Value: What and How?

0:00How We Produce What We Need Human beings no longer operate in this world on a hand-to-mouth basis as a rule. Most of us realize that if we are going to survive, and survive relatively well, we have to do more than expect nature simply to provide for us. Now there may have been a time, long, long ago, when human beings simply lived a hand-to-mouth existence. They lived in what have been called hunting and foraging societies. They simply wandered around following the game trails, living in the forests or on the savannas and plains, sometimes living alongside lakes or the ocean or streams, and they survived on on the basis of what nature provided directly for them. In that type of situation, human beings have to compete with all other mammalary forms, and it just so happens that man is not a particularly good competitor at that level. When we have to compete with carnivores and Herbivores for our daily bread, so to speak, we don't do particularly well.

1:22The one advantage that humankind has over all of the other living species that we know of is the ability to use the mind. Our rational prowess has made us what we are. And consequently, when men finally took stock of themselves, began to realize what kind of Creatures They Were, and then detected that they could go into nature to get certain raw materials and then convert those materials to things that nature couldn't produce. It was then that men began the long and painful upward progress that has taken them to our present situation. In other words, human survival today, even among tribes that are still relatively primitive, is based upon production, and production is the process of taking raw materials from nature and converting them into something more readily useful to us than nature directly provides.

2:32Now this business of production is a fascinating one. Man by his nature is just sort of a natural-born consumer. He wants to consume a vast amount of practically everything. I think virtually all scholars in the area have agreed that man's wants are insatiable. He just wants more and more, and he wants to put out less and less to get it. We're all fundamentally, I suppose, selfish in this respect. There is what could be called a law of parsimony. That is to say, you want to expend the least possible amount of effort, time, money, energy, brain power, to get the most possible return. And that would be the law of parsimony. So all of us are engaged in this process all the time. Now, there is an interesting equation that sets forth the various factors in production. If you have a pencil and paper handy, I'd I suggest that you jot this down because I want to refer to it and it will help you if you have the initials in front of you.

3:34This is called the equation of production. It's actually a very simple equation and it is not intended as an arithmetic equation so much as it is merely as a mathematical model. It reveals the factors of production. Reduction. I'm going to state this equation this way. MMW equals nR plus HE times T. In other words, MMW equals nR plus HE times T. What does that mean? MMW are the initials we We use to indicate man's material well-being or his wealth, if you like, or some like to say welfare, and that's quite correct. I usually don't use the word welfare in this connection because it also has a number of other meanings. But we could say man's material wealth. That's SMMW. And that is equal to, or it is the product of, three other factors. They are N, R, H, E, and T. Now, what's meant by N, R? N, R is the natural resource, the things that nature provides. Man is absolutely dependent upon nature. He is himself a creature of nature.

5:05He cannot escape from his own natural characteristics, and he depends upon nature for his survival. But nature, as I've indicated, doesn't provide the things that he really wants and can use in abundance. But he has to use these things that nature does provide as the base from which to construct or contrive the things that he does want. So the basic factor in production is N.R. At least that's the first basic factor and we put it down. Now to that, right after N.R. we add the plus sign indicating that there's an addition here and then we have the letters H.E. Now what's H.E.? H.E. stands for human energy. In other words, the energy that the man possesses in himself, his physical energy, His brain energy, his skills, his muscles, his brawn, whatever amount of energy he can put out, we call that human energy.

6:08Whether it's intellectual energy or physical energy doesn't matter, it's all human energy. So man takes his energy, whatever it is, and he applies it to nature, that's the N-R. So we have the H-E and the N-R working together, the man of course doing the work, nature providing the basic ingredients, and these two are put together in order to make the MMW. But there's another factor, and that's at the end of the equation, and it's just the letter T. Now, what is that? That signifies tools. Man is the toolmaker, and you'll notice that the tools Tools come after H.E. with the mathematical sign of multiplication in between, not a plus sign here, but a times sign. Why do we do that? Because in point of fact, tools multiply the effectiveness of human energy. They don't just add on a one-to-one ratio. A man has so much energy. But when he has a tool to work with, his energy is multiplied in relation to the effectiveness of the tool. Let me give you a little illustration of what I mean. We'll

7:27take one man here and run him through a series of performances and we can see how the result is multiplied each time his tool improves. Let's take the very basic idea of agriculture. A long, long time ago, men learned that they could emulate nature in this particular, that they could not only wait for crops to appear as a result of the haphazard processes of Seeding and Reproduction that Nature Provided, but that man could clear some space and then deliberately plant seed of special plants that he wanted to reproduce, and the result would be a concentrated crop of a given product in a specific area.

8:19Now that's a tremendous advantage when men have figured this out. But the first thing they had to do, of course, after clearing the ground, was to plow it, is to make a place for the seeds. Now they had no really good idea of how to do this. So they got sticks and sharpened them at one end. In fact, they would harden the point by just roasting it in the fire. And then they'd walk over the field and just punch vertical holes in the ground. This was called a planting stick. And they punched holes in it and then they'd drop a few seeds in each hole and cover it over, probably stamping the Earth over with their feet, and that's the process of plowing and harrowing and planting and cultivating all wrapped up into one.

9:07Now when you have one man using this particular primitive type of agricultural tool, he can, by working hard, probably produce enough food, enough in the way of a farm produce, to take Take care of himself and one other person. That's about it. If he really works very, very hard, he might be able to do that. Now, equally long time ago, somebody came up with a marvelous idea of how to improve the planting process. Perhaps they discovered a big branch broken off a tree in a storm. In any case, they came up with the idea of using a very

10:19many times over. And so the problem then was, of course, to drag the branch over the field, which men discovered how to do, and they would go out and haul this branch painstakingly back and forth across the field, put in the furrow, and then put in the seeds. Now when you got a man working about as hard as he could on this basis, well he could probably put in enough food to take Take care of himself and his family. Providing his family wasn't too big. Okay, now men discovered that they didn't have to just take the branch the way it was, the way nature might have provided it if you tore it off a tree. Instead, you could shape it. And they used, of course, to begin with very primitive tools, stone axes and things of this sort, to help shape the heavy end of the branch So that it actually had the kind of a curve and the kind of a point that they wanted it

11:14to have. And that way it went through the soil much quicker. And then somebody came up with the revolutionary idea of either hitching people to pull the branch rather than having the farmer do it himself, or probably, and somebody did come up with this, the idea of hooking a pair of oxen to it and dragging that across. Now that's really multiplying When you can sharpen it and have it shaped correctly, and then put some animal power on it, and the farmer, all he has to do is guide it. Oh my, you can really improve farm production. And by this process, things went along so well that a good farmer, working about as hard as he could, could put in enough food for about three families, his own and two others.

12:03Then somebody came up with another idea. Let's do away with the oxen, who are very strong but terribly slow, and let's get a pair of horses. And we'll put them at the end of this branch and we'll make a better, lighter branch with a sharper, smoother edge. And the horses will speed up the process. And when men got to having a horse-drawn plow, one man, working about as hard as he could, could put in enough food for about five families. Well this is the way we kept doing it. We finally figured out how to put a coating of metal on the inside of the wooden plowshare. And finally we did away with the wood entirely and the plowshare turned into iron and then finally into steel. And today of course you know what happens.

12:53Today you have a D-9 tractor, and you have multiple plows going out in both directions and directly to the rear of the tractor, and this same one man, who might have been using a stick punching holes in the ground, now sits on the tractor under an umbrella and reads Homer, and the tractor goes back and forth over multiple square miles of land, And that same one man can put in enough food to take care of a small city, and he doesn't work half as hard as his forebears did with their little planting sticks. Now what's happened in the whole process? The only thing that's happened is that the tool changed. Man is the same. The earth is the same.

13:39Seeds are the same. Nature is the same. All that happened is that one man, by having a constant improvement of his tools, multiplied the effectiveness of his energy when applied to nature. That's why we put the multiplication symbol. In other words, we have nR plus hE times T. And you know that's an interesting thing because back in the early days when we were beginning to understand how this thing This is only a couple of hundred years ago that we began to figure out how we put the pieces together. It's a relatively new study. We made an unfortunate choice of words here in trying to explain this to others.

14:24And we said, well, every time you get a tool, it's kind of a labor-saving device. Well, of course that's true. Every tool saves labor. And so we said it, it was an accurate statement, but it was unfortunate because there are various connotations that can be extrapolated from the use of the word labor-saving. It created, in fact, in time, the impression that the more tools you had, the less work would have to be done. And if you just got enough tools, everybody would be thrown out of work. And this created a fear on the part of many people that tools are really their enemy because the tools are taking their jobs away from them. The tools are doing things, and this is a particularly current fear today with automation and mechanization advanced to the large, the high level that it has advanced. Many people today are fearful that the tools Tools are taking away their jobs. As a matter of fact, exactly the reverse is true. Exactly

15:36the reverse. It is the tools that provide the jobs. Today, in our highly evolved, dynamic economy in this country, it takes an investment of about $26,000 in order to be able to employ one man. The men's jobs that we have are directly related to the tools that we can Now, if you think that's an exaggeration, just go back for a minute. Put yourself in a primitive condition, a condition of nature, a state of nature. Imagine a man, here, without any tools, whatever. No tools. Obviously, there are all the jobs in the world that need doing, but how's he going to do it? Let's suppose that he's got a very, well, suppose he wants to put in a field and he has no tools, none, not even a knife.

16:30How would he put a point on a stick in order to have even a primitive plowing stick, a planting stick? Well, probably he'd have to make a knife first. Out of what? Probably flint or some other kind of hard rock that he could get hold of. How long would it take him to make that knife? I don't know. It would depend on his dexterity and his skills in figuring one thing out and then another. But the task of getting that first tool is an enormous one. But supposing he didn't get that, how would he plant? Get down on his hands and knees and scratch holes with his fingernails. That's all he If man had to depend on his own conquest of nature with his bare hands and his bare teeth, he's just not a very good competitor. He probably couldn't make it.

17:28Imagine the plight of a man who tried to build a log cabin. Now a log cabin is a relatively simple structure. But say he has no axe, no saw, not even a jackknife. And he's out in the woods, there are plenty of trees. All the materials are there for making the cabin. He's got the N.R., he's got the H.E., but no T. How would he do it? You know, a beaver could beat him. A lot of creatures might be able to beat him. Man is relatively impotent until he has the tools. Until he has the tools, he doesn't have anything to do. He hasn't got a job. Your job today Today or in primitive times was and is entirely dependent upon the tools that exist or upon the tools that you can contrive and cause to come into existence and then and then only do you have a job. So man is entirely dependent upon his tools. Very interesting little examination of this took place not too long ago when the telephone company did some studies in here

18:40to indicate the advancement that had occurred in their own industry. Of course, this is a self-serving statement on their part because naturally every company is interested in putting the best possible light upon its own activities, for which you can hardly blame them. But what the telephone company pointed out was that back in the early days when the phone company got started, they didn't have a dial system, as you perhaps remember. If you're as old as I am, you remember it. Anyway, what you had was a telephone that you picked the receiver up and put it to your ear, and the mouthpiece was on the other instrument. You didn't have the cradle-type phone at all in those days. You just had the stand phone, which you held in your left hand usually, or vice versa, whichever hand pleased you. And you put the receiver to your ear, and then a female voice came in your ear and said, number please, or central. We used to call them centrals, or hello

19:37School Girls, or something of this sort. And so you'd give this girl the number that you wanted. It was usually just, well, I remember at the start there were just some numbers and then they finally put a name designation ahead of it, such as, I remember my own phone number, this is back in those days, it was Colfax 4090, I remember that. To begin with it was just 4090. And then there got, it became so many subscribers that we had Colfax 4090 and that distinguished you see and then there was Locust and Elm and I guess a lot of trees. But anyway that's how you got the number. Now the telephone company then went to work and they devised the dial system.

20:24And the dial system was automatic and you didn't have to get hold of central. You simply picked up the receiver and there was a dial there and you dialed the number and you were automatically connected. Well, there was a big furor over this. In fact, the telephone company took a strike over it because the workers were convinced that they were going to lose their jobs, that this automation was going to throw everybody out of work. The result was, however, that in this particular instance the telephone company went ahead, they managed to put in the dial system anyway and of course the dial system is in vogue Today, now in a study that the phone company has just made just a bit ago, they came up with the statement that this is the case. If they now had to convert back, that is, if they were to wipe out the dials and go back to manual operation completely, here's what they said. There aren't enough women in North, South and Central America, including

21:30Making Babes in Arms to Man the Switchboards of the Telephone Company in this Country. In other words, it would take more females than we have in the entire Western Hemisphere if they were all employed by the telephone company just to man the existing switchboards if they all had to go back to hand manual operation. Now what does that indicate? Well, What it really shows you is that if the telephone company had not converted to dials, it would never have gotten to the high level of service that it presently has. And, incidentally, the high level of service isn't as high as it ought to be, by a good deal. It is lagging very, very much behind where it should be, and nobody knows this better than the telephone people. But the fact remains that it would have been much worse, much less developed.

22:24Many people would have had phones. And the interesting thing is, today, the telephone company hires many more girls in the capacity of telephone operators than it did at the time they put in the dial system. They actually have more girls working. Now, what happened in this whole business? What happened was that the increase in the number of tools provided Jobs. And the more the tools became, the more tools came into existence. And the better the tools, the more people were hired. Now many of them, of course, were hired doing different things. But the fact remains that there are today hundreds of thousands of employees, whereas before there might have been only a few. And that all came about because man does require tools to have jobs. Tools are not man's enemy. They are the extensions of his hands in order to get things done. And man has to get things done. So keep this in mind. The basic equation explaining production, MMW equals NR plus HE times T. Man's material

23:42Financial wealth is equal to natural resources plus human energy multiplied by tools. I'd like to point something else out to you. There is no G in the equation. Government. Government doesn't play a part in production. We can indeed produce without government. We can and we do produce without government. Government does not play a productive role. If you insist on putting government into the equation, the equation would, of course, read nr plus he times t minus g. It would be a minus factor at the end. And, of course, if you put it on the one side of the equation, in order to keep the model accurate, you would have to have mmw minus g equals nr plus he times t minus g. So you have two factors that cancel each other out and you scratch them out. You don't really need them.

24:38Government does not play a role in production. Government is, if it is anything, a regulatory, judicial agency that is supposed to supervise production, and certainly it would not participate in acts of production. But many people don't recognize that, and so they continually imagine that government has to come in and that somehow, if government gets into productive activities, Everything is going to be better. The fact is that this is not correct, that the more government intervenes in productive activities, the less production occurs, the more obfuscation of ultimate goals and resources occurs. It is simply a cost and it is an unnecessary cost.

25:26So here is something else you might keep in mind about this whole business. Natural resources Our resources are about the same today as they were 2,000 years ago, or 4,000 or 6,000 years ago. A ton of ore is a ton of ore. A piece of coal is a piece of coal. A tree is a tree. Each one will vary a little bit, but there isn't a great deal of difference when it comes to natural resources. A horse is a horse. A cow is a cow. A field of wheat is a field of wheat. We've improved our breeds of cows. We've improved our types of wheat, but we're still dealing basically with much the same sort of thing.

26:11The same is true with man. Man is pretty much the same. An infant born in, say, 2000 A.D. isn't going to be a great deal different from an infant born, say, in 2000 B.C. He's going to make about as much noise and kick about as much and be about as hungry, and that's about the same. In other words, human beings are more or less a constant, the natural resources are more or less a constant. Now, it is obvious that we have improved men a little bit too. We haven't improved men physiologically particularly, possibly in the Western Hemisphere we have.

27:00In our part of the world, we eat better and we tend to live longer. We are larger than our European and Asiatic counterparts, usually, as a general thing. Not necessarily in each specific case, but in general we are bigger people, notably in the United States where our diet has been the best in the world. So these are minor variations that have occurred. Additionally, it would be true that we have better use of our minds because we have better means of learning and better means of accumulating our energies. But the big variable in this whole thing is the tools, the T. Our progress relates directly to the tools. The more we are able to improve our tools, the better we are able to live. And of course, the ideal Ideal which many people talk about getting and which as an ideal we probably will never achieve in a total sense. See, many people actually say that what we ought to have is full employment. Actually what we really want is full consumption. That's what we want.

28:13We'd like to have a situation in which everyone is gainfully unemployed. We'd all like to Thanks very much.