The Economic Advantages of the Division of Labor

The name of the great Scotsman Adam Smith is honored by all modern academic economists. The book "Inquiry into the Nature and Causes of the Wealth of Nations" (1776) cost him nine years of complete seclusion and brought him a glory of "father of economics" (Hill). This is the theory of production and dispensation, then the analysis of the effects of those factors in the history and, finally, it is a number of examples that are present in the economy (Hill).

According to Smith, it is the whole world. This book marks the birth of liberal economic theory. In contrast to the mercantile system, "Wealth of Nations" seeks to show all the benefits of natural freedom and competition, which act as an invisible hand and contribute to the rapid and harmonious development of the society. That division of labor, according to Smith, leads to an unprecedented increase in productivity and is extremely useful for the "public" in general. The main work of Adam Smith's political economy is "Inquiry into the Nature and Causes of the Wealth of Nations" (1777). Smith's book is divided into five parts. In the first, he analyzes the issues of cost and revenue, in the second, the nature of capital and its accumulation. In this work, he expounded the principles of his teachings. In other parts, the author refers to the development of the European economy in the era of feudalism, the emergence of capitalism, and the history of economic thought and public finances. Adam Smith explains that the main idea of his work is the economic development. These are the forces that act temporarily and control the wealth of nations (Anderson).

Central motif of "The Wealth of Nations" is the action of the "invisible hand". We have bread not by grace of the baker but because of his self-interest.
Smith was able to guess the fruitful idea that today, under certain social conditions, we describe through the term of "working competition," there are private interests that can actually harmoniously combine with the interests of society. The market economy is not governed by the collective desire, or it is not subordinated to a single concept, but it keeps to the strict rules. The actions of one individual make an imperceptible affect on the market situation (Smith).

Indeed, person pays those prices, which are requested. He/she can choose the quantity of goods at these prices. This is the basis of the greatest benefits. However, despite the combination of these individual actions, each buyer submits to the separate prices, and prices are subordinated to the individual reactions. In this case, the "invisible hand" of the market provides the outcome that does not depend on the desire and intention of the one person.

Moreover, this market automatism may well optimize the allocation of resources. Smith established the statement: the competition provides with the aim to "meet the needs." Sure, Smith made a profound sense that means "to meet the demand." He said that the competition seeks to equate prices, and this makes easier to allocate the resources within these industries, and free competition in the markets of the production tends to equalize the benefits gained from the factors; and thus, it sets the optimal ability to allocate the resources from the sectors. He did not suppose that the economy in production and the side effects often prevent the competitive condition achievement. The essence of this is described by him in the public work discussion. Nevertheless, he did get a start on the theory of the best allocation of these resources during the perfect competition.

Smith’s faith in the virtues of the "invisible hand" is less to do with concerns about the efficiency of the means distribution in static behavior of perfect competition. Decentralized price he considered as desirable one because the result of this is dynamic. The market expands and multiplies the benefits of the division of labor. In other words, it works as an engine that runs the capital accumulation and income growth (Smith).

Smith was not satisfied with the declaration that the free market economy provides the best quality of life. He pays great attention to the precise definition of the institutional structure that would guarantee the best work of market forces. He understands that the personal interests are in equal measure, and they hinder and contribute to the welfare of society. Market mechanism establishes the harmony only in that case if it is included in the legal and institutional framework.

The basis of the system's economic views of Smith was the idea that the wealth of society is created by labor in the production process. It depends on:
1. The proportion of the population engaged in productive labor.
2. The level of labor productivity. Smith considered it the most important factor of economic progress and the division of labor made it the starting point of the research. On the example of a pin factory, he showed tremendous growth in labor productivity due to the specialization of individual groups working on doing just one operation.
Smith, from the correct position, described the dependence of the labor division on the size of the market. He argued that the extensive market creates favorable conditions for the division of labor and specialization. On this basis, it is achieved the high-level of production. Because of the narrow market the opportunities are limited, and the division of labor productivity growth is difficult (Smith).

Some statements of the doctrine about the division of labor were formulated by Smith’s predecessors; in Smith’s theory, they received the new meanings. He convincingly explains that the work is the source of wealth of society, and the division of labor is a key factor in increasing the productivity and growth of public wealth (Anderson).

Smith explained the emergence of division of labor by people’s tendency to exchange. It is (according to Smith) one of the natural qualities of a person. The ability to exchange "initially spawned the division of labor." With this thought of Smith, we can not agree. Division of labor arose before the appearance of the commodity production and the goods exchange. As a result, there was no hard resistance to the proposed change. Moreover, it could be said that it did not take so much time for the change to become generally accepted.

The downside of Smith’s belief systems about the division of labor was a misunderstanding of the difference between the social and the manufactory division of labor. The first one takes place at all levels of society, and the latter is generated by capitalism. This is a particular method of production profit (relative surplus value). Smith also represented the capitalist economy as a large manufactory. This is incorrect as the division of labor between capitalist enterprises is formed spontaneously, and in manufacture it is formed deliberately, by the will of the capitalist.

There are such advantages in the division of labor:
1. Workers are trained in one task and specialize in this. As a result, this increases efficiency and output.
2. Less time is wasted moving from one workbench to another.
3. Production is faster and thus more products are produced (


To summarize all the above mentioned, the division of labor led to separation of the various professions and occupations from each other. This contributed to the first increase in productivity. As a result, the higher level of industrial development and the more separations of labor are present in the country. The work was performed by one man in the poor state. In a more developed state the same work is performed by several men. The labor for the production of any finished object should be distributed among a large number of people. Division of labor in different types and forms of its manifestations is a decisive prerequisite for the development of commodity production and market relations. It is the concentration of work effort in the production of a narrow range of products. This makes manufactures enter into relations of exchange in order to obtain benefits that they need. Smith convincingly shows that the work is the source of wealth of society, and the division of labor is a key factor in increasing the productivity and growth of public wealth.

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