The Wealth of Nations: Book 1, Chapter 1

This chapter is about the division of labor, which Smith believes is the main reason some nations are wealthier than others. Smith says the reason some nations are wealthier and more developed than others is because of the division of labor. He writes about a factory that produces thousands of pins per day, each worked on by ten different people; this illustration is somewhat famous.

He explains three reasons why the division of labor makes workers more productive.  The first two make sense:

  • Specialized workers need only be trained for one task.
  • Specialized workers waste less time switching from task to task

But the third reason seems confused:

  • Specialized workers are more likely to invent new labor-saving techniques and devices; also, societies with a division of labor will have specialized inventors who can invent new machines.

Smith realizes that technology has something to do with productivity, and gives us two reasons why technology might advance faster when there is  a division of labor.  But he’s having trouble explaining how technology relates to the division of labor.  The remarkable thing about pin-factories isn’t that they invent new pin-making technologies, it’s that they make use of advanced pin-making technologies.

Modern economic theory gives technology the starring role: the wealth of nations depends on advanced technology, technology that may or may not require specialized labor to make use of it.  This way of looking at things better explains, for example, why one man armed with wheelbarrow technology can move a pile of rocks from one place to another faster than several men can without a wheelbarrow, no matter how they divide up the labor.

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