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Updated May 4: see also the paper on  Physiocracy
                            and check back daily for more info.

Adam Smith:

1/3 of Wealth to junking mercantilitsm.
Smith to France 1760s, discussing econ a lot with
Quesnay and Turgot.  Quesnay, founder of French Physiocracy,
which was attack against 18th cent French Mercantilism.
Quesnay believed gov't should not manage the economy, which
he believed was governed by natural laws.  Smith picked
up this laissez-faire (government, hands off the economy)
approach from Quesnay.

Smith is concerned with the overall well-being of society.
He believes that the best way to achieve that overall
well-being is to give maximum economic freedom to the individual.
For instance, a baker should be free to set up a bakery in a town
and charge $5 per loaf.  For then, another a second baker, seeing the first baker
get wealthy, will set up a second bakery across the street and charge
$2 per loaf so as to steal baker number one's customers.  And then a third
baker sets up and charges $1 per loaf.

What is happening here is that private greed (bakers trying
to get wealthy) is being transformed
into public well-being (bread at $1 per loaf instead of $5).
Even though each baker is focuses on her own needs,
their collective actions through the competitive market
result in benefit for society as a whole.

Smith's laissez-faire econ is still alive late 20th century.
Specifically the Reagan administration in the 1980s
placed heavy emphasis on government deregulation.
And the prominant economist Milton Friedman, flourishing
in the 1960s and 70s, was a forceful critic of government
intervention in the economy (critic of Keynsian econ).

4. Discuss Adam Smith's pinmaker.

(A) Compare old vs. new way of making pins. What innovative
principle was Smith trumpeting?

þ old --> one person making pins --> make 1 to 10 pins/day.

þ new --> divide pinmaking up into 10 different specialties: person
# 1 unrolls wire from roll; person # 2 cuts wire into 3 in lengths;
person # 3 files point on wire; person # 4 makes heads; person # 5
welds heads onto pin stem, etc.

þ Smith trumpeting division of labor --> each person becomes expert
in one highly focused specialty, becomes very proficient --> major
productivity improvements.

(B) Why does Smith include a discussion of pinmaking in a book
entitled the Wealth of Nations?

þ Because he believes that invoking the principle of the div. of
labor is a key to making nations wealthy.

þ wealth --> means increasing stock of goods in a country --> how
to do? --> make workers more productive --> how to do that? -->
division of labor is a major means of doing that.

(C) Does Smith's pinmaking parable have any relevance to managers
of 21st-century factories and other businesses?

þ Hell, yes! Every business, university, other organization involes

þ Different medical specialists in a hospital; different
departments in a university and different specialties among
professors in any given department; McDonalds -- one person on thr
French Fries, another on the grill, etc.

þ on asembly lines in factory, each person has his specialty.

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