Economic development is both fairly simple and impossibly difficult. We know it’s fairly simple because 235 years ago Adam Smith was able to boil it down to three words: division of labor. While visiting a pin factory Smith observed that instead of making each pin from start to finish the workers would instead specialize in one or a few steps of the process and then pass their product on to another laborer. This focus allowed the employees to hone their skills and increase their productivity, albeit in only a few steps of pin-making. But Smith found when the slightly more productive employees work together the result is a fantastic increase in output. The same basic principle is in play for people who specialize in one industry and trade their surplus output with people who specialize in other industries. More output means more consumption which is essentially economic development. Simple as that. And yet something is missing.

The wealthy industrialized countries are certainly characterized by specialization and division of labor. But large portions of the world’s population still engage in economic activity best described as self-sufficient. In fact, wealthy industrialized countries are a relatively new phenomenon. For most of human history, life could be best described as poor, nasty, brutish, and short. So while the mechanism for achieving economic development is fairly simple, the process of getting that mechanism going in the first place appears to be quite difficult. Otherwise all these poor and stagnant societies would (presumably) just specialize and trade and become wealthy.