Insight to the Wealth of Nations: Chapters One through Three

Chapter 1:

Division of Labor


            In chapter one, it is very apparent that Smith is pro-capital, and anti-agriculture, which heavily contributes to his ideas surrounding what a rich country should look like. He argued that “the greatest improvement in the productive powers of labor, and the greater part of the skill, dexterity, and judgment with which it is anywhere directed, or applied, seem to have been the effects of the division of labor.”[1] For Smith the “improvement in the productive powers of labor” could only be achieved through manufacturing. This argument was mainly formed by Smiths disagreement with Physiocratic Theory. Given it was the 18th century, where feudal agriculture systems were still very much alive, Physiocratic scholars believed that “… the wealth of nations was derived solely from agriculture.”[2] While the Physiocrats were more concerned with the wealth of a nation in the form only a few people having money, Smith was concerned with the labor which could produce material things. If producing more material things caused greater wealth through the division of labor, agriculture could simply not comply. Smith argued that “the nature of agriculture, indeed, does not admit of so many subdivisions of labor, nor of so complete a separation of one business from another, as manufacturers.”[3] In other words, agriculture naturally was less productive because it allowed less division of labor. Smith was able to see the division of labor as a causal mechanism to producing a wealthier nation, through a nontraditional, nonfeudal lens.


Chapter 2:

The Principle Which Gives Occasion to the Division of Labor


In chapter two, Smith transitions from explaining what the division of labor is and the advantages that are derived from it, to where it essentially comes from. According to Smith, the divisions on labor is ultimately a result of, “the propensity to truck, barter, and exchange one thing for another.”[4] Smith goes on and makes a very interesting observation about how this principle (natural propensity) is fabricated by a self-interested behavior in society. He argues, “he will be more likely to prevail if he can interest self-love in his favor, and show them that it is for their own self-advantage to do for him what he requires of them.”[5] This self-interestedness causes diversity in types of goods that are made in a society. With a lot of different goods, natural trade forms as people supply their wants for goods that they themselves do not make. Therefore, the principle provides them with the necessities through mutual benefit. The principle, therefore, gives occasion to the division of labor.

Smith depicts his argument through an example of a tribe of hunter or shepherds. Within this tribe, there is a person whose occupation specializes in bow and arrow making. This person exchanges his bows and arrows for the cattle or vision that others in the community have. Although he could hunt with the bows and arrows he makes, it is probable that he would catch a little to no vision or cattle. Therefore, it’s in his own self-interest to dedicate his time to specialization of his own occupation, and exchange for the optimal amount of cattle and vision that he may have no otherwise gotten. “But without the disposition to truck, barter, and exchange, every man must have procured to himself every necessary and conveniency of life which he wanted.”[6] He argues that without having the ability to truck, barter and trade people would be forced to make everything one would need to be satisfied. Instead, with division of labor, people could continue to specialize and benefit from trucking, bartering, and trading with one another.


Chapter 3:

That the Division of Labor is Limited by the Extend of the Market

Although in chapters one and two Smith introduced the idea of the division of labor and where it comes from, chapter three introduces how to get the division of labor. He begins the chapter by saying, “as it is the power of exchanging that gives occasion to the division of labor, so the extent of this division must always be limited by the extent of that power, or in other words, by the extent of the market.” [7] Here, Smith introduces the idea of markets facilitating the division of labor. Through self-interest, laborers are going to specialize in markets that most benefit them. As more people gain benefit through the specialization in their own fields, markets would continue to grow and advance. Smith almost excitedly gives examples of what advancement could look like as markets would continue to expand throughout an entire country. Even so, the point remains that the division of labor truly contributes to the wealth of nations as specialization through markets enhances the life of anyone contributes to it

[1] Stigler, George J. “Selections from The Wealth of Nations” pg.1

[2] “Physiocrats.” Physiocrats – New World Encyclopedia. N.p., n.d. Web.

[3] Stigler, George J. “Selections from The Wealth of Nations” pg.3

[4] Stigler, George J. “Selections from The Wealth of Nations” pg.10

[5] Stigler, George J. “Selections from The Wealth of Nations” pg.10

[6] Stigler, George J. “Selections from The Wealth of Nations.” pg.13

[7] Stigler, George J. “Selections from The Wealth of Nations pg.14

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