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Adam smith

The image is a profile sketch of Adam Smith.
Adam Smith introduced the idea of dividing labor into discrete tasks. (Credit: Wikimedia Commons)

The division of and specialization of labor

The formal study of economics began when Adam Smith (1723–1790) published his famous book The Wealth of Nations in 1776. Many authors had written on economics in the centuries before Smith, but he was the first to address the subject in a comprehensive way. In the first chapter, Smith introduces the division of labor    , which means that the way a good or service is produced is divided into a number of tasks that are performed by different workers, instead of all the tasks being done by the same person.

To illustrate the division of labor, Smith counted how many tasks went into making a pin: drawing out a piece of wire, cutting it to the right length, straightening it, putting a head on one end and a point on the other, and packaging pins for sale, to name just a few. Smith counted 18 distinct tasks that were often done by different people—all for a pin, believe it or not!

Modern businesses divide tasks as well. Even a relatively simple business like a restaurant divides up the task of serving meals into a range of jobs like top chef, sous chefs, less-skilled kitchen help, servers to wait on the tables, a greeter at the door, janitors to clean up, and a business manager to handle paychecks and bills—not to mention the economic connections a restaurant has with suppliers of food, furniture, kitchen equipment, and the building where it is located. A complex business like a large manufacturing factory, such as the shoe factory shown in [link] , or a hospital can have hundreds of job classifications.

Division of labor

The image is a photograph of factory workers for a shoe company working separately on individualized tasks.
Workers on an assembly line are an example of the divisions of labor. (Credit: Nina Hale/Flickr Creative Commons)

Why the division of labor increases production

When the tasks involved with producing a good or service are divided and subdivided, workers and businesses can produce a greater quantity of output. In his observations of pin factories, Smith observed that one worker alone might make 20 pins in a day, but that a small business of 10 workers (some of whom would need to do two or three of the 18 tasks involved with pin-making), could make 48,000 pins in a day. How can a group of workers, each specializing in certain tasks, produce so much more than the same number of workers who try to produce the entire good or service by themselves? Smith offered three reasons.

First, specialization    in a particular small job allows workers to focus on the parts of the production process where they have an advantage. (In later chapters, we will develop this idea by discussing comparative advantage .) People have different skills, talents, and interests, so they will be better at some jobs than at others. The particular advantages may be based on educational choices, which are in turn shaped by interests and talents. Only those with medical degrees qualify to become doctors, for instance. For some goods, specialization will be affected by geography—it is easier to be a wheat farmer in North Dakota than in Florida, but easier to run a tourist hotel in Florida than in North Dakota. If you live in or near a big city, it is easier to attract enough customers to operate a successful dry cleaning business or movie theater than if you live in a sparsely populated rural area. Whatever the reason, if people specialize in the production of what they do best, they will be more productive than if they produce a combination of things, some of which they are good at and some of which they are not.

Questions & Answers

why SA is used in estimating of national income
Unique Reply
first what SA stand for?
Alhassan
I want Keynes clear example of critics on Long run , please!!
AA Reply
what study of macro economic..?
Yogini Reply
macroeconomics can be defined as a branch of economics that studies the structure and principles governing an economy(national,regional or global) rather than individual markets
kunle
yah..
boniphace
What is say's law of marketing?
INGRID Reply
goods once sold can't be returned
Marvin
but thats not true at all goods are returned all the time
Gregory
yah ur right, as a buyer, But in the marketing world, once a good is sold, its sold.
Marvin
thanks @marvin
INGRID
what study of macro economic ..?
Yogini
what does this saying in economics means "there is no such thing as a free lunch pls
Saibu Reply
autonomous consumption
Alhassan
consumption that is not related to level of income u hve.. eg consumption of basic necessities.
Ar
autonomous consumption is the consumption when income is zero or expenditure is not vary from income
ABIYOT
what is investment function?
Zahid
what is the relationship between demand and supply?
INGRID
According to ijmb marking guide, Differentiate between capital expenditure and revenue expenditure.
elemi Reply
Sir please provide me notes on :-unemployment-the trade-off between inflation and unemployment
Swikrit Reply
what is income
NAHUM Reply
reward for rendering a sercive the real income is after a taxt y-t = (y)
Alhassan
what are the components of trade?
Michelle Reply
whats is gdp
odell Reply
what is gdp per capita
odell
GDP of state divided by its population: GDP per capita. it is one of the most relevant indicator of prosperity among its citizens.
Dinesh
thanks
odell
which one is more advantageous or accurate to the other between GDP and GNP?
Katheery
Both, GDP measures only the incomes generated within the country, irrespective of ownership. whereas,GNP measures the total income earned by nationals.
Bon
but which one is a better measure
Katheery
what are supernormal profits
Caroline Reply
what are zero economic profits
Caroline
under what circumstances may a firm continue operating even when it is making losses
Caroline
why should government influence location of a firm
Caroline
using an illustration,distinguish between breakeven and shutdown point of a firm
Caroline
supernormal profits are profits beyond the normal profits a firm expects to have after the sale of all goods n services it produced
Katheery
what are the differences between choice and scarcity
Primus Reply
what is the difference between choice and scarcity
Primus
choice means we have many options scarcity means limitation within the same option we chose among choices.
Bijaya
what the d/f production efficeincy and out put efficeincy
ABIYOT
what is money?
Primus Reply
money is the material which used to exchange to buy or sell
ABIYOT
What is the law of large numbers
Nana Reply
Can anybody provide Solow Growth Model?
Sakar Reply

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Source:  OpenStax, Macroeconomics. OpenStax CNX. Jun 16, 2014 Download for free at http://legacy.cnx.org/content/col11626/1.10
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