Not a Zero-Sum Game - Ludwig von Mises Institute

Because some implications are so important, and sometimes
neglected, the principle of the division of labor deserves a more
detailed explanation at the beginning of economic textbooks.
Indeed, every other issue in economic texts is, in essence, an elab-
oration of how the division of labor and trade are spontaneously
coordinated in the market through the mechanisms of the price
system and the use of money. Notwithstanding complicated and
sophisticated monetary systems, the only function of money is,
ultimately, to facilitate the division of labor.
Explanations of exchange predominately rely on the fact that
people differ in their subjective valuations; that when they trade,
they give up something they subjectively value less than what they
receive. True enough. However, in this case, the aggregate total
material wealth of participants in the exchange has not increased;
it has merely changed hands.
The subjective valuation explanation fails to address how it is
that division of labor, in and of itself, increases the tangible out-
put-material wealth-of the participants, even when individual
productivity remains constant. The answer, unfortunately, is not
obvious: In their quest for satisfaction, people base their deci-
sions on the comparison of alternative opportunity costs at the
margin. And naturally, they choose the least costly option.
To illustrate, consider a simple arithmetic example of exchange
between two persons, in a worst case scenario. One participant,
InferJoe, is less productive than the other, SuperJack, in every-
thing. In all cases, InferJoe uses more time than SuperJack to pro-
duce the same thing. This assumption will help to demonstrate