Adam Smith and Division of Labor - Lab Report Example

Division of labor is the breaking up of the production process into small specialized tasks and roles for the labor who work in collaboration with the intent of increasing productivity. Division of labor has evolved as a slow natural process and is not a product of a long term human plan. It is with the division of labor that trade between countries; capitalism and the industrialization have been possible. Although it is said that division of labor makes an individual stupid and ignorant, however, it has an overall positive effect on the society and business as a whole as progress would not have been possible in such a magnitude without division of labor (Stigler 185-193). According to Stigler (1951, 187) Adam Smith explains this concept with his famous example of pin-making. If one person were to make pins, he would probably be able to make just one pin in a day. However, if the pin making process is divided into 18 stages and in all 10 workers split these tasks among themselves, each doing just one type of job, together they were able to produce 48000 pins. This is because as the task is divided each labor becomes proficient and specialized in that task as he is concentrating on just one type of work and therefore the human mind discovers the most efficient way of doing that task. Thus with division of labor, there is an increase in the production, skill and efficiency of time giving rise to the invention of machines. However, Adam Smith recognizes the disadvantages of division of labor and says that with specialization, when a man spends his whole life performing a few simple tasks he becomes stupid and ignorant. At the same time however, he also says that division of labor causes inventions and technological advancements. The contradiction is that when the division of labor makes the worker and in turn society as a whole stupid, then how can there be technological advancement and inventions in the same society (Stigler 187-188). Many economists according to Stigler (1951, 189) have held this against Adam Smith and have found his theory to be contradictory. However, upon closer scrutiny we see that when Smith said that the workman who spends his life doing a few simple tasks has no opportunity to implement his understanding and innovations as his work is too mechanical. He has no need to attempt to remove difficulties that never occur. He thus automatically loses the habit of exerting and generally becomes stupid and ignorant. Thus according to Smith his deftness at his own particular work is at the expense of intellect and his social merits. Thus revolutionary inventions can only be made by philosophers and intellectuals while ordinary specialized labors cannot think beyond their everyday tasks and can perhaps invent machinery only related to their specific jobs as their work restricts their creativity. Smith also maintains that classic inequalities between the social classes occur due to division of labor. Those without essential training and education cannot fit into the technologically advancing world and thus there is social disparity. Also, division of labor poses chances of employing children at a young age thus their education is neglected. Thus the difference in social classes heightens as the rich get more education and skill than the poor. To remove this he suggested the intervention of the government by encouraging education amongst the masses. This education which is a capital investment would be facilitated by introducing taxes among the higher classes thus further evening out differences. This would also in turn stabilize the economy (Stigler 185-189). Smith says that division of labor is not the result of human wisdom or long term plan but it is a slow and gradual process which occurred out of need. He says that the principle that gives occasion to the division of labor is based on treaty, barter and exchange of one thing for another. Specialization and the exchange culture which stems from it, leads to societal development where every man becomes a merchant in some capacity as he thrives on exchanging. The problems of commerce and civilization are lessened with such specialization as one becomes mutually beneficial for the other. There is internal security of state and organized system of justice as proper rules and regulations are formulated with increasing international trade. Thus technologically advanced countries which result from division of labor are better able to expand and protect their trade and commerce. There is economic progress which makes the rich richer and enriches the poor also. Thus economy as a whole prospers and uplifts the standard of living of the poor (Stigler 186-188). According to Stigler (1951, 185-193) some economists criticize that the division of labor enhances disparities as some men are naturally more talented than others. Smith argues this by saying that everyone is born with the same capabilities however; it is the education, custom and habit that create difference in talent. If there were no treaty, trade and barter, everyone would have to produce everything needed for sustenance by themselves and everyone would be performing the same job and thus there would be hardly any difference in talent. The difference in talents is highlighted when workers are employed in their specialized occupations. Smith was more positive about the division of labor when other economists like Adam Marshall argued saying that it destroyed community and social intimacy. Smith claimed that it merely transforms the quality and means of interdependence and enhanced personal and private interdependence. He said it is positive because it ends charitable relationships and encourages relationships where everyone can mutually benefit from the other (Stigler 187-188). . As Smith says in Stigler’s article (1951, 185-190), continuing with the pin manufacturing example, when division of labor is incorporated in the manufacture of pins, 48000 of pins are produced by 10 workers. This more than satisfies not only their own needs, but that of their surrounding market also. They are now producing more than needed in the current market thus they can either seek new markets or let these pins go to waste. Thus the division of labor causes efficient use of resources and expands the market posing more opportunities for prosperity for these producers as they sell in larger markets. This in turn will encourage more division of labor as demand increases and the firm reaping the economies of scale would be producing at a lower cost and gaining more profit. Small concerns grow into manufacturers and then into industries spreading across larger markets increasing productivity. This would firstly increase the employment in the industry, but as technology takes over and specialization increases, employment will decrease as production increases as specialization makes production more efficient. There will be fewer but giant manufacturers in the industry producing at cheaper cost as labor would be fewer but more expensive as they become more specialized. When the demand increases only then would production increase and therefore division of labor would increase. This, according to Smith means that the market determines the amount of division of labor would take place. Also, technological development and easier and quicker access to countries for example via sea would mean that those countries or areas would be catered to first. This would increase the wealth of the regions as the division of labor increases (Stigler 186-192). However, Smith only mentions ‘acquired advantages’ but fails to mention about natural advantages which one may have over the other. For instance a country may be endowed with more natural resources or capital than another or may be technologically more advanced which will give it a comparative advantage over another country producing identical goods (Stigler 189). Some economists according to Stigler (1951, 189-193), also point out that this dependence is both ways and that the market is also dependent upon the division of labor. A manufacturer can only cater a market if the labor is not as productive as it is demanded by that market. Thus the division of labor is dependent upon the extent of the market and the extent of the market is also dependent upon the division of labor and specialization. Conclusion Division of labor is the key to progress and prosperity. It has enabled trade to take place between countries and thus increase the wealth of nations. With division of labor trade relations and therefore social relations between people and countries have bettered as everyone depends on one another for survival. Division of labor has created job opportunities and skill has increased along with production capacities as economies of scale steps in. On a large scale level there has been prosperity for nations and elated standards of living. However, division of labor is said to make people more ignorant and stupid limiting their creativity and inventiveness. Division of labor does spread inequality as countries with natural advantage progress faster than the other countries. However, the overall effects of division of labor have been positive and lead towards progress and prosperity. References George J, Stigler. “The Division of Labor is Limited by the Extent of the Market.” The Journal of Political Economy 59(3) (Jun., 1951): 185-193 Read More