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  • Essay / Adam Smith's Theory of Economic Development - 858

    As mentioned above, Smith's assessment of economic growth and performance is determined by labor productivity, and he believes that the division of labor has significantly improved labor productivity. He states: “The greatest improvements in the productive capacities of labor, as well as in the greater part of skill, dexterity and judgment,… have been the effects of the division of labor” (10). Smith supports his assertion by showing the relationship between the growth of an industry and the level of specialization of that industry. It compares the agricultural and manufacturing industries. Smith argues that the reason the growth of manufacturing has been much greater than the growth of agriculture is that agriculture allows for less division of labor. Smith goes on to identify the three circumstances that make the division of labor effective. First, specialization allows workers to focus on their particular trade, leading to increased dexterity in each worker. Second, division of labor saves time wasted when workers move from one area of ​​work to another that requires different skills and tools. Finally, the increased focus of workers on one function leads to technological innovations that improve productivity. Additionally, Smith believed that in a "well-governed society", "universal opulence" caused by the division of labor