Friday, November 02, 2007

A Remark on Adam Smith and Specialisation

Chris Meisenzahl posts on The Amateur Economist and Curmudgeon Blog, 1 November, (here):

“Homeschooling and Economics” and makes a passing remark to Adam Smith (via the estimable) Dr. Boudreaux who “provides an excellent analysis here. We've learned that specialization is very beneficial (as he says, going all the way back to Adam Smith) and that it makes us all wealthier.”

For the record, Lost Legacy likes to clear up claims for Adam Smith that give him credit when earlier scholars either originated the ideas attributed to him (mainly because he is so famously associated with them) or they reported on the ideas of even earlier scholars.

Adam Smith made the division of labour and specialization as a central theme in Wealth Of Nations (the ‘pin factory’ example, which he used from Diderot’s Encylopedia). The idea of specialization having positive effects on productivity (increasing returns to scale) certainly dominates modern economic thinking but it has a long lineage before Adam Smith saw its central significance to the creation of wealth.

Plato, unsurprisingly, noted the division of labour; William Petty gave examples of specialisation in the making of a watch in the 17th century; Bernard Mandeville in the Fable of the Bees did so too (1724), and in France in the 18th century numerous authors noted the phenomenon and in Diderot’s case illustrated it.

“We learned about” the benefits of specialisation from others before Adam Smith; that modern economists learned about specialisation ‘from Adam Smith’ is probably true in the sense that modern economists do not usually study the history of economic thought (such chairs and courses now fairly scarce on the campus) and the source of their information is from passing remarks of their tutors about Wealth Of Nations.

Given that their tutors also attribute to Adam Smith fantasy notions about his alleged ‘laissez-faire’ theories, alleged ‘small government’ totems, alleged theories (‘paradigms’ even) of invisible hands’ and his alleged disposition to oppose joint stock companies, and so on, perhaps it is a minor quibble to point out the antecedents to his theories of specialisation.

However, Adam Smith took the division of labour and the extent of the market to a degree that others hadn’t before him, and according to Schumpeter (echoed by Rothbard) nobody had done since, and that aspect of specialisation deserves notice in the compression of expression in an en passant sentence. From that perspective, I am grateful for Chris Meisenzahl creating the opportunity to add a bit of history to the statement about Adam Smith and the division of labour and specialisation.


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