Adam Smith quote from The Wealth of Nations. What is this saying? What is the division of labor? Why is it limited by the extent of the market?
In: Economics
Division of labor is doing different jobs. There was a time when everybody grew their own food, baked their own bread, made their own clothes, built their own cabin, etc. For an economy to develop into one where there are bakeries and tailors and carpenters depends on a market where people can sell services and goods in return for money they can then spend on other goods and services.
If you are in a tribe and there is only yourself and one other person who can hunt/gather for food, your labor is absolutely essential for the survival of your tribe. You don’t have time or opportunities to focus on developing new tools or better ways of life. If however you are in a tribe (town) where food is provided for in a reasonably assessable way for the population, it allows other to focus on art/ specialized tools/ development.
Division of labor is the ability to get an art degree knowing that you will still be able to provide food because the market is so large that another person supplied food to buy your art.
Division of Labour is pretty much that, a group of people dividing what labour they must do to meet their needs. A complete lack of division would necessitate every person be entirely self sufficient, they make their own clothes, grow their own food, make their own medicines, etc.
Obviously this isn’t very efficient and it means no person can really get all that good at a specific task. If one guy can specialize into just making clothes, some woman only catching fish, etc they become better at that task than they would if they had to do everything else.
But that causes a problem, the tailor needs to eat and fisherwoman needs clothes but they cant do those themselves (or at least arent as good at it). So there needs to be some mechanism to exchange the goods/services between them, otherwise this system doesnt work. This mechanism doesn’t *have* to be a market, but in Adam Smith’s time of Mercantilism and early Capitalism, that’s what the mechanism was.
So the division of labour is limited by the extent of the market, because if there isnt someone specialized in the job of making medicines within the market, then the fisherwoman and the tailor have to do that for themselves.
Latest Answers