IndexIntroductionAdam Smith's division of laborConclusionBibliographyIntroductionAdam Smith was an 18th century economist best known for his books "An Inquiry into the Nature and Causes of Wealth of Nations". In his first book he underlines the importance of the division of labor which he defines as "the greatest improvement in the productive capabilities 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 stating that it was the primary factor in causing economic growth. The division of labor is defined as the breakdown of the production process into individual parts, in which labor specializes in a particular role in the process of producing a good or service. In the division of labor, instead of producing a product from start to finish, the worker works on one aspect along the production chain. This has the added benefit of increasing labor productivity and therefore production. While Smith was previously openly positive about the division of labor, he later seems to contradict himself, even going so far as to criticize the theory. Economic growth is the process in which a country experiences an increase in real output usually measured in GDP (gross domestic product) which is a measure of the total monetary value of all goods and services produced within an economy over a period of specific time (usually a year). Overall, this essay will argue that Smith favored the theory of the division of labor (despite later criticism) and that it is central to the role of economic growth. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an Original Essay Adam Smith's Division of Labor Adam Smith divided the benefits of the division of labor into three distinct parts. First, “the improvement of workers' dexterity” (Smith, 2001). Because workers repeatedly perform the same task, they naturally improve as they become accustomed to and specialize in the process, whereas a worker who performs multiple tasks throughout the production process will never truly become accustomed to any one process. Second, by performing only one function in a production process, workers save time otherwise spent switching from one task to another. Third, by focusing their minds on a task, workers “will soon discover easier and faster ways to do their jobs” (Smith, 2001). By this Smith means that as the worker focuses on a specific task, it is easier to learn and invent more productive ways to perform this task, thus increasing output per worker. According to Smith, these three factors would contribute to one of the largest increases in labor productivity (measured as output per worker in a period). To illustrate this, Smith used the example of a pin factor where one worker producing from start to finish could not make a pin in a day while ten workers working individually on a production process could make "more than forty-eight thousand pins ” thus showing a rapid increase in output and increasing marginal returns (when the increase in output resulting from a production process is subsequently greater than the increase in inputs). For the division of labor to occur, Smith envisioned two primary requirements. First, the market must be sufficiently large. In small towns and villages, businesses that produce by division of labor will be too effective as they will produce too many goods for the area toconsume them. Smith used the example of a worker who makes nails. In a small market, if the worker specialized in the production of nails, he could produce "three hundred thousand nails a year", yet the worker would not be able to sell anywhere near a thousand nails a day in such a market. As a result, workers in these sectors are "forced to apply themselves to all the different branches of industry" so that they produce a smaller quantity but a wider range of goods that are more likely to be sold. Although this trade will be similar, under these circumstances there is still an inability to exploit the full productive potential of the division of labor. By comparison, larger, faster-growing and wealthier cities can do this thanks to their much larger market and therefore much larger purchasing power. Second, a society must have a monetary system that goes beyond barter. The use of coins as a medium of exchange removes the double coincidence of desire that occurs in the barter of goods (because to purchase a good it is necessary to have a good that the seller wants in exchange). By its nature, the division of labor limits the quality of goods a worker can exchange, meaning that "exchange must often have been greatly hindered and embarrassed in its operation." A monetary system removes this caveat by providing a common means of exchange between workers, who otherwise would not have been able to exchange their products with each other. Real economic growth occurs through 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 economy. An increase in both units of factors of production will therefore lead to a greater, and possibly higher, quantity of quality goods and services produced within an economy. This will likely lead to a higher monetary value of all goods and services produced within an economy. Using this definition, it is easy to agree why Smith, in achieving economic growth, explained that "the core of it lies in its emphasis on the division of labor." Smith considered the division of labor as the factor that contributes most to labor productivity, which implies a significant increase in the quality of a factor of production (labor) and therefore economic growth as a result. While the division of labor may be a feature of increased 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 not investing in capital prevents potential economic growth. Capitalists, on the other hand, are owners of productive capital and to increase future profits they invest heavily in capital. This investment increases economic growth through the accumulation of more and higher quality fixed and working capital that produces more goods and services within a nation. Overall, this represents an increase in the capital factor of production within an economy, meaning greater productivity (and therefore output) per machine. Without this the economy will be severely hampered from future production potential. Between Adam Smith's first and fifth books a change of heart occurs in his analysis of the division of labor. While his first book clearly explains that the division of labor makes a man more intelligent by saying "easier and more suitable methods of doing one's work" (Smith, 2001), which implies that concentrating the mind on one process increases. 68-9.