Friday, January 18, 2008

More excerpts from Logic of Life

Adam Smith, the father of modern economics, traveled Europe as tutor to the Duke of Buccleugh. But despite his travels, Adam Smith never actually visited a pin factory. While sitting at home in Kirkcaldy and penning the most famous passage in economics, he was inspired by an entry in an encyclopedia. The passage is no less important for that.

Smith argued that a general handyman who turned his hand to the business of making pins,

...could scarce, perhaps, with his utmost industry, make one pin in a day, and certainly could not make twenty. But in the way in which this business is now carried on, not only the whole work is a peculiar trade, but it is divided into a number of branches, of which the greater part are likewise peculiar trades. 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.

Smith reckoned that ten specialized pin-makers, using equipment designed and built by specialists, could produce 48,000 pins a day. Ten generalized handymen could produce perhaps one pin each. In the "trifling" business of making pins, quite rudimentary division of labor multiplied the output per person almost five thousand times. From a rational choice point of view, dividing labor is a no-brainer.

The division of labor is utterly fundamental to the wealth we enjoy in modern economies. Complicated products, such as the computer on which I am typing this paragraph, are unimaginable without the combined and cumulated efforts of the countless specialists who worked out how to manufacture integrated circuits or how to control a computer using a mouse and a pointer on the screen. Most of those specialists couldn't boil an egg, let alone survive alone on a desert island. They are dependent on other people's expertise, if only the expertise of the cooks at the local Chinese take-out, and computer users the world over are dependent on theirs.

Even simple products like the short cappuccino I have beside me would be impossible without the division of labor. Is there anyone in the world who has mastered ceramics, dairy farming and the art of the perfect espresso roast? I'd be bowled over by someone who had any two out of three.

That is all very well, but what does it have to do with marriage? There is not much reason to think that Adam Smith gave the matter much thought: a bachelor, he lived with his mother. Yet marriage used to be one of the fundamental ways to gain from division of labor. Before there were well-developed markets for anything much, and long before you could order a cappuccino, men and women were able to enjoy some of the gains from the division of labor by getting married, specializing, and sharing. Back on the Savannah, one might hunt and the other might gather. In the more recent past, one might be good at guiding a plough and sewing while another would specialize in cooking and household repairs. Nothing about Adam Smith's story suggests division of labor according to traditional sexual roles, but make no mistake: the family has rational roots. It is the oldest pin factory of all.

-Divorce Is Good for Women

1 comment:

Gavin Kennedy said...

The problem with Tim Hardford’s account of the division of labour is this sentence:
“Adam Smith never actually visited a pin factory. While sitting at home in Kirkcaldy and penning the most famous passage in economics, he was inspired by an entry in an encyclopedia.”
Yet Adam Smith in Wealth Of Nations makes the specific statement that ‘I have seen a small manufactory of this kind [the process described as the ‘18 operations’ to produce pins] where ten men only were employed, and where some of them consequently performed two or three distinct operations’.

I have asked Tim Harford for the evidence for his assertion that he never visited a pin factory. He most likely took the French 18 operations from Diderot’s Encyclopedia (1755), which was also based on Chamber’s Cyclopaedia (1741).

But if Adam Smith states he visited a ‘small manufactory’ he almost certainly did. He most probably visited one of which there were several near him in Kirkcaldy (1766-73), though at the time when he first made notes on the division of labour in his ‘Early Draf’ (1762) he was teaching in Glasgow and there were many manufactories (small forges, etc.,) nearby.

I await Tim Harford’s explanation for his assertion.