Why Is Division Of Labor Important?

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Smith starts An Inquiry into the Nature and Causes of The Treasure of Nations with the following claim: “The greatest improvement in the productive power of labour, and the greater part of skill, intelligence, and judgment which exists wherever directed, or exercised, seems to have been the result of the division of labour” (Ii1).

Whenever I ask a student to read that sentence, I stare as I ask them the question—why is the division of labor important?

Occasionally, an intrepid reader or two will offer the economists’ answer—productivity and efficiency!

This is actually part of his answer. Smith explains,

So those ten people can make between them more than forty-eight thousand nails in a day. Therefore, each person making a tenth of forty-eight thousand pins, may be considered as making four thousand eight hundred pins per day. But if they all worked separately and independently, and without one of them being educated in this extraordinary work, they would not each of them really make twenty, perhaps not one nail a day; that is, certainly, not two hundred and forty, perhaps not four thousand and eight hundred parts of what they are able to do at present, owing to the proper division and combination of their different occupations (Ii3).

Division of labor increases productivity and makes it more efficient by dividing the different tasks of doing something between different people and by simplifying the work that needs to be done by each person. On the economic side of things, this innovation that Smith saw helped spark the Industrial Revolution, and was a precursor to comparative advantage—David Ricardo’s economic concept of advantages in production between industries and nations. But for Smith and us, the answer is much more.

As part of Gen Z, the generation of hustlers and multitaskers, my readers should appreciate the division of labor more than most, and yet when I think of most of them, the wonder that is the division of labor—that we don’t have to do everything we use in our daily lives from start to finish ourselves or pay someone else’s price to do it—is lost on them.

Have we reached such a level of division of labor in the 21st century that it is no longer surprising?

Perhaps because I have been trained to think about political and economic development, I think about the benefits of the division of labor often. For example, I am always looking for ways to get out of my homework. When I was young, this was a way to find out if I could use shortcuts that my mother didn’t see. Now that I’m older and have a job, this takes the form of me looking for some kind of device that will make the mundane tasks of everyday life easier. The best invention, so far, is my Roomba from iRobot. Instead of spending time every day cleaning up after my dog Lacy and all of his many messes, the machine does it for me. This frees me up for more reading, writing, or, more Netflix-ing. For my students, the division of labor allows them to have time to pursue their passion projects, and even start things from scratch if they choose. Before the eighteenth century, doing things from start to finish was not an option and certainly not the basis of YouTube fame. Doing EVERYTHING yourself from start to finish was a reality of everyday life for many people in many places. But the division of labor allows more freedom. Smith tells the story of a little boy who, because of the segregation of the workers, was inspired to make his small job in the factory easier. Division of labor promotes efficiency because each person works on one small task, knows how to do it well, and does not have to keep switching between tasks; but it also encourages each employee to make their work faster and easier.

In the first fire engines, a boy was always employed to alternately open and close the connection between the boiler and the cylinder, according to whether the piston was rising or falling. One of those boys, who liked to play with his companions, observed that, by tying a cord to the handle of the valve which opened this connection to another part of the machine, the valve would open and close without his assistance, and leave him free to stray from his fellow-players. One of the greatest advances made in this machine, since it was first invented, was in this way the discovery of a boy who wanted to save his work. (II8)

In order to have the freedom to play with his friends, the boy invents a better way to use a fire engine. You benefit because you get more time to play. His boss benefits because he can now use his workers to do other manual work. Consumers also benefit because the cost of the end product will be lower because it requires fewer workers.

But the division of labor is also more than the sum of its parts—the division of labor. My Roomba and I, my students, and the factory guy all benefit from the added freedom of division of labor. Smith highlights these moral advantages of division of labor. Another moral advantage of the division of labor is the increased need for trade:

It is not from the goodness of the butcher, the brewer, or the baker, that we expect our dinner, but from their consideration of their own interests. We talk to ourselves, not to their personality but to their self-love, and we never talk to them about our needs but about their benefits. (I.ii.2)

Smith made this statement after asserting a basic feature of human nature that gives rise to the division of labor—the human desire to truck, trade, and barter. Dogs have no idea of trading one bone for another, but humans are always thinking about how they can improve their situation by working with others.

This speech about human nature is Smith’s second of his own you heard. The first occurs in the first line of his first work, Theory of Moral Sentiments:

How selfish every man is evidently some principles in his nature, which interest him in the wealth of others, and render their happiness necessary to him, though he derives nothing from it but the pleasure of seeing it. (II1.1)

For Smith, human nature can be characterized by two main qualities—the tendency to put ourselves in the shoes of others, a process he will call empathy, and the desire to improve our situation by exchanging with others. The two go hand in hand. We quickly learn that we cannot interact with others without putting ourselves in their shoes. Why? Because we wouldn’t know what to give to get what we want from them. Money makes this easy, but an example I often use in the classroom is kids trading their lunches in high school. If you really want another child’s pudding cup, you should know better what they like so you can get them to trade with you. If you give them leftover brussels sprouts, you probably won’t have any luck, but if you give them their favorite fruit or a different dessert you might do better. For Smith, the division of labor built upon two natural conditions in human nature and in so doing created the opportunity for greater efficiency, cheaper production, and more jobs. He also appreciated the division of labor to facilitate human interaction and understanding on a large scale. Indeed, one of the reasons why the division of labor was the “greatest advance” is because it was not a design or a single-minded invention. The division of labor is based on individual self-interest and striving to improve their situation, and by doing so, it encourages people to take an interest in each other.

It also ensures jobs, social mobility, and innovation for the poorest in society. Smith puts it: “But though they were very poor, and consequently but careless of the necessary machinery, they could, when they exerted themselves, make between them about twelve pounds of nails a day.” He also notes that they can do this “without one of them being educated in this strange business” (Ii3). The division of labor allows the underprivileged and those who have not had the advantages of education to make a meaningful contribution to society and make a good living.

While many who want to criticize the commercial promise cite Smith who sounds like an early Marx in Book V of The Treasure of Nations when he says that division of labor can make people “stupid and as ignorant as possible of a human being,” when he introduces this concept, Smith actually associates division of labor with innovation and freedom to the lower members of society. Remember the little boy who invented new things because he wanted the “freedom” to play with his friends (Vif50). Labor fragmentation is therefore a double-edged sword. Is it really a huge improvement in labor?

So if readers ask me, why are we making such a big deal about the division of labor? First of all I say, everything you have, everything you are able to do every day, all the things you enjoy and the freedom you enjoy is because of the division of labor. The division of labor is also responsible for creating job opportunities for many more people and helped create the hockey growth effect that the world has enjoyed since the Industrial Revolution. But more than that, the opportunity for greater human cooperation, understanding, and freedom is what Smith calls “the greatest development.”

Editors’ note: In honor of the 250th anniversary of publication An Inquiry into the Nature and Causes of the Wealth of Nations, we contain our greatest hits from it AdamSmithWorks, part of the Liberty Fund network. This piece was originally posted there.