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When I was living in Taiwan in the 1980s, most things I paid for were less expensive than most of the same things would have been in the United States (from the point of view of exchange rates between the two countries' currencies). Particularly notable was how inexpensive Adidas brand walking shoes were. Another peculiarity of the local economy was how little cost was added to the price of food by eating out. Yes, restaurant food was more expensive than food prepared at home, but not by nearly the same factor as restaurant food is in the United States.

But note that these comparisons are by nominal prices, at official exchange rates. Wages were also much lower in Taiwan in those days. I had a high-wage occupation (teaching English as a foreign language), so I was living large in the local economy, but even so I wasn't saving up much money for my return to the United States.

Most immigrants to the United States, from an enormous variety of countries, find that they can work fewer hours per week to buy the things they most desire than they could in the countries they left. That's why the direction of immigration flows between the United States and almost all other countries results in the United States having a net gain of population by immigration. When people compare their opportunities in the States with their opportunities in the country where they grew up, they mostly think that the United States offers a quite good trade-off. And that's not even to get into issues such as less corrupt government officials or less polluted air and water.

The more hands through which that money passes between the producer and the consumer, the more money is lost to waste.

The best research in economics results in a contrary conclusion. More trade and exchange means more efficiency all around.

"This division of labor has, rather than increased productivity and decreased cost, in fact increased cost due to monetary waste at each exchange."

I find this argument to internally contradict itself in light of the fact that Western nations have a much higher standard of living. I will not disagree exchanges result in monetary waste, but in fact would argue that the increases in productivity due to specialization far outstrip the losses due to waste. The higher number of exchanges is thus evidence of the higher productivity that makes them affordable. The issue of whether there is increased productivity due to specialization is completely separate from that of whether the division of labor will result in wage slavery. There is quite a bit of evidence to support the former, while the latter appears quite speculative.

When I see millions, perhaps billions of people around the world living on less than $2 a day -- impossible in the west -- I can't help but disagree with you.

How do you reconcile the poverty rate in the U.S. at $12,000 compared to $2 in india?

It would appear that the division of labor has actually increased the cost of living -- at any standard. If you only had $2 a day in the United States, you would probably die and that is not hyperbole.

Numbers are just numbers - you can set the money supply at any arbitrary point, and it'll set the price level accordingly.

The real question is how much an average income will buy in goods. I don't have an answer to this, but I do have a thought experiment. How many hours do you have to work in order to afford food for a month? My own case is a little odd because my employer provides food 5 days of the week, but even if I tripled my food budget, it would take me 6 hours of (pre-tax) work to afford a month of food. How does that compare with Poland or India?

Similarly, you could price other goods in hours-of-time. It costs me slightly more than a week to afford a shiny new laptop computer, while even the bargain-basement OLPC laptops cost nearly 2 months for someone living on $2/day. It costs me about 3 minutes to afford fresh fruit (really, it takes me more time to pick it out than to work for it) - how much does it cost someone in Poland?

Why would you use the pre-tax number? Also, at 6 hours that means you're definitely in some top percentile of income. For me that number is at least 20 hours, and I make an above-average income for the (first-world) country I live in.

Because tax rates vary across countries, so if you're trying to compare standards of living based on real income, it's slightly less misleading than using post-tax dollars. Only slightly, though. The idea is that one should separate out differences in SOL resulting from division-of-labor vs. those relating to government policies, since the original poster's argument is that division of labor results in less overall welfare.

I agree completely. All poverty statistics should be denominated in eggs.

  The efficiencies found by automation and commoditization of labor are lost in the waste of trickle down economics.

Just because less money changes hands doesn't make the system more efficient. Poor people buy a lot less with a lot less.

No, he said the money changes hands fewer times - this (all else being equal, which it's not) does make things more efficient.

An automated invoice is more efficient than handing over cash. Like you said, not all things are equal.

I lived on a $300/month salary (eastern europe) and it didn't feel like getting 20x less of what I'm getting now in US for $6k/month. I simply didn't have to pay $80 for a pack of 6 pills of fairly generic antibiotic which I had to pay another $70 for a 15-minute visit to a doctor just to get the prescription for. That's what... about $25 per pill?

There, I simply walked into a pharmacy and paid about $2 for a jar that felt like a lifetime supply of exactly the same pills.

Food was also dirt cheap at local farmers markets, and I also didn't have to pay $60/hour to car mechanic and the same big mac at local McDonalds was only about $0.5

So... no, "a lot less with a lot less" isn't even close to an accurate description. Moreover, middlemen do introduce inefficiency, especially in tightly regulated "markets" like the healthcare: I know a fair bit of how the medical equipment market in US works, and I can tell you that you'll get exactly the same pacemaker installed for about 60% less in Germany as compared to US: that's because your friendly regional salesman of Boston Scientific really likes to fly his own plane, and the doctor who put it in you really enjoys legalized kickbacks for "research purposes".

The same applies to law and finance: bribing police or settling disputes by negotiating was a lot cheaper than going to court in US armed with a $400/hour lawyer, and without 30 year mortgages real estate market actually represented real market prices as opposed to being just a trading commodity [overpriced many times over] with a side effect of providing actual housing.

Instead of paying $200K for a summer house, me and my dad built our own, small but cute 800s.f. cabin. Took us about one summer of weekends and less than $2K in raw materials.

I'm not saying that life was fun in a 3rd world country, but measuring the cost of living is a very, very nontrivial matter, that's all.

If you think standard medical care is bad, wait until you see the state of dentistry int he US.

A two-barrel caulk gun costs $3 at a home-improvement warehouse, but $250 if ordered through a medical supply catalog (with the same part number stamped on it). A dental handpiece costs $2500 to buy and $80 to repair in the US, but one can be bought new for $70 from China. And the Chinese ones work just as well, if not better.

For some reason, American dentists are remarkably risk-adverse; while they'll moan and complain about how high their bills are, they'll also refuse to consider any solution unless they've personally used it for 30 years. Just getting them to use computerized practice management is Sisyphean struggle.

Services cost more in the US, but most stuff costs about the same or a little less. However, you get paid at the inflated services rate.

Go to the correct US store and buy a 100LB bag of cheep rice and it will be cheaper than a lot of developing nations. But go to the dentist, doctor, or a restaurant and it's cheap in the developing world. Granted most things tend to be cheap where they are produced but as long as you avoid having other people do stuff for you living in the US can be extremely cheep.

PS: A friend of mine who was making 46k/year in Fairfax VA, one of the more expensive areas to live in the United States, and saved 20,000$ in one year. He was living the life of an Indian college student in the US and that's cheep. He said the only downside was washing his own clothes, but he just dumped it in the machine so it was a trivial change.

I have not read "wealth of nations" myself, to verify Chomsky's opinion of Smith's work, but I have it on hold at the library and will soon.

Reading Adam Smith or Karl Marx on economics is a lot like reading Jules Verne on moon flights and submarines. They were geniuses, but genius only goes so far when you don't have that much data to work with and are predicting the future.

Think of it like physics. Just as energy is lost when it changes form, money is lost when it changes hands.

You might be interested in reading about Ronald Coase, transaction costs, and The Nature of the Firm: http://en.wikipedia.org/wiki/The_Nature_of_the_Firm

When I was traveling in Krakow, Poland, I was living on 10USD a day, including lodging, food (really awesome food), transportation and entertainment. I still don't understand how a train ride away the same lifestyle would cost 50USD a day. Why?

Because Dollars are in demand and Zlotys aren't. Look, money isn't "special". It's just a token of exchange. Supply and demand apply to it as to any other commodity. Dollars are valuable because you can trade them anywhere. The discrepancy is purely a premium for liquidity.

It's this premium that skews US labor and trade, though. A computer programmer in Poland can use Zlotys for everyday living and work USD contracts. A computer programmer in the US pretty much has to use USD for everyday living -- even though they don't need the extra global liquidity the dollar offers.

But he does - that premium is the only reason the US can still afford to import anything.

I wander when that was.