
Adam Smith and the Pin Factory - bookofjoe
https://www.johnkay.com/2019/12/18/adam-smith-and-the-pin-factory/
======
CalChris
Reminds me of _I, Pencil_ , although that should be the other way around given
that Smith was writing in 1776 and Read was writing in 1958.

[https://fee.org/resources/i-pencil/](https://fee.org/resources/i-pencil/)

Smith is describing _the division of labour_ in an elegantly and interesting
way. Read uses the same kind framing around a familiar object to say:

 _If you can become aware of the miraculousness which I symbolize, you can
help save the freedom mankind is so unhappily losing._

I'll take Smith.

~~~
dredmorbius
Read's fable is another fabrication specifically created as free-market
propaganda.

[http://crookedtimber.org/2011/04/16/i-pencil-a-product-of-
th...](http://crookedtimber.org/2011/04/16/i-pencil-a-product-of-the-mixed-
economy/)

~~~
deogeo
_I, Pencil_ isn't even an argument that needs rebuttal. It lulls the mind to
sleep with a pleasant story of cooperation, hoping the reader will forget that
government intervention didn't happen because supply chains are too complex
for the market to handle, but because of various market failures and collusion
that happened _in practice_.

Food safety regulation, worker and environmental protections, antitrust laws -
they did not come from theory.

~~~
droitbutch
> but because of various market failures and collusion that happened in
> practice.

No. The pencil is built because of the incentives (read: potential for
profits) for each of the people involved. The lighthouse keeper maintains the
lighthouse to earn a salary. The truck driver earns his/her paycheck based on
milage&tonage hauled. The entrepreneur bought the rights to log the land
because he/she believed he could make a buck. Etc.

I, Pencil is not a story of cooperating for social/feel-goody sake - but
rather for individual incentives all along the way. The million people
involved in making that pencil - none of which knows any of the others.

I, Pencil is a story that shows government intervention is not needed to build
the pencil.

~~~
davidw
It's almost as if... both have a role to play. It's a wonderful illustration
of how disparate people come together to produce something.

At the same time, it's also nice to have some rules and regulations and people
who enforce them so that, say, one of the suppliers tries to start using toxic
ingredients in the pencil's paint, and gets thrown in jail for it.

~~~
roenxi
I was about to write a short post about the lead that I assumed was in early
lead pencils, but it turns out [0] that there never was any lead in lead
pencils and they are humorously mis-named.

[0]
[https://en.wikipedia.org/wiki/Pencil#Discovery_of_graphite_d...](https://en.wikipedia.org/wiki/Pencil#Discovery_of_graphite_deposit)

------
SilasX
So apparently the economists analyzing the pin factory didn't even know how
pin production actually worked? As Kay notes, it doesn't affect their
conclusion, but interesting nonetheless.

There's also a neat dispute on the pin factory analysis I thought I'd share.
Kevin Carson, drawing on work by Steven Marglin, argued that the pin factory
example doesn't prove what Smith thinks it did, because it neglected the
possibility of a single worker batching each step himself and reaping the same
benefits[1]:

>Marglin took Adam Smith's classic example of the division of labor in pin-
making, and stood it on its head. The increased efficiency resulted, not from
the division of labor as such, but from dividing and sequencing the process
into separate tasks in order to reduce set-up time. This could have been
accomplished by a single cottage workman separating the various tasks and then
performing them sequentially (i.e., drawing out the wire for an entire run of
production, then straightening it, then cutting it, etc.).

George Reisman, in a Mises Institute article, disputed these claims [2],
saying that you can't get the enhanced efficiency this way because of set-up
time, tool duplication, the requirement to do it at scale to make a profit:

>If, for example, there were six distinct steps entailed in pin making, then
instead of six workers working side by side continuously,in one factory, each
continuously using a definite tool or piece of equipment, we would have, under
cottage production, six cottage workers each performing a large volume of a
given operation, while the tools and equipment required for the other five
operations remained idle. His output from any given operation would also then
remain idle until he finished that operation and turned to the next operation.

>The clear implication is that under the arrangement of cottage production so
beloved of Carson and Marglin, the six workers would need between them thirty-
six sets of tools and equipment instead of only six such sets and would have
an unnecessarily large volume of partially finished product on hand at any
given time. ...

>In sum, cottage production would entail a tremendous waste ofcapital and be
enormously inefficient, ...

[1]
[http://www.mutualist.org/sitebuildercontent/sitebuilderfiles...](http://www.mutualist.org/sitebuildercontent/sitebuilderfiles/MPE.pdf)
p. 166

[2] [https://cdn.mises.org/20_1_5.pdf](https://cdn.mises.org/20_1_5.pdf) p. 7
in PDF

~~~
aalleavitch
I could make an argument against that:

The factory workers are leaving underutilized what is by far the most useful
tool in the entire process, the human brain.

A cottage worker has sight over the whole process and is directly empowered to
make adjustments to it that increase efficiency or improve the product.

The factory worker is helpless to do anything but repeat a repetitive act as
according to orders, leaving their mind to rot.

~~~
zhte415
Often only the first parts of the book are quoted, most often the famous pin
factory. But this misses the book as a body of work.

An except from later in the book that I think aligns with your point:

> the understandings of the greater part of men are necessarily formed by
> their ordinary employments. The man whose whole life is spent in performing
> a few simple operations, of which the effects are perhaps always the same,
> or very nearly the same, has no occasion to exert his understanding or to
> exercise his invention in finding out expedients for removing difficulties
> which never occur. He naturally loses, therefore, the habit of such
> exertion, and generally becomes as stupid and ignorant as it is possible for
> a human creature to become. The torpor of his mind renders him not only
> incapable of relishing or bearing a part in any rational conversation, but
> of conceiving any generous, noble, or tender sentiment, and consequently of
> forming any just judgment concerning many even of the ordinary duties of
> private life... But in every improved and civilized society this is the
> state into which the labouring poor, that is, the great body of the people,
> must necessarily fall, unless government takes some pains to prevent it.

It's worth noting that Smith's work was a prelude to that of, for example,
Ricardo on the pricing of land (labour/capital) and Marx on ownersip of
land/capital.

------
jdsully
> But does it matter?

I think it matters that the examples are untrue. It's quite easy to craft a
nice story that illustrates a point. The story is more influential than mere
statements because it doubles as proof. Thus the student may come away
thinking he or she not only knows a fact but now that they can prove it. This
will make it much harder to correct if false.

~~~
rossdavidh
Agreed. If you are just trying to explain what division of labor is, then you
can explicitly label your example as fiction. If you are trying to provide
evidence as to how much good it does (and the benefits of division of labor
are controversial, to this day), you need to be using examples (and numbers)
that are true.

~~~
jariel
"(and the benefits of division of labor are controversial, to this day)"

No, the benefits of division of labour are not remotely controversial.

Does everyone at a company do financial planning, marketing, hr, write code
devops?

No, rather software people write/support software.

Finance people do finance.

Marketing people do marketing.

Even in factories - are almost no products these days assembled from start to
finish by the same team.

There might be some cases wherein there's a decision to be had, but generally
no. There's no controversy here.

Finally - Smith's story is still valid. Making pins faster using division of
labour is still probably valid.

The 'truthiness' of the story isn't even the issue - the issue is the
'impact'. A single labourer might be able to do 'all the parts of the pin' by
doing a different task each our of the day. But for more complicated
processes, wherein there's real skill involved ... not so much.

------
rossdavidh
I believe (and I am certainly not the first to think so), that division of
labor was adopted not so much to increase efficiency, as to make labor more
malleable. If each step is very simple, then it takes little time to train a
new worker to it, and so if the one you used to have quits or becomes too
expensive, it's easy to replace them.

Division of labor is, not entirely coincidentally, also often disliked by the
laborer.

~~~
sp332
I think that's more a property of assembly line work in particular, and not
the deeper idea of division of labor.

~~~
rossdavidh
You could be correct on that, but the pin factory example was much like
assembly line, in that each worker only did one step, all day long.

------
dredmorbius
A few observations:

There's impressively _little_ biographic information about Smith, and
certainly very little by way of records from himself (letters, journals),
other than his books, as he ordered _and witnessed_ the destruction of his
personal papers shortly before his death. Much discussion about Smith's life
is conjecture or assembled from remaining fragments, either recollections of
others, or his (very rare) letters. Smith was a poor correspondant, and left
few of the latter, either.

The one near-contemporaneous biography of which I'm aware and familiar is that
of Dugald Stewart, published in 1793:

[http://assets.press.princeton.edu/chapters/s10573.pdf](http://assets.press.princeton.edu/chapters/s10573.pdf)

Some notes on that by Gavin Kennedy, a modern Smith scholar, who died this
past April:

[https://adamsmithslostlegacy.blogspot.com/2014/02/dugald-
ste...](https://adamsmithslostlegacy.blogspot.com/2014/02/dugald-stewart-on-
adam-smiths-lifes-work.html)

On the whole matter of the pin factory: as enduring and (to some) endearing as
the anecdote is, what's struck me is that few discussions of the Industrial
Revolution attribute it to the simple division of labour. Rather, it's the
consequence of _mechanisation_ of production, first through water power, and
following about 1800, steam. You'd think Smith might have been aware of this,
as Newcomen's "atmospheric engine" was 65 years old at the publication of
_Wealth of Nations_ , and James Watt had been working on his own enhancements
since 1763, though true, he didn't release a commercial product until 1775,
the year before _Wealth_ was published.

But Watt, like Smith, was a Scottsman. Surely the two would have know of each
other? After all, both were in Edinburough.

Well, as it turns out, they did. Watt had ... some degree of difficulty ... in
establishing himself professionally in Edinburough (the degree of interference
from the blacksmiths' guild, the Hammermen, is displuted), and gained
stability through a position at the University of Edinburough, in part through
the intercession of Smith himself, in 1757, and the two were friends. Watt
worked on a Newcomen engine at the University, that being the basis of his own
improved designs, beginning in 1763.

The bulk of the commercial significance of steam didn't occur until _after_
the publication of *Wealth of Nations, with about 500 engines existing in
1800, at the expiry of Watt's (previously extended) patent, and after Smith's
own death. But if we're going to credit Smith with so much insight over the
field of economics, it's peculiar to let this specific, and gargantuan, lapse
simply slide.

~~~
astine
Frankly, Smith's attachment to the labor theory of value is a bigger mistake
than this. _Wealth of Nations_ isn't an important book because Adam Smith was
right about everything he wrote about in it but because it constitutes one of
the first really comprehensive treatises on the topic. There is a lot of, for
the time, great insight in that book. The biggest one is that the wealth of a
nation is not measured by the size of its treasury but by the productive
capacity of its economy. That might seem basic to modern people, but it was a
much less well understood concept at the time.

~~~
claudiawerner
Smith's attachment to the LTV was not really misguided - it was arguably the
foundation of thought about value and price. Marx notes that Smith and later
Ricardo had hit on something, but only in the most disorganized and haphazard
way. Marx's theory of value corrects many of the inconsistencies and
ahistorical notes of Smith and Ricardo's theories.

~~~
astine
Smith was attempting the understand the nature of value and where prices came
from and concluded that labor, which in enlightenment thinking was commonly
seen at the source of all value (al la John Locke,) must be the common
denominator. His evidence for this was that price correlated more strongly
with the amount of labor that went into a good than with any other good. (He
has an interesting analysis of the relative merits of rents paid in grain vs
silver to this effect.) Riccardo built on this idea and attempted to show that
labor and price were strongly correlated across the board. Marx later came
along and demonstrated that that correlation didn't exist and that price
didn't match labor quantity at all. However, instead of throwing out theory
after showing how it didn't match evidence, he instead decided that the theory
was totally fine, and instead it was in fact reality that must be wrong.
Marx's approach to this is a bit backwards, IMHO.

~~~
claudiawerner
>Marx later came along and demonstrated that that correlation didn't exist and
that price didn't match labor quantity at all.

The full theory of prices is only explained by Marx in the context of
competing capitals, and the full development of M-C-M', but Marx does clearly
accord correspondance between values and prices, even if they're not the same
thing, and they're at different levels of abstraction. Marx does offer an
argument for _why_ labour is taken as the substance of value (and why socially
necessary labour time is its magnitude) - and it's all developed further in
the analysis of money. Yes, "labour" doesn't correlate with price in Marx's
schema, but the "amount" of _abstract labour_ , determined by the socially
necessary labour time required to reproduce a commodity, does.

Shaikh and Tonak show that in the case of freely reproducible commodities,
excluding things such as natural resources and land (covered in the theory of
rent instead), some empirical research does show correspondance between
labour-values and prices in subsets of the economy where it can be measured.

Marx's theory of exploitation requires a correspondance between wages (as
money) and value (the product of the labour process). It wasn't as though Marx
saw an inconsistency and ran with the theory anyway. Unfortunately for his
detractors, the same arguments since Bohm-Bawerk have been repeated since they
were made despite adequate refutation by those who hold to Marx's "LTV".

~~~
astine
" _Marx does offer an argument for why labour is taken as the substance of
value_ "

The problem here is that we're talking about Smith's LTV and not Marx's. Marx
may provide his own reasons for believing in the LTV but he disproved Smith's.
So the fact that Marx had these reasons are irrelevant if we're trying to
justify Smith's adherence.

Though, it is worth pointing out Marx did develop his LTV in part by reading
the likes of Smith and Ricardo. The reasons he gives for the LTV in Capital
are absent in A Contribution to the Critique of Political Economy in which he
merely takes LTV as a given. Actually, that's not quite right, he quotes
Smith, Ricardo, and Franklin among others in support of LTV so it's my
conjecture that he in fact _did_ see an inconsistency and run with the theory
anyway. It was only later in his career that he felt the need to justify that
decision.

~~~
claudiawerner
>Actually, that's not quite right, he quotes Smith, Ricardo, and Franklin
among others in support of LTV so it's my conjecture that he in fact did see
an inconsistency and run with the theory anyway.

Of course, but his quotation is both praising and damning; he believed that he
resolved the issue with the dual character of labour power, a qualitatively
special commodity, to preserve the integrity of the theory, which previously
failed to explain the origin of profits in a capitalist economy. He takes his
critique of political economy from the rare gems of insight developed
previously (by Smith and Ricardo). His criticism was that the theory as
developed in classical political economy _is_ inconsistent, but not
inconsistent in the dimension you earlier pointed out - that prices do not
match up to labour values. He took that part for granted.

Smith's work has holes, at least according to Marx, but the insight he
developed, labour being the substance of value (more precisely, exchange
value) was crucial to Marx's development of the theory. My point is that the
theories can't be lumped together, since Marx presents such a radical break
from Ricardo (and thereby Smith).

------
minikites
[https://www.goodreads.com/book/show/23206098-who-cooked-
adam...](https://www.goodreads.com/book/show/23206098-who-cooked-adam-smith-s-
dinner)

>When Adam Smith proclaimed that all our actions were motivated by self-
interest and the world turned because of financial gain he laid the
foundations for 'economic man'. Selfish and cynical, 'economic man' has
dominated our thinking ever since, the ugly rational heart of modern day
capitalism. But every night Adam Smith's mother served him his dinner, not out
of self-interest, but out of love.

>Even today, the unpaid work of mothering, caring, cleaning and cooking is not
part of our economic models. All over the world, there are economists who
believe that if women are paid less, then that's because their labour is worth
less.

~~~
zozbot234
> ...Adam Smith proclaimed that all our actions were motivated by self-
> interest and the world turned because of financial gain

Funny that someone should write that, because Smith wrote a book called
_Theory of the Moral Sentiments_ in which he argued the exact opposite.

------
caiocaiocaio
Wealth Of Nations is a weird book to read. Where I grew up, people worshipped
it and generally considered it to be the second greatest book of all time,
after the Bible. I ended up reading both in my thirties, and two things
occurred to me:

1) It's very obvious that none of the adults I knew as a child had read more
than a few isolated quotes from Wealth of Nations or the Bible. None of them
had even the slightest idea what sort of content either of those books
contained, or what they were like in tone or in substance. 99% of what I grew
up hearing about both books was completely made up.

2) Wealth of Nations presents a very chipper and optimistic sense of
entrepreneurship that 99% of people in the world of business today would
consider naive at best. If Adam Smith had written that book today, he would be
laughing stock.

~~~
bluGill
Most books written more than 100 years ago were poor by today's standards.
Editors didn't really do a good job (did the job even exist?), and it shows.
It would be like publishing someone on hackernews - there might be good
insight, but the grammar, prose, and spelling leave a lot to be desired.

~~~
davidivadavid
Except that of the books published 100 years ago, the ones that stood the test
of time and are still published today are far more likely to be of high
quality by today's standard, while most books published in any given year will
inevitably be forgotten.

Did editors exist 100 years ago? Erm, yes they did? According to Merriam
Webster, the term was used in its current acception in 1649. And the job done
by editors could arguably have existed for a much longer time.

------
mempko
Smith's pin factory example was taken straight from old muslim philosophy of
the Caliphate. Turns out there is no such thing as 'western civilization'
since most ideas are remixes, including cross cultural ones.

~~~
krapp
>Turns out there is no such thing as 'western civilization' since most ideas
are remixes, including cross cultural ones.

There's no such thing as "pure" Western civilization, nor is there such a
thing as a "pure" culture, in the sense of being uninfluenced by lateral
cultural transfer. Even Japan, which is often held up as an example of a
"unique and homogeneous" culture is deeply influenced by its neighbors
(particularly Imperial China) and centuries of interaction with the West.

But in terms of broad influences - Christianity, Greek and Roman influence,
Shakespeare, common linguistic and political roots, etc, I think it's clear
that "Western civilization" does at least exist in a broad sense.

~~~
earthboundkid
If you want to be a splitter rather than a lumper, that’s fine, but there’s no
reasonable division that separate “Muslims” from “The West”.

There just is no historical separation between our societies for the obvious
reason that they’re geographically adjacent and have been in continuous
contact, unlike say “The West” and India or China or the Americas.

European philosophy was explicitly founded when medieval universities were set
up like Islamic schools and teaching Averoes and Avicenna. Before that,
Aristotle and Plato had been all but lost to the Latins. Chemistry is from
“al-quemi” and algebra is “al-jebra”.

It’s really only post-fall of the Ottoman Empire that you see even a notional
sense that our civilizations are disconnected. Splitting them now is just pro-
war propaganda being laundered through bad history.

~~~
krapp
I don't necessarily want to be either - I consider culture to be a continuum
rather than a fixed state.

And you're right, Islam shares a common heritage with Christianity and Judaism
(despite being conspicuously absent from the "Judeo-Christian" moniker) so it
makes no sense to consider the influence of only two.

~~~
earthboundkid
It’s not just that they’re Abrahamic. “Western civilization” if it means
anything means “Abrahamic religion plus Greek philosophy” as the two main
traditional schools of thought. India and China don’t have that. Islam does!
They translated the Greeks and introduced it to the Latin speakers between the
fall of Rome and the Renaissance. It would be like cutting Augustine out of
Western civilization because he lived in Tunisia.

