Topics: Economics, Society, The Wealth of Nations Pages: 6 (1800 words) Published: April 26, 2014
Adam Smith is regarded as the father of modern economics and considered still one of the greatest minds in economics today. This is greatly due to his groundbreaking classic work; The Wealth of Nations. Smith addresses two main concepts that contribute to the wealth of nation. This essay will reflect Smith’s understands of the division of labour and exchange and how these two concepts relate to the wealth of nations. By trying to understand these concepts it is important to recognize the consequences of these phenomenon in the eighteenth century. Smith therefore acknowledges the difficulties that arise out of these concepts and suggest solutions therefore. Smith’s (1776: xxiv) observations of society led to the conclusion that two different types of society exist. Societies whereby families’ main means of production is to hunt and fish in order to provide were classified as ‘savage’ societies, according to Smith (1776:xxiv). Such societies were often very poor and disease- ridden. On the contrary, Smith (1776: xxiv) classifies modern, thriving nations as ‘civilized’. Such societies produce a much greater amount than the demand therefore and often result in a surplus of products. However, among the civilized there are a large amount of people that do not labour or produce at all yet gave rise to decupled consumption. Furthermore, Smith (1776: xxiv) examines society in order to understand the cause of the difference in the above two societies. Smith (1776: xxiii) concludes that this difference is the direct result of the “annual labour of every nation” or described today as productivity. Hence, productivity improves or declines; firstly, according to the number of skilled labour and secondly, the efficiency at which employed labour produce to compensate for unemployed labour. These two circumstances will either create savage or civilized societies, according to Smith (1776: xxiv). In elaborating his argument, Smith (1776: xxiv) further deepens his understanding of the productive power of labour. Smith (1776:3) examines the productive power of labour by understanding the causes of improvements to labour and the natural distribution of produce. Smith (1776: xxiv) examines the skill, dexterity and judgment with which labour is applied as a cause of improvements in productive power. However, Smith (1776:3) concludes that “the greatest improvement in the productive power of labour has been the effects of the division of labour”. This concept is defined as the separation of work into smaller parts (Smith, 1776:4). Smith (1776: 4) provides the example of the pin factory to better explain the structures and effects of the division of labour. A pin-maker, who is uneducated and unfamiliar with the pin-market, could only produce a few pins per day. However, the same uneducated pin-maker could produce a great amount more if his job was specialized to a certain task. Specialization focus the skills of the pin-maker to a specific task and will also result in the decrease of time the pin-maker takes complete the specific task. Thus, each specialized labour contributes to making the pin (Smith, 1776:5). According to Smith (1776:5), the increase in productive power of labour has been advantageous for manufactures and therefore has given rise to the separation of different skills and employment opportunities. The advantages of the division of labour have led to the increase of dexterity, the decrease in time used to produce and lastly, the division of labour has given rise to the ability to mechanize to facilitate labour (Smith, 1776:7). As the advantages of the division of labour transform savage societies into civilized societies many occupations are divided and tasks are separated. Smith (1776:12) describes this through the use of the example of manufacturing a woolen coat. The tasks needed to produce a woolen coat are separated and is a collective effort from the farmer to the wool cleaner to the weaver. The weaver needs to exchange...
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