Specialization and Surpluses

Abstract

Just as the advantages of markets cannot be denied or contained, humans in the pursuit of their own self-interest inevitably discovered the advantages of specialization. Our time and effort are perhaps the most precious resources of all, and each of us strives to use our endowed resources most efficiently to produce that which will best sustain us. We naturally gravitate to an economic system that best caters to our desire to use our endowed resources most efficiently.

I have seen a small manufactory (of pins) where ten men only were employed, and where some of them consequently performed two or three distinct operations. But though they were very poor, and therefore but indifferently accommodated with the necessary machinery, they could, when they exerted themselves, make among them about twelve pounds of pins in a day. There are in a pound upwards of four thousand pins of a middling size. Those ten persons, therefore, could make among them upwards of forty-eight thousand pins in a day. Each person, therefore, making a tenth part of forty-eight thousand pins, might be considered as making four thousand eight hundred pins in a day. But if they had all wrought separately and independently, and without any of them having been educated to this peculiar business, they certainly could not each of them have made twenty, perhaps not one pin in a day.

(Adam Smith, On the Causes and Consequences of the Wealth of Nations, Book 1, Section 1.2, 1776)