PrepTest 138

Topic: Social Science

Paragraph 1

• Paragraph note
  • Paradox introduced (Pin Factory vs. Invisible Hand)
• Views, minor Meta-Structures, and the author's attitude
  • Warsh's view: There's a contradiction in Smith's economic theory between the "Pin Factory" and the "Invisible hand" (first and last sentences)
  • Author's attitude: "great contradiction" (first sentence)

Paragraph 2

• Paragraph note
  • Background on Pin Factory (more employees = more efficient) and Invisible Hand (competition leads to public goods)
• Views, minor Meta-Structures, and the author's attitude
  • Smith's views:
    • Pin Factory: Increased size results in increased efficiency, as each employee can produce more when they specialize in one task (first and second sentences)
    • Invisible Hand: Self-interest can promote the common good without anyone intending to (third sentence)
  • Example of Invisible Hand:
    • Businesses sell goods to make money, but end up making people who buy them happy (last sentence)

Paragraph 3

• Paragraph note
  • Paradox explained (Pin Factory model reduces competition, undermining Invisible Hand model)
• Views, minor Meta-Structures, and the author's attitude
  • Comparison between Pin Factor and Invisible Hand, according to the author:
    • The Pin Factory's emphasis on increasing returns leads to bigger businesses and eventually results in monopolies (second and third sentences)
    • But the Invisible Hand requires a lot of competition, so it rests on the assumption that returns diminish as businesses get bigger (fourth through last sentences)
  • Cause-and-effect relationship, according to the author:
    • A large business’s ability to achieve larger scale and lower costs causes smaller firms to be driven out of the industry, which eventually causes industries to be dominated by a few monopolies (third and fourth sentences)
  • Author's attitude: "are opposed" (first sentence); "create a natural tendency" (third sentence); "to work properly, there must be many competitors" (fifth sentence); "depends on the assumption that returns to scale are diminishing" (last sentence)

Paragraph 4

• Paragraph note
  • Marsh on why Pin Factory was de-emphasized by economists (harder to represent mathematically)
• Views, minor Meta-Structures, and the author's attitude
  • Marsh's view:
    • Economists de-emphasized the Pin Factory model because they aspired to represent models mathematically (like science), and the Pin Factory was very hard to represent with math (third through last sentences)
  • Comparison, according to Marsh:
    • The economics of diminishing returns (Invisible Hand) was easy to represent mathematically, while increasing returns (Pin Factory) was very difficult (last sentence)

Paragraph 5

• Paragraph note
  • Recent update (Economists finally found ways to represent Pin Factory mathematically)
• Views, minor Meta-Structures, and the author's attitude
  • Author's view:
    • Economists failed for a long time to describe the Pin Factory, even though the Pin Factory model was apparent in many industries; finally, in the 1970s, economists succeeded in representing the Pin Factory with enough rigor to make it mainstream (first through last sentences)
  • Example of industries that followed the Pin Factory model: railroads (first sentence)
  • Definition of "underground river": increasing returns (third sentence)
  • Author's attitude: "increasing returns obviously characterized many industries" (first sentence); "had finally found ways to describe the Pin Factor with the rigor needed to make it respectable" (last sentence)

Main Point: Since it was seen to contradict the Invisible Hand and was hard to model mathematically, the Pin Factory (increasing economies of scale) was de-emphasized in economics for hundreds of years until recent mathematical models described it and entered the mainstream.

Paragraph 1, Sentences 1-2 (P1, S1-S2) - A paradox is introduced

P2, S1 - One-half of the paradox is described

P2, S3 - The other half is described

P3, S4-S5 - The paradox is stated

P4, S2-S3 - A question is asked and answered

P5, S3-S4 - A recent development in economics relevant to the paradox

Paradox/Resolution: This passage utilizes a Paradox/Resolution Meta-Structure.* The author starts the passage by introducing a contradiction, which we can view as a paradox. But there's an interesting facet to the paradox here. This paradox surrounds the contradiction between the Pin Factory and the Invisible Hand, as the former assumes increasing returns to scale, but the latter argues for decreasing returns. And while the author does show that the Pin Factory math has been shown to work out and has entered mainstream economic thought, that doesn't resolve the inherent contradiction between the two concepts. If anything, it makes it worse by suggesting that there are increasing returns to scale in some industries, thus undercutting a central assumption of the concept of the Invisible Hand!

So, usually, the main point in a Paradox/Resolution passage is the author's resolution. But here, the author doesn't quite resolve the paradox. So, the main point can't be the resolution. However, the paradox is still central to the passage, and so we should explore what aspect of the paradox was key to this passage. Since the passage focuses much more on the Pin Factory/increasing returns to scale — talking about how it leads to a contradiction, how it was downplayed for centuries, and how it's recently entered mainstream economic thought — that half of the paradox is the main topic of the passage. We summed up the author's thought on this half of the paradox, as you can see from what we wrote above.

*We think that's the best fit for the passage, but there are several other answer options you could go with. Either Debate Meta-Structure — Describing or Resolving a Debate — could work for this passage. The passage also uses a Question/Answer Meta-Structure in the fourth paragraph, but this Meta-Structure could be applied to the entire passage as well. We'll use this as an opportunity to remind you that there's usually more than one Meta-Structure that could fit the passage!

This is a tough passage, both conceptually and in the details. It also has eight questions associated with it, which tells us that the LSAT felt there was a lot to ask about. However, the passage is broken up nicely into paragraphs that each deal with a single and distinct concept, so we're going to rely on our paragraph-by-paragraph notes to ensure that we can find the right information as needed, and we're not going to rely on our memory for these questions — especially for a topic that we're unfamiliar with, our memories are bad! (Unless you're an Econ major, in which case, this is a nice present!)