Readings in the Economics of the Division of Labor

The following sections are included:

• Preface

• Acknowledgement

• Contents

The following sections are included:

• Greek Origins, Medieval Islamic Wisdom and Schumpeter's "Great Gap" Thesis

• Emergence of Political Economy of the Division of Labor

• Extent of the Market, Increasing Returns and the Division of Labor: From Adam Smith to Allyn Young

• Division of Labor in Society and Division of Labor in Manufacture

• Spontaneous Order, Money and Knowledge: Mandeville, Ferguson and the Austrian Insights

• Concluding Remarks

• References

The following sections are included:

• From Cyropœdia

• From Oeconomicus

I think a city comes to be because none of us is self-sufficient, but we all need many things. Do you think that a city is founded on any other principle?

No.

And because people need many things, and because one person calls on a second out of one need and on a third out of a different need, many people gather in a single place to live together as partners and helpers. And such a settlement is called a city. Isn't that so?…

Let us begin our discussion of the question with the following considerations:

Of everything which we possess there are two uses: both belong to the thing as such, but not in the same manner for one is the proper, and the other the improper or secondary use of it. For example, a shoe is used for wear, and is used for exchange; both are uses of the shoe. He who gives a shoe in exchange for money or food to him who wants one, does indeed use the shoe as a shoe, but this is not its proper or primary purpose, for a shoe is not made to be an object of barter. The same may be said of all possessions, for the art of exchange extends to all of them, and it arises at first from what is natural, from the circumstance that some have too little, others too much…

The following sections are included:

• Human Civilization in General

• With Regard to the Amount of Prosperity and Business Activity in Them, Cities and Towns Differ in Accordance with the Different Size of Their Civilization (Population)

• Prices in Towns

• The Real Meaning and Explanation of Sustenance and Profit. Profit Is the Value Realized from Human Labor

• The Crafts Require Teachers

• The Crafts Are Perfected Only If There Exists a Large and Perfect Sedentary Civilization

• Crafts Can Improve and Increase Only When Many People Demand Them

The following sections are included:

• From Political Aritmetick

• From Another Essay on Political Aritmetick

Arts, and mills, and engines, which save the labor of hands are ways of doing things with less labor, and consequently with labor of less price, though the wages of men employed to do them should not be abated. The East-India Trade procures things with less and cheaper labor than would be necessary to make the like in England; it is therefore very likely to be the cause of the invention of arts, and mills, and engines, to save the labor of hands in other manufactures. Such things are successively invented to do a great deal of work with little labor of hands; they are the effects of necessity and emulation; every man must be still inventing himself, or be still advancing to farther perfection upon the invention of other men; if my neighbour by doing much with little labor, can sell cheap, I must contrive to sell as cheap as he. So that every art, trade, or engine, doing work with labor of fewer hands, and consequently cheaper, begets in others a kind of necessity and emulation, either of using the fame art, trade, or engine, or of inventing something like it, that every man may be upon the square, that no man may be able to undersell his neighbour. And thus the East-India Trade by procuring things with less, and consequently cheaper labor, is a very likely way of forcing men upon the invention of arts and engines, by which other things may be also done with less and cheaper labor, and therefore may abate the price of manufactures, though the wages of men should not be abated…

The following sections are included:

• On the Nature of Society

• From the Third Dialogue

• From the Sixth Dialogue

The following sections are included:

• Of the Superiority of One Process of Manufacture over Another

The following sections are included:

• On the Necessity of a Social Life

The following sections are included:

• Of the Separation of Arts and Professions

The following sections are included:

• FIRST

• II

• III

• IV

• XLVIII

The following sections are included:

• Book I Chapter I Of the Division of Labor

• Book I Chapter II Of the Principle Which Gives Occasion to the Division of Labor

• Book I Chapter III That the Division of Labor Is Limited by the Extent of the Market

• Book I Chapter IV Of the Origin and Use of Money

• Book II Of the Nature, Accumulation, and Employment of Stock. Introduction

• Book III Chapter I Of the Natural Progress of Opulence

• Book IV Chapter I Of the Principle of the Commercial or Mercantile System

• Book V Chapter V, Part III, Article II: Of the Expence of the Institutions for the Education of Youth

The same rule which regulates the relative value of commodities in one country does not regulate the relative value of the commodities exchanged between two or more countries.

Under a system of perfectly free commerce, each country naturally devotes its capital and labor to such employments as are most beneficial to each. This pursuit of individual advantage is admirably connected with the universal good of the whole. By stimulating industry, by rewarding ingenuity, and by using most efficaciously the peculiar powers bestowed by nature, it distributes labor most effectively and most economically: while, by increasing the general mass of productions, it diffuses general benefit, and binds together, by one common tie of interest and intercourse, the universal society of nations throughout the civilised world. It is this principle which determines that wine shall be made in France and Portugal, that corn sell be grown in America and Poland, and that hardware and other goods shall be manufactured in England…

The following sections are included:

• On the Division of Labor

• English manufacture

• French manufacture

• On the Division of Mental Labor

When Adam Smith wrote his immortal elements of economics, automatic machinery being hardly known, he was properly led to regard the division of labor as the grand principle of manufacturing improvement; and he showed, in the example of pin-making, how each handicraftsman, being thereby enabled to perfect himself by practice in one point, became a quicker and cheaper workman. In each branch of manufacture he saw that some parts were, on that principle, of easy execution, like the cutting of pin wires into uniform lengths, and some were comparatively difficult, like the formation and fixation of their heads; and therefore he concluded that to each a workman of appropriate value and cost was naturally assigned. This appropriation forms the very essence of the division of labor, and has been constantly made since the origin of society…

The following sections are included:

• Notes to Chapter One "Of the Division of Labor"

• Notes to Chapter Three "That the Division of Labor is Limited by the Extent of the Market"

The following sections are included:

• Of Co-operation, or The Combination of Labor

• Of Production on a Large, and Production on a Small Scale

The following sections are included:

• Division of Labor in Manufacture, and Division of Labor in Society

The following sections are included:

• The Limitations to the Division of Labor

The following sections are included:

• Industrial Organization

• Industrial Organization, Continued. Division of Labor. The Influence of Machinery

• Correlation of the Tendencies to Increasing and to Diminishing Returns

A striking feature of the present position of economic science is the almost unanimous agreement at which economists have arrived regarding the theory of competitive value, which is inspired by the fundamental symmetry existing between the forces of demand and those of supply, and is based upon the assumption that the essential causes determining the price of particular commodities may be simplified and grouped together so as to be represented by a pair of intersecting curves of collective demand and supply. This state of things is in such marked contrast with the controversies on the theory of value by which political economy was characterised during the past century, that it might almost be thought that from these clashes of thought the spark of an ultimate truth had at length been struck…

My subject may appear alarmingly formidable, but I did not intend it to be so. The words economic progress, taken by themselves, would suggest the pursuit of some philosophy of history, of some way of appraising the results of past and possible future changes in forms of economic organisation and modes of economic activities. But as I have used them, joined to the other half of my title, they are meant merely to dispel apprehensions, by suggesting that I do not propose to discuss any of those alluring but highly technical questions relating to the precise way in which some sort of equilibrium of supply and demand is achieved in the market for the products of industries which can increase their output without increasing their costs proportionately, or to the possible advantages of fostering the development of such industries while putting a handicap upon industries whose output can be increased only at the expense of a more than proportionate increase of costs. I suspect, indeed, that the apparatus which economists have built up for dealing effectively with the range of questions to which I have just referred may stand in the way of a clear view of the more general or elementary aspects of the phenomena of increasing returns, such as I wish to comment upon in this paper…

The following sections are included:

• Introduction

• Attempts at Solution Hitherto

• The Problem of the Genesis of a Medium of Exchange

• Commodities As More or Less Saleable

• Concerning the Causes of the Different Degrees of Saleableness in Commodities

• On the Genesis of Media of Exchange

• The Process of Differentiation Between Commodities Which Have Become Media of Exchange and the Rest

• How the Precious Metals Became Money

• Influence of the Sovereign Power

What is the problem we wish to solve when we try to construct a rational economic order?

On certain familiar assumptions the answer is simple enough. If we possess all the relevant information, if we can start out from a given system of preferences and if we command complete knowledge of available means, the problem which remains is purely one of logic. That is, the answer to the question of what is the best use of the available means is implicit in our assumptions. The conditions which the solution of this optimum problem must satisfy have been fully worked out and can be stated best in mathematical form: put at their briefest, they are that the marginal rates of substitution between any two commodities or factors must be the same in all their different uses.

The following sections are included:

• Name Index

• Subject Index