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Critical Analysis

The Wealth of Nations by Adam Smith.

In The Wealth of Nations (1776) Smith describes the time in which industrialization began to emerge in a society that, through the forces of demand, required greater availability of goods in an expanding market. The main ideas and findings of Smith’s work circulate around the concept of the division of labor which he says is the source of increased productivity. In the first part of The Wealth of Nations, Smith explains in great detail the three main effects of the division of labor, which are specialization, the saving of time that is required to go from one process to another, and the invention and utilization of machines which make the job easier and allow a greater output. Smith explains how the division of labor has been a slow process that has been conceived in an organized human society. The division of labor described by Adam Smith in the Wealth of Nations can have two different interpretations: one “market-oriented” (Vincent-Lancrin, 2003) or social division of labor, and the other “organisation-oriented” (Vincent-Lancrin, 2003) or organizational division of labor. These two interpretions of the division of labor often do not receive the awareness that they deserve; even though they form an integral part of the explanation of the division of labor provided by Smith.

The existence of two interpretations of the division of labor does not mean that they contradict each other. As a matter of fact both interpretations are intrinsically linked.

We can think of the social division of labor as “the market division of society, or the separation of specialised trades and occupations” (Vincent-Lancrin, 2003). At first glance Smith’s work seem to reflect only a social division of labor, but when looked at it closely we can see that there is also an organizational division of labor which we can define as “the organisation of work in the firm, which is usually called the technical division of labor” (Vincent-Lancrin, 2003). The organizational division of labor closely resembles the social division of labor. There are some small variations between the two and that is why it is not easy to distinguish one from the other, perhaps because in The Wealth of Nations Smith is more concerned with explaining the causes of the division of labor, rather than the aspects of it. Vincent-Lancrin says that “Smith is concerned with markets as well with organisations, each functioning according to the same principle. Therefore, Smith does not believe that the organisational and the social division of labour are fundamentally different….We should bear in mind that the social and organisational division of labour are not two separate processes. In the same way that individuals might not want to build a town but only a house, they might not want to build a social division of labour, but only an organisational division of labour. However, the town does not come after the house not the social division after the organisational divisions; the latter develops simultaneously with the former вЂ" a point clearly made by Young (1928) in his classic paper. The Smithian market is thus made of organisations and is surely not a market without organisations. The market and the firm are two expressions of the same division of labour, the first is unintendedly constructed whereas the second is intendedly constructed”

Due to the two divisions of labor interpretations, one of Smith’s most famous example, the pin-factory, has been the object of much criticism, says Vincent-Lancrin. Critics have said that Smith “is confused with two different kinds of division of labour. Marx argued that there is a difference in nature rather than in degree between the technical division of labour (in the pin factory) and the social division of labour (the differentiation of trades), because the latter involves free and independent relationships between people, whereas the former involves relationships of dependence and authority (Marx, 1867, I, 4, ch. 14, Pleiade I, pp.896-8)” But Smith nowhere in The Wealth of Nations says that the pin-factory example can not be applied to the social division of labor. The pin-factory case was simply an example that Smith used to illustrate how the division of labor works. This example talks about the organizational division of labor but it can also be well applied to the social division of labor (trades). “The effects of the division of labour, in the general business of society, will be more easily understood by considering in what manner it operates in some particular manufactures.” (Smith, 1776). But why did Smith choose that particular example? The answer to that question is also found in The Wealth of Nations. Smith wanted to illustrate the effects of the division of labor by using something that could be easily understood by most people. The pin-factory case was exactly what he was looking for. Vincent-Lancrin argues that Smith “does not limit his analysis to the factory; but he does not say that only generalization at the market level is correct:” and then he proceeds to cite Smith, “In every other art and manufacture, the effect of the division of labour are similar to what they are in this very trifling one; though, in many of them, the labour can neither be so much subdivided, nor reduced to so great a simplicity of operation. (WN, I.i.4)”.

When Smith talks about the three effects of the division of labor, he elaborates on the first two. In both cases (first and second cause of the division of labor) he uses examples to illustrate the point that he is trying to get across. When Smith talks about specialization, he gives the example of a smith who is used to handle a hammer. Smith says that if this man was obligated to make nails, then the output of this activity would be very low in quantity and very poor in quality; but on the other hand, smiths that do nothing else but making nails can produce a better quality product and in much greater quantities, Smith says. The second cause of division of labor is also accompanied by an example. Smith illustrates this concept by citing the case of a country weaver who must cultivate a small farm. Smith explains how this person loses a significant amount of time when he passes from his loom to the field and from the field to his loom. If these two activities were performed by two different people then lost of time would be considerably reduced, Smith says. But when it comes to the third cause of the division of labor; Smith talks about how the division of labor enables the usage and invention of machines that accelerate