episode_0028

What is economics?

Academically, the explanation is complicated, but simply defined, it is this:

The entirety of consumption, distribution, and production carried out by every individual and group that constitutes a society.

Making things, approving documents at a company, buying food at a store, and so on.

The synthesis and interaction of all those actions is precisely economics.

And “The Wealth of Nations” is…

The first book to define this vast and complex organic/inorganic interaction in the form of scholarship.

In other words, this book is the origin of economics and nothing less than its Old Testament.

No, in fact, you can just call it the Bible. That’s what they say in academia anyway.

“Is it… is it really such a great book?”

“Of course!”

The fact that the modern Ministry of Economy and Finance can implement economic policies is all thanks to Adam Smith and “The Wealth of Nations.”

Determining interest rates, loosening the money supply to adjust exchange rates, and implementing large-scale restructuring—all of it.

If it weren’t for him, experts would still be limited to printing money as a stimulus package, you know?

They wouldn’t have even dreamed of creating credit-based currency beyond the gold or silver standard.

You can just consider that the development of human civilization related to economics is all under the grace of “The Wealth of Nations.”

No exaggeration, really.

‘Its status tends to be fading in modern times… but it’s still a great book, that’s a fact.’

Of course, some point out limitations of the era or errors that arose due to societal changes.

Some of the arguments Adam Smith put forward don’t match our reality at all.

Nevertheless, you should never underestimate the value of this book.

When you think about it, the societal changes themselves were brought about by the influence of “The Wealth of Nations.”

“This book focuses on one policy in particular: the division of labor.”

“If we’re going by the meaning of the words… does that mean dividing up the work?”

“Yes. It means dividing one task into small parts and assigning them to several people little by little.”

What exactly is the content of this book that I praise so much?

Adam Smith, in writing “The Wealth of Nations,” emphasizes the element of the division of labor.

As a factor that allowed England to overcome its competitors and reign as the world’s strongest empire.

That the small island nation in the North Sea rose to become a great empire, surpassing France, which possessed vast plains and farmland, and Spain, which ruled the New World, was.

Thanks to the improvement of productivity realized by the division of labor, and the resulting economies of scale and expansion of the market.

‘It’s also a key factor in the Industrial Revolution.’

In fact, the book contains an example like this.

When 10 workers who made 20 iron nails a day were gathered and assigned to each process, they were able to produce as many as 48,000 a day.

Just by changing the way they worked, production increased 240 times.

‘That’s an exaggerated description.’

Of course, it doesn’t actually increase that dramatically.

However, it is a clear fact that efficiency increases by several or dozens of times depending on the type of product and technology.

If they previously manufactured 100, it’s not difficult to make 2000 or 3000.

Even without any fundamental changes or innovations. Just changing the process can achieve this much effect.

England increased its national power based on this explosively increased productivity.

They pioneered overseas markets and grew their domestic industry and economy, but… what about Hispana?

“When a successful division of labor is achieved, the price of goods decreases along with the increase in production. And coincidentally, there are good customers all around?”

“Are you saying that trade will take place by selling the mass-produced goods to countries that need supplies?”

“That’s right.”

The less labor time is invested, the lower the labor costs. In other words, the more mass production is achieved, the lower the price of the goods.

Unlike neighboring countries where artisans and craftsmen still make things slowly one by one.

Hispana will actively sell goods to Kram and Navre, using its newfound price competitiveness as a weapon.

Since they are short of people and their industries have shrunk due to the war, it is inevitable that the goods will sell like hotcakes.

They will export the goods that are pouring out in such quantities that they cannot handle them domestically and earn a huge trade surplus.

“I understand what you’re saying, but…”

Kallia, who had been pondering my explanation, asked back.

“Isn’t this purely a good thing for Hispana? It’s helping them make a lot of money and grow their industrial power.”

“That’s right. But you only know one thing and not the other.”

She’s not wrong.

This is certainly beneficial to Hispana.

The publication of “The Wealth of Nations” will not weaken the empire, but rather strengthen it.

But at the same time, it will make Hispana’s rapidly expanding economy dependent on the special situation of the war.

When the war ends and international demand decreases, the industry will self-destruct due to oversupply.

“After the end of the war, Kram and Navre’s imports will plummet. Then where will Hispana sell its goods? They don’t have a colony big enough to pass on the losses to, do they?”

“…Ah.”

The law of supply and demand is absolute.

To solve the phenomenon of oversupply, there must be a forced creation of demand. If not, the economy will collapse.

But there’s nowhere to take the fall?

The New World is still full of undeveloped land and its economy is not big enough.

Ilain, Arteom, or Helvetia would be crazy to allow Hispana’s goods to devastate their domestic markets.

If they look for other countries, there are a few small island nations like Hawaii or the Alcyone Federation in the southern sea…

Nowhere is there a partner with whom large-scale trade can be achieved.

In conclusion, the moment they accept this book, Hispana’s economy is doomed.

“If they don’t like that, they’ll have to directly participate in the war to forcibly increase demand and stimulate consumption. Well, either way, it’s a win for us.”

“…You’re a truly wicked person. That’s why I like you even more, though.”

What exactly did you mean by that?

I suddenly wanted to ask mischievously, but I held back.

After all, Kallia and I both know roughly what she meant.

* * * * *

‘I’ll have to do a lot of editing this time.’

Before writing, I set up a few outlines.

In order to use the literature left by the great scholar for my own purposes, in my own way.

“First, discard the part that mentions freedom. Also, everything about individual rights or human rights.”

Adam Smith praised individual economic and political freedom.

Because he saw that the free life enjoyed by diligent and virtuous individuals led to the wealth of the entire nation.

Like a person who thought of himself as a moral political philosopher.

He believed that free rights and democracy in money were for the development of mankind.

A common norm and control that everyone observes, the law, is of course necessary.

He thoroughly criticized and condemned the rule and abuse of power by powerful figures such as lords.

The invisible hand is also an argument that came from that context.

When there is a truly free state without artificial interference such as monopolies or government-patronized companies.

He believed that the market could adjust its own problems and manage prices and supply.

“It’s unnecessary nonsense for me.”

It was knowledge that should never be made public in this world.

It’s not like I’m doing this shit to make humanity happier and more abundant, right?

[Generally, an individual does not intentionally promote the public interest, nor does he know how much he is promoting it. Every choice that individuals make is only for their own well-being and focuses only on their own interests.

However, as in many other cases. At that moment, the individual is led by an invisible hand to achieve a goal of public interest that he did not intend.]

[Not intending it does not mean that it has a negative impact on society. By pursuing their own interests, individuals can more often and more efficiently promote the interests of society than when they intentionally try to promote the interests of society.

The pursuit of individual self-interest tends to have a better effect than the public interest pursued directly.]

So I emphasized only the elements of non-interference and unlimitedness, excluding the essence.

So that even if problems arise in the market later, the idea of forcibly intervening and solving them is impossible.

[The division of labor was born not from a specific human wisdom, but from the human disposition to exchange one substance for another to satisfy desires.

Each individual’s efforts to improve the conditions in which they find themselves is in itself a very powerful principle. It can prosper society without any help, and it is also the driving force behind human society.]

[Even if you look at the division of labor simply, you can obtain three advantages: improved proficiency of specialized workers, saving time wasted switching tasks, and improving workers’ own efficiency.

It increases production and increases the benefits of society as a whole by promoting each individual’s desire to improve their position and abilities.]

Of course, I didn’t leave out the main topic, which is the essence.

I had a hard time revising the part that presented actual cases.

Because I almost recreated the paragraphs that mentioned actual regions and events, mentioning Scotland and England.

I made up some appropriate hypothetical cases, but there won’t be any problems. After all, there is no real-time information sharing in this era without wireless communication.

If you match the context before and after and adjust the numbers appropriately, the readers will be fooled.

“It’s done. Please take it to the printing house.”

As I handed the manuscript to Kallia, my heart began to flutter with anticipation.

Ah, I’m curious.

What kind of crazy reaction will those bastards show this time?