How Do Beavers Make Steel?
David Friedman’s beautiful explanation of trade was made famous by Steven Landsburg in his chapter the Iowa Car Crop from The Armchair Economist.
David’s observation is that there are two technologies for producing automobiles in America.
One is to manufacture them in Detroit, and the other is to grow them in Iowa. Everybody
knows about the first technology; let me tell you about the second. First you plant seeds, which are the raw material from
which automobiles are constructed. You wait a few months until
wheat appears. Then you harvest the wheat, load it onto ships,
and sail the ships eastward into the Pacific Ocean. After a few months, the ships reappear with Toyotas on them.
I learned recently from Robert Allen’s Global Economic History that Friedman’s analysis was preceded by more than three hundred years by an unknown Micmac Indian who at the height of the fur trade observed:
In truth, my brother, the Beaver does everything to perfection. He makes for us kettles, axes, swords, knives and gives us drink and food without the trouble of cultivating the ground.