Adam Smith Essay

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Topic: Adam Smith and the Division of Labor Essay

There is no doubt that Adam Smith was a truly famous philosopher and a founder of classical political economy. His book “An Inquiry into the Nature and Causes of the Wealth of Nations”, no doubt, is one of the greatest works in the history of humanity. “The Wealth of Nations” mentions relatively many important concepts, including the concept of the division of labor, which in turn is considered as one of the most significant in the modern economical theory. Many of Smith’s views on the division of labor make sense even today and can be applied to some aspects of modern society and economy. However, it must be considered that there are some limitations, which are caused by historical changes.

At the very beginning of “The Wealth of Nations” Smith (1776) mentioned that different countries tend to have different economic specialization what depends on abundance and scantiness of available resources and produced goods and on “the skill, dexterity and judgment”. The first chapter of this book is called “Of the Division of Labour” and mostly is devoted to describing this truly important concept. Although the author did not provide a clear definition of the division of labor, he provided a detailed explanation of the significance and main impacts of this concept.

For example, according to Smith, “The greatest improvements in the productive powers of labour, and the greater part of the skill, dexterity, and judgment, with which it is anywhere directed, or applied,seem to have been the effects of the division of labour.” (Smith). He noticed that different manufactures can specialize in different types of activities and in the production of different types of goods. He also paid attention to the fact that great manufactures often suppose the division of labor even within manufacture itself when different tasks and operations can be divided between different workers. Smith provided an example of trifling manufacture where, according to the author’s observations, a significant increase in labor productivity was achieved due to the division of labor. Moreover, he emphasized that in every “art and manufacture” effects of introducing the division of labor tend to be rather similar. Smith claimed that labor could be divided and even subdivided so that every worker could be responsible for one simple operation. On his opinion, the most intensive division of labor is present in countries with the most developed industry and the highest degree of improvement. Therefore, in relatively poor countries the division of labor is not developed and one person has to do many different types of work, what does not allow to benefit from specialization. In developed countries, on the contrary, narrow specialization is widely spread. As a result, there emerges a large number of trades and professions even within one branch industry.

However, Smith believed that in agriculture opportunities for the division of labor are more limited. Because of the seasonal changes, one worker cannot do the same job constantly, what in turn limits the positive effects of specialization. That is why Smith claimed that improvement of labor efficiency in agriculture tended to be slower in comparison with progress in the industry. Moreover, he stated that the most successful nations can overachieve their neighbors in both agriculture and industry but industrial development plays a significantly larger role. Despite the weak industrial development, poor countries still can successfully produce and export agricultural products because they are cheaper. Smith explained significant positive impacts of the division of labor with 3 main factors. First of all, concentration on one type of activity allows to develop good skills, what increases the quantity of performed work and leads to improvement of efficiency. Also, specialization could prevent loss of time that had to be spent for transferring from one type of work to another so that more time could be devoted to work. Moreover, specialization always tended to lead to the invention of new machines and other useful inventions that improved productivity dramatically. He believed that concentration on one object and one problem allowed people to discover easier ways to perform a certain type of work.

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Smith claimed that one of the most important reasons of the division of labor was human nature. Humans have the ability to communicate with each other, cooperate and exchange some things for another. Moreover, while animals mostly tend to be independent and self-sustainable, people mostly are interdependent. On his opinion, treaty, barter and purchase serve as main methods of satisfying one’s needs in human society. As a result, people started specializing in certain activities and selling results of their labor in order to be able to get what they needed. The difference in talents, education, customs and habits leads people to different career choices. Smith emphasized that the division of labor is limited by the extent of the market. He claimed that if a market is very small, a person will not tend to devote oneself to one certain profession because such a strategy is not effective and does not provide with all necessities. Moreover, there are such branches of industry that require large markets (for example, cities) in order to function properly.

The analysis of Smith’s concept of the division of labor shows that his concept mostly is absolutely applicable to the modern economy. First of all, it should be noticed that Adam Smith was completely right when he claimed that the division of labor leads to significant improvement of labor productivity. Considering the evidence provided by the author and the character of the economic development of the global economy, it can be stated that the division of labor increases productivity. That proves Smith’s statement and, therefore, demonstrates that this idea is applicable in the modern economy. Moreover, it has to be mentioned specialization is really widely applied and very many examples can be provided in order to support this statement. There is a very large number of different professions such as programmers, technologists (many types), managers, different types of workers (both skilled and unskilled) and many others. Moreover, many modern factories combine extremely many technological operations and, mostly, each of them has to be either performed or overseen by a curtain specialist. Numerous assembly plants can be considered as a good example of widely spread division of labor in the modern world.

Smith’s statement that rich countries are based on specialization and development of industry also should be considered, at least, as partially correct. On the one hand, there is no doubt that the lack of specialization is spread only in poor countries while all developed countries (for example, the USA) use many modern technologies, what in turn lead to a diversity of professions. It is true that developed countries do not rely on agriculture because it usually estimates less than 5 % of their economies. However, Adam Smith could not know that in the future economy of the country would be able to be based rather on services than industry. For example, the economy of Hong Kong is mostly based on services, although it is characterized by high level of the division of labor. Moreover, Smith was right, claiming that poorer countries can be exporters of agricultural products. However, his statement that agriculture develops slower than the industry is not completely correct because it could not consider the impacts of Green Revolution and the introduction of new technologies.

The thesis that the division of labor is limited by size of market is absolutely correct because it is confirmed by modern researches. Also, there are many examples that can support this thesis. For example, it is well known that manufacturing plants require certain amounts of production in order to be profitable, what in turn requires a certain size of market. Moreover, Smith provided a perfectly inteligible explanation of social and psychological reasons of the division of labor. He also emphasized that people depend on each other, what still is correct in conditions of the globalized world when.

Considering all the evidence reported it can be stated that Adam Smith’s concept of the division of labor mostly is correct and can be applied to the modern economy, although some aspects of this concept are not completely correct. For example, Smith was right when he mentioned a significant role of the division of labor in increase of labor productivity and economic development, which still remains. However, his statements about the lack of specialization in agriculture and the decisive role of industry in economic prosperity have already become obsolete because of introducing new technologies and emerging of post-industrial economies that are based on services.

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