The Essential Questions and Answers

1. INDUSTRIALIZATION The Essential Questions and Answers

2. What do we mean by the term industrialization? • This term describes the change that occurred in American society after the Civil War that included the following characteristics • The unprecedented growth in human productivity due to the use of machinery and new technology in nearly all areas of work • The mass production of goods that previously took much longer to create • The movement of labor from rural areas to urban areas to match up with the available capital • The Division of Labor that broke large jobs into small, repetitive tasks

3. How did gains from trade lead to industrialization? • Why do you and the checkout person both say, “Thank You” when you complete a purchase at the supermarket??? • The grocer wanted your cash more than the candy bar, and you wanted the candy bar more than the cash…YOU BOTH WIN!! • YOU HAVE BOTH GAINED FROM THE TRADE!!! • Trade happens because both sides view the action or exchange as a ‘win-win’ scenario!

4. How did gains from trade lead to industrialization? • Gains from trade are the result of a buyer and seller who voluntarily interact in free markets. • Buyers and sellers both believe that their actions will increase their perceived profits. • If they didn’t think they would profit in some way, then they wouldn’t enter the market! • The use of force or coercion on either a buyer, a seller, or both, means that we don’t have a truly ‘free’ market.

5. How did gains from trade lead to industrialization? • REALITY CHECK: Each person in the world has different skills, talents, abilities, tools, energy level, education, likes, dislikes and work ethic • Economists call these things “Human Capital” • all of these things are scarce or limited to one degree or another in every human being • Example: • It would cost Mr. Smithabout 20 hours to prepare a roof for new shingles, but a professional roofer can do this in about 5 hours • On the other hand, Mr. Smith can prepare a lesson plan in ½ an hour while it would take the roofer 2 hours

6. How did gains from trade lead to industrialization? • So…they TRADE! And, both of them are better off, because they have more free time. • So, Mr. Smith gets a new roof in under 20 hours, and the roofer has his kids educated in under 2 hours by Mr. Smith • This allows them to SPECIALIZE in what they are best at, and this is how they both gain (time) from trade

7. How did gains from trade lead to industrialization? • This is the underlying concept behind every single human action! • Humans believe that the actions they take will produce outcomes that improve their perceived profits • “Perceived profits” can mean many things like: • money, happiness, comfort, ease, improvement, love, fun, friendship, popularity, even avoiding certain people, avoiding pain or embarrassment are considered ‘profitable’ depending on the person’s values • So, every time people trade, they do it because they believe they are gaining one or more of these “perceived profits”

8. How did gains from trade lead to industrialization? • 1: What was it that made people so much more productive during the post-Civil War era? • 2: How is it that ‘win-win scenarios are possible? • 3: What happens to human decisions when force and coercion are used? • 4: How would you reconcile the idea that ‘All Men are Created Equal with the “Reality Check”? • 5: Why don’t people do everything they need by themselves? • 6: Why do Mr. Smith and the roofer need to specialize? • 7: Is it possible to know what every person feels is ‘profitable’?