We Need Each Other: An Economic Perspective

September 29, 2021 Updated: October 4, 2021


Poets, songwriters, psychologists, romantics et al., have expounded on the human need for love, companionship, friendship, closeness, and so on. True. But one of the most important ways in which human beings need each other is rarely pondered and infrequently written or talked about: our economic need for each other.

We need each other economically in order to achieve widespread prosperity. Wealth isn’t created in a vacuum. The fundamental factor that has driven the stupendous wealth creation and rising standards of living of the modern era is what economists call “the social division of labor.” An increasingly elaborate division of labor has lifted the mass of human beings from abject poverty to widespread prosperity over the past two centuries.

Here is its essence: Rather than eke out a subsistence standard of living by having every individual perform the same few time-consuming, self-sustaining economic actions (i.e., producing food, making clothing, and building shelters), humans have learned the wealth-creating genius of specialization. In a social division of labor, individuals specialize in tasks at which they become particularly proficient; then they pool, share, or trade the product of their labor with others who specialize in different tasks.

Specialization unlocks several powerful economic forces: Concentrating on one or a few tasks augments skills and productivity. It increases competition, which leads to improved quality and lower prices. Expanding the division of labor over larger geographical areas tends to allocate production to where it enjoys the greatest comparative advantages and also generates economies of scale. The more people included in the division of labor, the greater the total wealth production and the higher the resultant standards of living.

This is where the radical greens got it totally wrong: They thought that a swelling human population would plunge the world into great poverty. On the contrary, the more people there are and the more inclusive the division of labor, the higher the overall level of affluence. That affluence, in turn, provides the economic wherewithal to reduce pollution both before and after the fact; that is, by prevention and by remediation—both expensive undertakings, but affordable in wealthy societies.

Over the immense span of history, rational human beings gradually realized that they were better off economically by incorporating more people into their division of labor. Thus, families and clans banded together into tribes. Some formed villages, and many villages grew into towns and cities that often evolved into leagues, kingdoms, and eventually nation-states with considerable trade taking place across national borders. In pursuit of economic betterment, human beings have overcome barriers of cultural, linguistic, and religious differences to expand the division of labor.

The major retardant to this economic progress has been the all-too-ready willingness of humans to use violence against their fellow man. Humans always have had two basic options for how to interact with societies other than their own: peaceful trade or violent conflict. Monarchs, emperors, khans, dictators, and so on often have used their subjects as sacrificial pawns in their self-aggrandizing desire for conquests, whereas the subjects’ interests would have been better served by peaceful trade.

Much of human history has been darkened by the unenlightened belief in “the Montaigne dogma,” named after the 16th-century French philosopher Michel de Montaigne. This was the primitive notion that economics is a zero-sum proposition—that one person’s gain must be another person’s loss, i.e., that there are always winners and losers. In such a harsh world, violence and aggression seemed brutally logical. If the other has something you want and you are stronger, then you attack, defeat, and seize what you want.

The logic of peaceful trade is diametrically opposite of the logic of enrichment via aggression and plunder. Economics shows peaceful, voluntary transactions to be positive-sum—i.e., both sides gain. You can assess the logic of this proposition quite easily. You sell your 2012 sedan to someone for $6,000. You, the seller, value $6,000 more than you do the car, or you wouldn’t have sold it for that amount. The buyer wouldn’t give you $6,000 unless he valued owning the car more than the $6,000. In short, both sides gain: positive-sum. (And nobody gets killed or wounded—a not inconsiderable collateral benefit!)

Today, with more people living at higher standards of living than ever before, we have confirmation of the superiority of the peaceful model of interaction with “foreigners” and “others” over the violent mode of interaction. If we can avoid war and integrate even more of the planet’s people into a global division of labor, we will attain even higher levels of prosperity for even larger numbers of human beings. If, on the other hand, a major war erupts, much wealth will be destroyed and many producers of wealth (i.e., people!) will be lost. War would disrupt and cripple the division of labor and the production of wealth. We would regress economically. Peace is the preferred policy for citizens desiring to improve their standard of living.

A final word: Today’s highly developed division of labor presents an existential dilemma. On the one hand, turbo-charged by ever-richer capital accumulation and technological advances, it has produced unprecedented wealth and standards of living. On the negative side, it has made us uniquely vulnerable to a societal breakdown.

Think of it: How many of us today would have a marketable skill if the world’s electricity grid were to be knocked out of commission and war returned us to a pre-industrial economy? My Amish friends would get along OK, but most of us wouldn’t. I, for example, took advantage of our advanced division of labor to teach economics. Of what use would that be in a subsistence-economy world? I don’t know how to grow food, make clothes, or even build a shelter, so I would be essentially useless in an economic sense—and so would most of my peers. The elementary survival skills that sustained humans for millennia have atrophied through lack of use for the majority of the population over the past few generations.

The bottom line is twofold: 1. We have every incentive to strive to keep the peace. 2. The prime directive of our country’s military should be to protect us against attacks and to keep the lights on.

The division of labor shows that we really do need each other. And we need each other to be alive and free so that we can continue making the world a wealthier place in which we can eradicate the age-old curse of poverty.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.

Mark Hendrickson
Mark Hendrickson is an economist who retired from the faculty of Grove City College in Pennsylvania, where he remains fellow for economic and social policy at the Institute for Faith and Freedom. He is the author of several books on topics as varied as American economic history, anonymous characters in the Bible, the wealth inequality issue, and climate change, among others.