. Their knowledge is enduringly embodied in machines, recipes and programmes from which you benefit. Unlike Louis XIV, you number among your servants John Logie Baird, Alexander Graham Bell, Sir Tim Berners Lee, Thomas Crapper, Jonas Salk and myriad assorted other inventors. For you get the benefit of their labours, too, whether they are dead or alive. The point of all this cooperation is to make (Adam Smith again) ‘a smaller quantity of labour produce a greater quantity of work’. It is a curious fact that in return for this cornucopia of service, you produce only one thing. That is to say, having consumed the labour and embodied discoveries of thousands of people, you then produce and sell whatever it is you do at work – haircuts, ball bearings, insurance advice, nursing, dog walking. But each of those thousands of people who work ‘for’ you is equally monotonously employed. Each produces one thing. That is what the word ‘job’ means: it refers to the simplified, singular production to which you devote your working hours. Even those who have several paying jobs – say, freelance short-story writer/neuroscientist, or computer executive/photographer – have only two or three different occupations at most. But they each consume hundreds, thousands, of things. This is the diagnostic feature of modern life, the very definition of a high standard of living: diverse consumption, simplified production. Make one thing, use lots. The self-sufficient gardener, or his self-sufficient peasant or hunter-gatherer predecessor (who is, I shall argue, partly a myth in any case), is in contrast defined by his multiple production and simple consumption. He makes not just one thing, but many – his food, his shelter, his clothing, his entertainment. Because he only consumes what he produces, he cannot consume very much. Not for him the avocado, Tarantino or Manolo Blahnik. He is his own brand.



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