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Monday, September 01, 2008

Adam Smith and the Division of Labor

Gavin Kennedy at Adam Smith's Lost Legacy says Adam Smith was "on the side of the labourers on the issues that mattered most to them: higher wages are preferred to lower wages, a point worth remembering, I think, on Labour Day.":

Adam Smith and the Importance of the Liberating Force of the Division of Labour, by Gavin Kennedy:  Daniel Bulone writes in Tunnel Vision (‘Observations on Exchange’), 1 September: “Adam Smith: Machine-Minded Misanthrope or Merry Man of Manufacture?” Here:

“Adam Smith lived in a time when industry was on the verge of revolution. A unique relationship between workers and machines had begun, one in which the two worked together, in an almost equal partnership, to produce marketable goods. This leads one to wonder if the newfound brotherhood of man and machine affected Smith’s writings. What is more, did Smith see people as a means toward an end? It is hard to avoid thinking as much, when he speaks of workers in terms of what they can produce. ... It is true that he was a scientist, whose job was to quantify the activities of workers. However, the way he speaks of the division of labor makes it seem as though it is a way to transcend the bothersome tendencies of humanity. ... Essentially, Smith’s process involves the greater value of the whole above that of the individual. According to him, people achieve maximum efficiency when they are cogs in a vast network of industry.

In addition to thinking of people as commodities, he does not have a particularly sunny view of humanity. When speaking of a common workman in WON, Smith states that the problem of too many tasks at once “renders him almost always slothful and lazy, and incapable of any vigorous application.” ...

This is rather a sad way to look at Adam Smith on the division of labour.

Smith’s approach, as a moral philosopher, was ‘to do nothing but observe everything’, and in his case he took the long-view of history to explain how and why a section of humanity in Europe had created societies somewhat advantageous to the spread of opulence compared to the stagnant 18th-century societies of India and China (the latter in the 15th century was on the verge of becoming the world’s leading economy – it had the technology - until it deliberately aborted its development on the instructions of a totalitarian emperor by cutting all links with other civilizations).

Also, compared to the earlier societies (‘the Age of Hunters’) of North and South America, the ‘meanest labourer’ in 18th-century Scotland was considerably richer in his annual consumption of goods than the ‘richest’ Indian (and African) Prince (Wealth Of Nations, I.i.11: pp 23-4). The difference in living standards (appalling as they may appear to appear to modern consumers) was down to the enhanced divisions of labour in Europe.

Instead of being relatively independent of others – each hunter going into the forest and with his own tools catching something for his family to eat, building his own shelter for the night and covering himself and his families with animal skins – the initial division of labour came from the propensity to truck, barter, and exchange one thing for another. Some people made arrow heads and flights for their arrows, others exchanged game for arrow heads, and so on. In doing so they became less independent and more dependent on their fellows and the mothers of their children.

The ‘pin factory’ by no means is the most important aspect of the division of labour in Adam Smith's view, though it is important to indicate the productivity consequences of co-operative labour, which is a singular matter of importance for the spread of opulence, especially among the lowest paid. ...

Indeed, it is in productivity gains all along a final product's supply chain, and the many separate supply chains connected to points on it, that is main the source of economic growth and the spread of opulence, which constantly works away under the entrepreneurial drive and technological enhancement brought about by thousands of others.

Allyn Young considered that

"Adam Smith's famous theorem that the division of labour depends upon the extent of the market … I have always thought, is one of the most illuminating and fruitful generalisations which can be found anywhere in the whole literature of economics".

This observation is particularly authoritative today because Young’s 1928 article in The Economic Journal article has recently promoted developments in modern growth theory away from its early versions (Harrod-Domar, Solow) towards recognizing increasing returns.

Smith went well beyond the restricted single-product example of a pin factory, with which most people associate his name, in his crucial example of the ‘multiplicity of trades’ in the making of a common labourer’s woollen coat, the ‘produce of the joint labour of a great number of workmen’, during which he displays emphatic and unusual excitement by placing exclamation marks at the end of three consecutive sentences, the last concluding: ‘What a variety of labour too is necessary in order to produce the tools of the meanest of those workmen!’(WN p 23) ...

The more developed the society, the more interconnected are the separate markets for each good or service.

It is the extent of the market that drives the division of labour and the division of labour that drives the extent of the market. By considering only the ‘pin factory’ example of an aspect of the division of labour, Daniel Bulone (like many others before him) may have missed entirely the grand sweep of Adam Smith’s analysis, as well has missing the essential humanity of his outlook on the pressing need to liberate the labouring poor from drudgery of extremely low incomes.

The latter paragraphs of his post on Smith the ‘cynic’, and so on, are particularly unhelpful of understanding his general disposition that high wages are better for all concerned than low wages:

Is this improvement in the circumstances of the lower ranks of the people to be regarded as an advantage or as an inconveniency to the society?*38 The answer seems at first sight abundantly plain. Servants, labourers and workmen of different kinds, make up the far greater part of every great political society. But what improves the circumstances of the greater part can never be regarded as an inconveniency to the whole. No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who feed, cloath and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, cloathed and lodged… (WN I.viii.36: p 96)


…The liberal reward of labour, as it encourages the propagation, so it increases the industry of the common people. The wages of labour are the encouragement of industry, which, like every other human quality, improves in proportion to the encouragement it receives. A plentiful subsistence increases the bodily strength of the labourer, and the comfortable hope of bettering his condition, and of ending his days perhaps in ease and plenty, animates him to exert that strength to the utmost. Where wages are high, accordingly, we shall always find the workmen more active, diligent, and expeditious, than where they are low (WN I.viii.44: p 99).

I would have thought these sentiments would place Adam Smith on the side of the labourers on the issues that mattered most to them: higher wages are preferred to lower wages, a point worth remembering, I think, on Labour Day.

    Posted by on Monday, September 1, 2008 at 10:35 AM in Economics, History of Thought, Unemployment | Permalink  TrackBack (0)  Comments (9)


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