– November 24, 2018
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As I write this, on Thanksgiving Day in the United States, I have had one piece of remarkably delicious pumpkin pie. We also feed pumpkin to our dogs, Murphy and Skippy, as a supplement because it is full of vitamins and fiber, and it’s delicious even just as pure pumpkin.

It costs us about $1 per day to feed our dogs the canned pumpkin. How can we do that? The answer is division of labor.

Division of Labor

Adam Smith famously made two assertions in the first three chapters of Wealth of Nations (1776). The first was that both the source and meaning of wealth is access by people to goods and services, and that the source of that is what he called “division of labor.” The second claim is important enough to be the title of chapter 3: “That the Division of Labor is Limited by the Extent of the Market.”

Smith summarized these two conclusions in his deeply insightful discussion of the “woolen coat”:

Observe the accommodation of the most common artificer or day-labourer in a civilized and thriving country, and you will perceive that the number of people of whose industry a part, though but a small part, has been employed in procuring him this accommodation, exceeds all computation. The woolen coat, for example, which covers the day-labourer, as coarse and rough as it may appear, is the produce of the joint labour of a great multitude of workmen. The shepherd, the sorter of the wool, the wool-comber or carder, the dyer, the scribbler, the spinner, the weaver, the fuller, the dresser, with many others, must all join their different arts in order to complete even this homely production. How many merchants and carriers, besides, must have been employed in transporting the materials from some of those workmen to others who often live in a very distant part of the country! how much commerce and navigation in particular, how many ship-builders, sailors, sail-makers, rope-makers, must have been employed in order to bring together the different drugs made use of by the dyer, which often come from the remotest corners of the world! What a variety of labour too is necessary in order to produce the tools of the meanest of those workmen! To say nothing of such complicated machines as the ship of the sailor, the mill of the fuller, or even the loom of the weaver, let us consider only what a variety of labour is requisite in order to form that very simple machine, the shears with which the shepherd clips the wool. The miner, the builder of the furnace for smelting the ore, the feller of the timber, the burner of the charcoal to be made use of in the smelting-house, the brick-maker, the brick-layer, the workmen who attend the furnace, the mill-wright, the forger, the smith, must all of them join their different arts in order to produce them. (Smith, 1776, book I)

The “day-labourer,” a poor working man, can take advantage of the fact that many people have participated in a process that none of them fully understand, and of which the day-labourer himself may be totally unaware. The plans and purposes of thousands of people are coordinated, and the results organized, even though the activities are widely separated in space and none of the participants know each other personally.

But there is a third, more subtle but clearly articulated, claim that Smith makes about the division of labor: It’s portable, and takes the form economists call a “non-linearity.” Others might just call it the “work ethic.” It goes like this: the more you work on something, the more you know. The more you know, the better you can apply the accumulated techniques and tools that work in the particular local circumstances in which you find yourself.

The surprising thing about this third claim is that it means the division of labor can be cultivated in a setting with no history of prosperity, and highly productive specialization can be fostered even in people who have no special knowledge or abilities at the outset.

In a surprisingly self-aware — and frankly, egalitarian — observation, Smith compares the “philosopher,” the person held in highest esteem by the Enlightenment, and the “street porter,” a person among the most “lumpen” (ragged, slow-witted) of what Marx would later call the “lumpenproletariat.” Smith noted that, while the philosopher might like to think of him- or herself as being innately superior in some way, much of the apparent difference is simply the result of extended application of study and practice, made possible by division of labor:

The difference of natural talents in different men, is, in reality, much less than we are aware of; and the very different genius which appears to distinguish men of different professions, when grown up to maturity, is not upon many occasions so much the cause, as the effect of the division of labour. The difference between the most dissimilar characters, between a philosopher and a common street porter, for example, seems to arise not so much from nature, as from habit, custom, and education. When they came in to the world, and for the first six or eight years of their existence, they were, perhaps, very much alike, and neither their parents nor play-fellows could perceive any remarkable difference. About that age, or soon after, they come to be employed in very different occupations. The difference of talents comes then to be taken notice of, and widens by degrees, till at last the vanity of the philosopher is willing to acknowledge scarce any resemblance. 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. All must have had the same duties to perform, and the same work to do, and there could have been no such difference of employment as could alone give occasion to any great difference of talents.

As it is this disposition which forms that difference of talents, so remarkable among men of different professions, so it is this same disposition which renders that difference useful. Many tribes of animals, acknowledged to be all of the same species, derive from nature a much more remarkable distinction of genius, than what, antecedent to custom and education, appears to take place among men. By nature a philosopher is not in genius and disposition half so different from a street porter, as a mastiff is from a grey-hound, or a grey-hound from a spaniel, or this last from a shepherd’s dog. Those different tribes of animals, however, though all of the same species are of scarce any use to one another. The strength of the mastiff is not in the least supported either by the swiftness of the greyhound, or by the sagacity of the spaniel, or by the docility of the shepherd’s dog. The effects of those different geniuses and talents, for want of the power or disposition to barter and exchange, cannot be brought into a common stock, and do not in the least contribute to the better accommodation and conveniency of the species. Each animal is still obliged to support and defend itself, separately and independently, and derives no sort of advantage from that variety of talents with which nature has distinguished its fellows. Among men, on the contrary, the most dissimilar geniuses are of use to one another; the different produces of their respective talents, by the general disposition to truck, barter, and exchange, being brought, as it were, into a common stock, where every man may purchase whatever part of the produce of other men’s talents he has occasion for. (Smith, 1776, book I)

In other words, the mastiff’s muscle does not depend on the spaniel’s sagacity; they are just genetically different, and that’s that. But the people who are now the philosopher and street porter were once very similar, and in fact nearly indistinguishable. One developed the talent of “being a philosopher.” That development depended on a system where others did all the other things — making food and clothing, providing housing and security, and so on — that made it possible for the philosopher to study for decades.

Of course, there are innate differences in talent, mental or physical agility, and so on. Smith’s point is that we tend to overemphasize these, and to attribute differences in status to intrinsic merit when a substantial portion of the eventual differences in mature citizens is due to the accumulated effect of many —perhaps 10,000? — hours spent in developing abilities.

Smith does not conclude that therefore these differences are morally or substantively arbitrary, though. In fact, the very stability and prosperity of the system rests on acting on the promised entitlement to the benefits of success.

Smith’s division of labor is a hopeful doctrine because even a person with limited advantages, or a region or nation with no apparent comparative advantage, can with hard work develop an absolute advantage by exploiting the opportunities afforded by division of labor. Other people will work to provide all the things you need to go off and specialize, even if the niche your specialization occupies is very narrow, provided the “extent of the market” is large enough to support that niche.

Pumpkins

Pumpkins are a specialized kind of gourd, or squash. The first “pumpkin pie” was apparently obtained by cutting off the top of a pumpkin, removing the stringy insides and seeds, and then pouring in a mixture of spices, honey, and milk. Put that punkin in the still-hot ashes of a fire, put more ashes around it, and in two or three hours, it’s yum time!

You can grow pumpkins almost anywhere. But more than half of the world’s pumpkin production comes from one state: Illinois. And most of the production in Illinois is centered in an area extending just a few dozen miles from Peoria. Why? Because Peoria is the “philosopher” of the pumpkin patch world; the rest of us are just street porters.

According to the University of Illinois extension service:

Eighty percent of all the pumpkins produced commercially in the U.S. are produced within a 90-mile radius of Peoria, Illinois. Most of those pumpkins are grown for processing into canned pumpkins. Ninety-five percent of the pumpkins processed in the United States are grown in Illinois. Morton, Illinois just 10 miles southeast of Peoria calls itself the `Pumpkin Capital of the World.’

Economist Timothy Taylor gives a clear explanation for why this small area has such a dominant position:

Weather and soil are part of the advantage, but it seems unlikely that the area around Peoria is dramatically distinctive for those reasons alone. This also seems to be a case where an area got a head-start in a certain industry, established economies of scale and expertise, and has thus continued to keep a lead. The Illinois Farm Bureau writes: “Illinois earns the top rank for several reasons. Pumpkins grow well in its climate and in certain soil types. And in the 1920s, a pumpkin processing industry was established in Illinois, Babadoost [a professor at the University of Illinois] says. Decades of experience and dedicated research help Illinois maintain its edge in pumpkin production.” According to one report, Libby’s Pumpkin is “the supplier of more than 85 percent of the world’s canned pumpkin.”

So the area around Peoria is well-suited for pumpkin growing. But the experience of making maximal use of the local conditions, and developing infrastructure and specialized techniques for planting, managing, and harvesting, is very powerful. The area around Morton, Illinois (the “pumpkin capital of the world”) produces more than 100 million pounds of pumpkin each year.

We are thankful for many things, and that’s appropriate. We are not always as thankful as we should be for division of labor, however. This Thanksgiving, I tried to make my pumpkin eating more gratefully aware, a testament to Smith’s great principle.

(Thanks to Warren Smith, of Washington, North Carolina, for the suggestion!)

 
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Michael Munger

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Michael Munger is Professor of Economics at Duke University and Senior Fellow of the American Institute for Economic Research. His degrees are from Davidson College, Washingon University in St. Louis, and Washington University. 

Munger is the author of Is Capitalism Sustainable? (AIER, 2019)
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