ADAM SMITH: Concerning the Division of Labor

Back in the old days there weren’t any people called economists. Adam Smith taught moral philosophy, which included economics, but also involved political science, ethics and what we would now call sociology. One of the basic problems of all human societies is how to provide food, shelter and clothing for its members. For Adam Smith, the moral philosopher, this was not only a practical problem but an ethical one as well. In human terms we have two different levels when we consider the material means of living well: The desire of food is limited…but the desire of the conveniences and ornaments seems to have no limit. This is related to the problem Socrates talked about in his republic. Just having enough food to eat is fine if you’re building a city for pigs. But people want delicacies to eat as well as nice things for themselves and their families. They want fancy clothes to wear and comfortable transportation and elegant homes or apartments. The problem is, there’s only so much to go around. How do we decide who gets the best food, the best clothes, the best homes and apartments? How can we most efficiently distribute the goods and services of society? We could turn it over to the politicians. Unfortunately Smith points out that Kings and ministers are themselves always, and without exception, the greatest spendthrifts in society. In short, we can’t trust politicians to stay within the budget. We could let the folks who run the businesses decide. Unfortunately Smith points out that people of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. So that pretty much leaves us ordinary folks to work things out for ourselves. This is just what Adam Smith is proposing. He argues that the propensity to truck, barter, and exchange one thing for another…is common to all men, and to be found in no other race of animals…Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog. But wouldn’t this lead to a dog-eat-dog kind of world with every man for himself? Smith says that, yes, it will be every man for himself but not necessarily a dog-eat-dog society. He asks: who is most qualified to look after your own best interests? The politicians? No. The business owners? No. You are. I am. But we have to provide for our needs in a manner worthy of human beings. Adam Smith believes that in civilized society people stand at all times in need of the cooperation and assistance of great multitudes. In almost every other race of animals each individual, when it is grown up to maturity, is entirely independent, and in its natural state has occasion for the assistance of no other living creature. But man has almost constant occasion for the help of his brethren… Human beings aren’t the only social creatures on the planet. There are bee hives and schools of fish and herds of antelope and colonies of ants. However, human beings have a deep psychological need of one another in order to supply not only our material needs, but our social needs as well. Aristotle correctly points out that human beings are by nature social creatures. Hermits are the exception rather than the rule of human nature. It’s a rare (and often eccentric) individual who will move out to the woods, build his own house, get his own food, and make his own clothes. The rest of us adapt to living in society with other people. And we learn early on that some of us are good at some things, others of us are good at others. Ideally I do what I’m good at and you do what you’re good at. Then we swap what we’ve done: I’ll give you this, if you’ll give me that. Of course we don’t usually do this directly. We use money instead. And Smith is clear that 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. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. This may seem cold and heartless but it’s the most civilized way to live according to Adam Smith. Each of us pursuing his own interests benefits everyone.