The Economics Book

66

DIVIDE UP PIN

PRODUCTION, AND

YOU GET MORE PINS

THE DIVISION OF LABOR

W

henever people work in

a group, they invariably

start by deciding who is

going to do what. It was the great

Adam Smith (p.61) who turned

this division of labor into a

central economic idea. At the very

start of his influential book The

Wealth of Nations, Smith explains

the differences between production

when one person carries out the full

sequence required to make

something, and when several

people each do just one task each.

Writing in 1776, Smith noted that

if one man set about making a pin,

going through the many steps

involved, he might make “perhaps

not one pin in a day.” But by

dividing the process among several

men, with each specializing in a

single step, many pins could be

IN CONTEXT

FOCUS

Markets and firms

KEY THINKER

Adam Smith (1723–90)

BEFORE

380 BCE In The Republic,

the Greek philosopher Plato

explains how a city emerges,

then grows by exploiting the

gains made by dividing labor.

1705 Dutch philosopher

Bernard Mandeville coins the

term “division of labor” in his

The Fable of the Bees.

AFTER

1867 Karl Marx argues that

division of labor alienates

workers and is a necessary

evil that will eventually be

superseded.

1922 Austrian economist

Ludwig von Mises argues

that division of labor is not

alienating but brings huge

benefits, including greater

leisure time.

When workers concentrate

on one task...

... repetition increases

skill and speed.

... no time is

wasted through switching

between tasks.

This increases production

and reduces cost.

Divide up pin production,

and you get more pins.