Adam Smith Specialization Quotes

specialization is both the cause and the effect of prosperity, and it creates the modern economic life that allows us to move beyond subsistence. Small groups of people—no matter how talented, no matter how skilled or strong or smart—cannot be wealthy by modern standards over any sustained period of time.

Both the fragmentation of power and the conflicting government policies are rooted in the political realities of a democratic system that operates by enacting detailed and specific legislation. Such a system tends to give undue political power to small groups that have highly concentrated interests, to give greater weight to obvious, direct, and immediate effects of government action than to possibly more important but concealed, indirect, and delayed effects, to set in motion a process that sacrifices the general interest to serve special interests, rather than the other way around. There is, as it were, an invisible hand in politics that operates in precisely the opposite direction to Adam Smith’s invisible hand. Individuals who intend only to promote the general interest are led by the invisible political hand to promote a special interest that they had no intention to promote.

It was George the Mailman’s last day on the job after 35 years of carrying the mail through all kinds of weather to the same neighborhood. When he arrived at the first house on his route, he was greeted by the whole family who congratulated him and sent him on his way with a tidy gift envelope. At the second house, they presented him with a box of fine cigars. The folks at the third house handed him a selection of terrific fishing lures. At the fourth house, he was met at the door by a strikingly beautiful blonde woman in a revealing negligee. She took him by the hand, gently led him through the door, which she closed behind him, and took him up the stairs to the bedroom where she blew his mind with the most passionate love he had ever experienced. When he had enough, they went downstairs and she fixed him a giant breakfast: eggs, potatoes, ham, sausage, blueberry waffles, and fresh-squeezed orange juice. When he was truly satisfied, she poured him a cup of steaming coffee. As she was pouring, he noticed a dollar bill sticking out from under the cup’s bottom edge. "All this was just too wonderful for words," he said, "But what’s the dollar for?" "Well," she said, "Last night, I told my husband that today would be your last day, and that we should do something special for you. I asked him what to give you. He said, “Screw him. Give him a dollar.” The breakfast was my idea.

There is an excellent short book (126 pages) by Faustino Ballvè, Essentials of Economics (Irvington-on-Hudson, N.Y.: Foundation for Economic Education), which briefly summarizes principles and policies. A book that does that at somewhat greater length (327 pages) is Understanding the Dollar Crisis by Percy L. Greaves (Belmont, Mass.: Western Islands, 1973). Bettina Bien Greaves has assembled two volumes of readings on Free Market Economics (Foundation for Economic Education). The reader who aims at a thorough understanding, and feels prepared for it, should next read Human Action by Ludwig von Mises (Chicago: Contemporary Books, 1949, 1966, 907 pages). This book extended the logical unity and precision of economics beyond that of any previous work. A two-volume work written thirteen years after Human Action by a student of Mises is Murray N. Rothbard’s Man, Economy, and State (Mission, Kan.: Sheed, Andrews and McMeel, 1962, 987 pages). This contains much original and penetrating material; its exposition is admirably lucid; and its arrangement makes it in some respects more suitable for textbook use than Mises’ great work. Short books that discuss special economic subjects in a simple way are Planning for Freedom by Ludwig von Mises (South Holland, 111.: Libertarian Press, 1952), and Capitalism and Freedom by Milton Friedman (Chicago: University of Chicago Press, 1962). There is an excellent pamphlet by Murray N. Rothbard, What Has Government Done to Our Money? (Santa Ana, Calif.: Rampart College, 1964, 1974, 62 pages). On the urgent subject of inflation, a book by the present author has recently been published, The Inflation Crisis, and How to Resolve It (New Rochelle, N.Y.: Arlington House, 1978). Among recent works which discuss current ideologies and developments from a point of view similar to that of this volume are the present author’s The Failure of the “New Economics”: An Analysis of the Keynesian Fallacies (Arlington House, 1959); F. A. Hayek, The Road to Serfdom (1945) and the same author’s monumental Constitution of Liberty (Chicago: University of Chicago Press, 1960). Ludwig von Mises’ Socialism: An Economic and Sociological Analysis (London: Jonathan Cape, 1936, 1969) is the most thorough and devastating critique of collectivistic doctrines ever written. The reader should not overlook, of course, Frederic Bastiat’s Economic Sophisms (ca. 1844), and particularly his essay on “What Is Seen and What Is Not Seen.” Those who are interested in working through the economic classics might find it most profitable to do this in the reverse of their historical order. Presented in this order, the chief works to be consulted, with the dates of their first editions, are: Philip Wicksteed, The Common Sense of Political Economy, 1911; John Bates Clark, The Distribution of Wealth, 1899; Eugen von Böhm-Bawerk, The Positive Theory of Capital, 1888; Karl Menger, Principles of Economics, 1871; W. Stanley Jevons, The Theory of Political Economy, 1871; John Stuart Mill, Principles of Political Economy, 1848; David Ricardo, Principles of Political Economy and Taxation, 1817; and Adam Smith, The Wealth of Nations, 1776.

Remarkably, a friend of James Watt at the University of Glasgow best understood how this phenomenon of labor savings would unfold. Making a wide set of observations and predictions about specialized industrial processes—in which each laborer focused on a particular task rather than creating the whole as craftsmen and artisans did—Adam Smith advanced the idea of “division of labor” as a central concept in his 1776 Wealth of Nations, the treatise that defined the contours of market capitalism. As people specialized and the work needed for a given task decreased, the overall need for human labor would not fall as was feared. Instead, standards of living would increase as more people could afford more, widening the market for all sorts of new goods, which would create new forms of work. To Smith, this endless discovery of efficiency gains was the catalyst for all economic growth. The ability for humanity to collectively rise above a day’s work for a day’s sustenance, by definition, required the economy to get more out of mankind’s collective labor. At the same time, Smith argued that these newly discovered efficiencies that caused men to lose their livelihoods would seem cruel, but were inevitable as new ways replaced old. The interdependencies caused by industrialization, where one man’s effort was tied to that of another and then another, were an abstraction. As people left the self-sufficient village farm, where shelter, food, and clothing were simple domestic responsibilities, the idea of losing one’s place in the specialized economy was a danger that few had been exposed to.

Reading The Wealth of Nations as an attack against lobbying from special interest groups and cronyism suggests that for Smith the violence and inefficiencies of rent seeking mercantilist policies cause harm and are unjust. For Smith, rent seeking and state capture by special interest groups is not only inefficient, but uses the (actual) "blood and treasure" of fellow citizens to enrich a few merchants under the false pretence of enriching the country. The Wealth of Nations can therefore be read as a moral condemnation of mercantilist policies: unjust policies are also inefficient policies.

Between economic growth and social development, or the development of civil society A lot of classic social theory links the emergence of modern civil society to economic development.28 Adam Smith in The Wealth of Nations noted that the growth of markets was related to the division of labor in society: as markets expand and firms take advantage of economies of scale, social specialization increases and new social groups (for example, the industrial working class) emerge. The fluidity and open access demanded by modern market economies undermine many traditional forms of social authority and force their replacement with more flexible, voluntary forms of association. The theme of the transformative effects of the expanding division of labor was central to the writings of nineteenth-century thinkers like Karl Marx, Max Weber, and Émile Durkheim.

At the very beginning of The Wealth of Nations, Smith explains the power of specialization in creating prosperity. Ideally, we specialize and get good at something, relying on the opportunity to get the rest of what we desire from others. But if we are all self-interested, why will my neighbor or a stranger help me out, providing the goods I cannot provide for myself? Smith’s answer is a simple one—my neighbor will help me if there’s something in it for my neighbor. Trading—offering something in return for my neighbor’s help—is how we sustain the power of specialization.

Adam Smith affirms that the division of labour is less applicable to agriculture than to manufactures. Smith had in view only the separate manufactory and the separate farm. He has, however, neglected to extend his principle over whole districts and provinces. Nowhere has the division of commercial operations and the confederation of the productive powers greater influence than where every district and every province is in a position to devote itself exclusively, or at least chiefly, to those branches of agricultural production for which they are mostly fitted by nature. In one district corn and hops chiefly thrive, in another vines and fruit, in a third timber production and cattle rearing, etc. If every district is devoted to all these branches of production, it is clear that its labour and its land cannot be nearly so productive as if every separate district were devoted mainly to those branches of production for which it is specially adapted by nature, and as if it exchanged the surplus of its own special products for the surplus produce of those provinces which in the production of other necessaries of life and raw materials possess a natural advantage equally peculiar to themsélves. This division of commercial operations, this confederation of the productive forces occupied in agriculture, can only take place in a country which has attained the greatest development of all branches of manufacturing industry; for in such a country only can a great demand for the greatest variety of products exist, or the demand for the surplus of agricultural productions be so certain and considerable that the producer can feel certain of disposing of any quantity of his surplus produce during this or at least during next year at suitable prices; in such a country only can considerable capital be devoted to speculation — in the produce of the country and holding stocks of it, or great improvements in transport, such as canals and railway systems, lines of steamers, improved roads, be carried out profitably; and only by means of thoroughly good means of transport can every district or province convey the surplus of its peculiar products to all other provinces even to the most distant ones, and procure in return supplies of the peculiar products of the latter. Where everybody supplies himself with what he requires, there is but little opportunity for exchange, and therefore no need for costly facilities transport.

We all have disabilities in some areas. Some people are able to hide their disability or handicap better than others. I feel everyone is special.