Adam Smith, the father of capitalism left the world with the foundations of the free-market. One key brick in this foundation is Smith’s theory on the division of labor.
Though many may remember Smith for his “Invisible Hand,” he dedicated more space in his Wealth of Nations to the division of labor than he ever did on the hand of the market.
The idea of division of labor theory proposes that specialization in the marketplace is not only more efficient but more beneficial for all those involved.
Smith was radical for his time, as he suggested that it would be better for both the worker and the business in question to focus on breaking down production of goods into smaller components.
We must recall that this was a time where one worker performed countless professions, such as a doctor also serving as a dentist.
He provides the example of the pin makers:
“One man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations; to put it on, is a peculiar business, to whiten the pins is another; it is even a trade by itself to put them into the paper; and the important business of making a pin is, in this manner, divided into about eighteen distinct operations, which, in some manufactories, are all performed by distinct hands.” -Wealth of Nations, Book I
This is in stark contrast to a singular pin maker attempting to accomplish all 18 parts himself. Smith illustrated that using division of labor, industry productivity could increase exponentially, as a singular pin maker could only make 1/10th that of the 10 workmen working on each component.
A modern illustration of this concept was brought to life by Henry Ford, with the invention of the assembly line.
Instead of one worker focusing on one car, or even a small team working on one vehicle, Ford broke his car production into smaller counterparts. Letting each of his workers focus on one aspect of the process before passing it to the next part of the production line.
This also allowed for each worker to become an expert on his given task, increasing not only the value of his work but the rate at which they could perform it.
Some feared that this concept about labor would lead to a lack of intelligence in society, as not much intellect was necessary to straighten pens or put engines in cars.
A New Age of Labor
It has been more than two centuries since Smith published the Wealth of Nations, and just as society has evolved, so have markets.
We no longer live in an impoverished world where a vast majority of the population are forced to make pins to survive. Though poverty is not eliminated, it is well on its way to extinction.
Pins and cars are now almost entirely created by machines with human overseers, who have a great deal of intellect despite previous fears about the effect of Smith’s theory.
We now live in an age of specialized industry.
I give an example from my own life to illustrate this point, as I sit in a hotel in Washington, D.C. writing this article for your reading pleasure.
Instead of being forced to walk blocks to get my car to go find the sushi burrito I was craving (don’t judge me) and the bottle of wine to accompany it, which would have forced me to face D.C. traffic and taken at least an hour of my time better spent writing. I ordered the burrito through UberEats and the bottle of wine through Klink, an alcohol delivery service.
Not only did I receive both the burrito and the wine within 45 minutes of ordering them, it gave me the opportunity to finish this article.
If we did not live in an age of specialization, I would have been forced to go to my car, go to the grocery store, and figure out how to make my own sushi burrito. As it is, this is a specialized market that creates such wonders as the sushi burrito.
Instead, I used an application to order a specialized food, which a specialized driver then brought straight to my door, the bottle of wine not far behind.
Capitalism is truly a wonderful thing.