The Scottish Enlightenment: Economics and the Division of Labour

Context of The Scottish Enlightenment Anthology

• Bibliographic Information: This anthology, titled The Scottish Enlightenment: An Anthology, is edited and introduced by Alexander Broadie. It was first published as a Canongate Classic in 1997 by Canongate Books Ltd, Edinburgh.

• Scope of the Work: The anthology covers a wide range of intellectual disciplines characteristic of the Scottish Enlightenment, including:

  • Human Nature: Featuring David Hume, Dugald Stewart, and Thomas Reid.

  • Ethics: Featuring Francis Hutcheson, David Hume, Adam Smith, and Hugh Blair.

  • Aesthetics: Featuring Francis Hutcheson, David Hume, and Thomas Reid.

  • Religion: Featuring Adam Smith, David Hume, George Campbell, Hugh Blair, and Henry Home (Lord Kames).

  • Economics: Featuring Sir James Steuart and Adam Smith.

Sir James Steuart: Principles of Political Oeconomy

• The Transition of Trade: Steuart observes that nations initially contented themselves with their own productions, leading to less intimate connections. Early trade was characterized by the exchange of consumable commodities, which did not greatly interest the state as consumption was equal on both sides without a balance.

• The Introduction of Precious Metals: Once precious metals became an object of commerce and an "universal equivalent for everything," they became the measure of power between nations. Consequently, acquiring or preserving a proportional quantity of these metals became an object of extreme importance to prudent nations.

• The Balance of Trade: Steuart argues that well-conducted foreign trade draws wealth from other nations. However, he warns that this benefit can stop or reverse. Prudence must be exercised to prevent a nation enriched by commerce from blindly continuing trade when the balance is against her, which would lead to the same inconveniences previously experienced by her less prosperous neighbors.

Adam Smith: The Division of Labour and Economic Growth

• The Central Theme: The first sentence of The Wealth of Nations refers to the improvement in the productive power of labour, signaling that economic growth is a major theme. Smith posits that the division of labour is the essential prerequisite for any degree of economic growth.

• The Pin-Maker Example: Smith utilizes the famous example of a pin-making factory to illustrate the efficiency of divided labour:

  • A single workman, uneducated in the business and without proper machinery, could scarcely make one pin a day and certainly not more than $20$.

  • When the task is divided into about $18$ distinct operations (drawing the wire, straightening it, cutting it, pointing it, grinding the top for the head, etc.), a small manufactory of $10$ men can produce upwards of $48,000$ pins in a day.

  • This equates to $4,800$ pins per person, which is at least the $240$-th (and perhaps the $4,800$-th) part of what they could perform individually.

Advantages of the Division of Labour

• Increase in Dexterity: Repetitiveness of a single, simple task increases the workman's skill and speed. Smith cites nail-makers: a common smith might make $200$ to $300$ bad nails a day, while boys under $20$ who only make nails can produce upwards of $2,300$ per day.

• Saving of Time: It eliminates the time lost in passing from one species of work to another or moving between different locations and tools. Smith notes that workers often "saunter" or trifle when switching tasks, leading to a habit of indolent application.

• Invention of Machinery: Division of labour simplifies tasks, making it easier to identify how to mechanize them. Many improvements in machinery were originally inventions of common workmen seeking to ease their own labor.

  • Example: In early fire-engines, a boy tied a string from a valve handle to another part of the machine so the valve would open/shut automatically, allowing him to play with companions.

  • The Role of Philosophers: Not all machinery comes from workmen. Some is invented by "philosophers or men of speculation" (like James Watt), whose trade is to observe and combine the powers of distant and dissimilar objects.

Constraints on the Division of Labour

• Nature of the Industry: Agriculture does not admit as much subdivision as manufacture. The seasonal nature of farming (ploughing, sowing, reaping) means the same man often performs multiple tasks. This is why the improvement of productive power in agriculture does not always keep pace with manufactures.

• Extent of the Market: The power of exchanging gives rise to the division of labour; therefore, the market size limits that division.

  • In the Highlands of Scotland, houses are so scattered that a farmer must be his own butcher, baker, and brewer.

  • A specialized trade like a "nailer" cannot exist in remote areas because a single person making $1,000$ nails a day ($300,000$ a year) would find no market for even $1,000$ nails annually.

• The Role of Water-Carriage: Navigation opens more extensive markets than land-carriage.

  • Logistics Comparison: Eight men and a ship can carry $200$ tons of goods between London and Leith in the same time it takes $50$ broad-wheeled wagons, $100$ men, and $400$ horses to carry the same weight.

  • Historical progress of civilization followed the Mediterranean Sea, the Nile in Egypt, the Ganges in Bengal, and the great rivers/canals of China because of the ease of inland navigation.

The Human Propensity to Exchange

• Natural Propensity: The division of labour arises from a human propensity to "truck, barter, and exchange one thing for another." Smith questions whether this is an original principle or a consequence of reason and speech.

• Distinction from Animals: Animals do not engage in contracts. Two greyhounds chasing a hare act in concurrence of passion, not by contract. No dog makes a "fair and deliberate exchange of one bone for another."

• Appeal to Self-Love: In civilized society, man requires the cooperation of multitudes. He cannot rely on benevolence alone. Smith states: "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest."

• Talent as an Effect: Smith argues that the difference in natural talents (e.g., between a philosopher and a street porter) is more an effect of the division of labour and education than a cause. Without exchange, every man would have to perform the same duties, resulting in no difference of talent.

The Origin and Use of Money

• The Double Coincidence of Wants: Early exchange was "clogged." If a butcher has meat and a baker wants it but has only bread which the butcher already has, no exchange occurs. To avoid this, men began keeping a quantity of a commodity few would refuse.

• Historical Media of Exchange:

  • Cattle (Homer mentions Diomede's armor cost $9$ oxen; Glaucus's cost $100$).

  • Salt (Abyssinia).

  • Shells (India).

  • Dried cod (Newfoundland).

  • Tobacco (Virginia).

  • Sugar (West Indies).

  • Nails (a village in Scotland).

• Preference for Metals: Metals are durable and divisible without loss. Early metals were used in "rude bars" without stamps (e.g., Romans using copper until Servius Tullius).

• The Need for Coinage: Coinage solved the trouble of weighing and "assaying" (testing fineness) metals. Mints were established to affix public stamps.

• Devaluation of Currency: Princes and sovereign states (motivated by "avarice and injustice") gradually diminished the real quantity of metal in coins to pay debts with less silver.

  • The Roman pound was reduced to the $24$-th part of its value.

  • The English pound and penny are roughly a third of their original value.

  • The Scots pound is about a $36$-th and the French about a $66$-th of their original values.

The Concept of Value

• Value in Use: The utility of an object (e.g., water, which is extremely useful but has little exchange value).

• Value in Exchange: The power of purchasing other goods (e.g., a diamond, which has little use but enormous exchange value).

• Research Goals: Smith intends to investigate:

  1. The real measure of exchangeable value (real price).

  2. The component parts of this price.

  3. The causes that hinder market price from coinciding with natural price.

Moral and Social Implications of the Division of Labour

• Intellectual Decay: Smith warns that performing a few simple, repetitive operations causes a man to lose the habit of mental exertion. He may become "as stupid and ignorant as it is possible for a human creature to become."

• Loss of Virtue: The stationary life corrupts "intellectual, social, and martial virtues." A worker in this state cannot judge the interests of the country or defend it in war.

• State Intervention: In every civilized society, the labouring poor will fall into this state "unless government takes some pains to prevent it."

• Education as Solution: Smith advocates for state-provided education in reading, writing, and arithmetic to counter the mind-numbing effects of specialized labor. He emphasizes that an economic system that stunts the minds of its workers is morally unacceptable.

• Integration with Ethics: Smith's lectures on economics were part of his course on moral philosophy at the University of Glasgow. He maintains that economic activity must have a sound moral basis.

• Interpretation of Sympathy: Broadie clarifies that Smith's reliance on self-interest in economics does not contradict his theory of "sympathy" in The Theory of Moral Sentiments. In that work, sympathy is a technical psychological term for social cohesiveness and an analytical tool for moral judgment, not merely a motive for human acts.