The Flute Factory: An Empirical Measurement of the Effect of the Division of Labor on Productivity and Production Cost

Article excerpt

The positive effect of the division of labor on output and production cost is one of the most fundamental assumptions in economics. The foundation on which this assumption is built rests heavily upon Adam Smith's Wealth of Nations (1776) estimation of the effect that the division of labor has on output per worker in an 18th century pin factory. Charles Babbage's book, On the Economy of Machinery and Manufactures (1832), substantially contributes to Smith's pin factory estimation by projecting the effect that the division of labor has on pin production cost in a 19th century pin factory. This paper will re-examine Smith and Babbage's pin factory estimations and re-structure and re-apply those estimations to the contemporary flute factory. In doing so, this paper will improve upon Adam Smith and Charles Babbage's estimation of the effect that the division of labor has on output per worker and production cost by empirically measuring that effect - demonstrating a positive relationship between the division of labor and productivity that has always been assumed, but never observed.

I. The Pin Factory

The notion of the division of labor was primarily introduced by Adam Smith in Wealth of Nations (1776) through a description of the different tasks performed when manufacturing a pin:

"[In] the trade of a pin-maker . . . one man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations; to put it on, is a peculiar business, to whiten the pins is another; it is even a trade in itself to put them into the paper; and the important business of making a pin is, in this manner, divided into about eighteen distinct operations, which, in some manufactories, are all performed by distinct hands, though in others the same man will sometimes perform two or three of them."(1)

In the quote above, the eighteen step pin production process is broken down into nine individual tasks performed by individual workers. This quote also demonstrates that, because the number of tasks performed by the individual depends upon the production process used by the manufacturer, the extent of the division of labor can vary between factories. In making these specific observations, Smith defines "division of labor" as the separation of one particular task into a series of component tasks, with these tasks being divided among two or more individuals. This definition of "division of labor" will be used in the following empirical observation of the flute factory.

According to Smith, the pin factory he observed was one where, "ten men only were employed, and where some of them consequently performed two or three distinct operations."(2) To demonstrate the consequence of the division of labor, therefore, Smith compared the output of each specialized factory worker to what he hypothesized the output would be of one of those workers producing pins by him/herself.

"Each person . . . making a tenth part of forty-eight thousand pins, might be considered as making four thousand eight hundred pins a day. But if they had all wrought separately and independently, and without any of them having been educated to this particular business, they certainly could not each have made twenty, perhaps not one pin a day."(3)

This comparison demonstrates that Smith measured productivity in terms of output per worker, in individual units of a good, to draw his conclusion about the effect of the division of labor. Smith's method of measurement will also be used in this study's analysis of the effect of the division of labor on output in flute manufacturing.

In his book, On the Economy of Machinery and Manufactures, Charles Babbage uses personal observations of a pin factory to further Smith's division of labor hypotheses. According to Babbage, the division of labor not only increases output per worker but also provides an economy of "skill" or "force" to the manufacturing process. …