Table of ContentsIntroductionAdam Smith's Division of LaborConclusionBibliographyIntroductionAdam Smith was an 18th-century economist who was most famous for his books "An Inquiry into the nature and causes of the wealth of Nations". In his first book, he expounds the importance of the division of labor which he calls "the greatest improvement in the productive powers of labor" (Smith, 2001). While the theory of the division of labor was already well established, Smith was the first economist to amplify the importance of the division of labor by asserting that it was the main causal factor of economic growth The division of labor is defined as the. breaking down the production process into individual parts, in which labor specializes in a particular role in the process of making a good or service In the division of labor, instead of producing a product from start to finish. end, a worker works on one aspect of the production line. This has the added benefit of increasing labor productivity and therefore output. While Smith had previously been openly positive about the division of labor, he later appeared to contradict himself, even going so far as to criticize the theory. Economic growth is the process by which a country experiences an increase in real production, usually measured as GDP (gross domestic product), which is a measure of the total monetary value of all goods and services produced within an economy over a specific period of time (usually one year). ). Overall, this essay will demonstrate that Smith was positive about the theory of the division of labor (despite later criticism) and that it is the epitome of the role of economic growth. Say no to plagiarism. Get a tailor-made essay on “Why Violent Video Games Should Not Be Banned”? Get the original essay Adam Smith's Division of LaborAdam Smith divided the benefits of the division of labor into three distinct parts. First, “improving the dexterity of workers” (Smith, 2001). As workers perform the same task repeatedly, they naturally improve as they become accustomed to and specialize in the process, whereas a worker who multitasks throughout the production process does not will never really get used to any process. Second, by performing only one function in a productive process, workers save time otherwise spent switching from one task to another. Third, by focusing their minds on a single task, workers will “soon discover easier and faster methods for accomplishing their own work” (Smith, 2001). By this Smith means that when the worker focuses on a specific task, it is easier to learn and invent more productive ways of accomplishing that task, thereby increasing output per worker. According to Smith, these three factors would contribute to one of the largest increases in labor productivity (measured in output per worker over a given period). To illustrate this, Smith used the example of a pin maker in which one worker producing from start to finish could not make one pin per day while ten workers working individually on a production process could make "more of forty-eight thousand pins,” thus showing rapid increases in output and increasing marginal returns (when the increase in output from a production process is subsequently greater than the increase in inputs). So that the division of laborproduce, Smith provided two main conditions. First, the market must be large enough. In small towns and villages, companies producing with division of labor will be too efficient because they will produce too many goods for the region to consume. Smith used the example of a worker producing nails. In a small market, if the worker specializes in making nails, he could make "three hundred thousand nails per year", but the worker would be unable to sell nearly a thousand nails per day in such a market . As a result, workers in these fields are "compelled to apply themselves to all the different branches of industry" so that they produce a lesser quantity but a wider range of goods which are more likely to be sold. Even if this trade will be similar, it remains impossible to capture the full productive potential of the division of labor in these circumstances. In comparison, larger, faster growing and wealthier cities can achieve this through a much larger market and therefore much greater purchasing power. Second, a society must have a monetary system that goes beyond barter. Using coins as a medium of exchange removes the double coincidence of desire that occurs in the barter of goods (since to buy a good you must have a good that the seller wants in return). By its nature, the division of labor limits the quality of goods that a worker can exchange for another meaning, namely that "the exchange must often have been greatly hindered and embarrassed in its operation." A monetary system eliminates this reservation by providing a common medium of exchange among workers, who otherwise might not have been able to exchange their products with each other. True economic growth occurs due to improvements in the quality or quantity of factors of production (capital, business, labor and land) which are the inputs used to produce goods and services within an enterprise. economy. An increase in either unit of production factors will thus lead to greater and possibly better quality production of goods and services within an economy. This will likely result in a higher monetary value of all goods and services produced within an economy. Using this definition, it is easy to understand why Smith explained, when it comes to economic growth, that "the heart of it lies in the emphasis on the division of labor." Smith viewed the division of labor as the main contributor to labor productivity, which implies a significant increase in the quality of a factor of production (labor) and therefore economic growth. While the division of labor may be a feature of increasing economic growth, Smith believed that "it is the accumulation of capital that drives it". Workers (who live on subsistence) and landowners (who do not own productive capital) have a low propensity to save and, therefore, they do not invest in capital, which prevents potential economic growth . Capitalists, on the other hand, own productive capital and, to increase their future profits, they invest heavily in capital. This investment increases economic growth through the accumulation of higher quality fixed and circulating capital that produces more goods and services within a nation. Overall, this represents an increase in the capital factor of production within an economy, which means higher productivity (and therefore output) per machine. Without this, the economy will be considerably.. 68-9.