Posted by: erichosemann | December 15, 2009

TWN: Book 1 Chapter 2

Chapter 2  Of the Principle Which Gives Occasion to the Division of Labour

22, 1 The division of labor is not the result of conscious human design.  It is the result of the human propensity to “truck, barter, and exchange.”

22, 2 Whether the propensity to truck, barter, and exchange one thing for another is an irreducible component of human nature or whether it grew from the “faculties of reason and speech” is of no concern to Smith’s point.  He considers this propensity a universal characteristic and one that differentiates humankind from all other animals.

Smith uses two greyhounds in pursuit of a rabbit as an example of apparent cooperation in the animal world, but notes that it is brought about by the accident of shared passion and not the design of the greyhounds; their movements while chasing the rabbit are not determined by conscious agreement and contract.  There is no binding contract in which they trade one good for another.  Smith then adds that “nobody ever saw one animal by its gestures and natural cries signify to another, this is mine, that is yours; I am willing to give this for that.”

[Note: In the edition I’m reading, this sentence carries the pithy footnote: “It is by no means clear what object there could be in exchanging one bone for another.”  This is a rather unimaginative remark, and it looks doubly so in light of the story of the man who traded a paperclip for a house.  My point being that exchange does not need the blessing of a disinterested third party to be mutually beneficial.  Maybe that was the editor’s attempt at humor.]

Animals, because they do not barter and exchange, must acquire things by pestering their fellows or their masters.   Humans employ this strategy too, but are so dependent upon such a vast multitude of other people that they cannot do so all the time.

A more efficient strategy of acquisition is to appeal to the self interest of the other party: “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.”

24, 1 Exchange brings about the division of labor because those individuals more adept at doing or making certain things can use the surplus of their labor as a medium of exchange.

25, 1 Thus the division of labor shapes us more than our individual talents shape it.  Smith cites the differences between a “common street porter” and a “philosopher” as an example.  As children, the philosopher and the porter were on many accounts the same.  These similarities diminish as they mature and begin to exercise their natural abilities repeatedly in a single field.

Without the propensity to truck, barter, and exchange, each man would be responsible for the procurement and production of all his necessities; there would be no opportunity for specialization and thus no opportunity for the development of individual identity.

26, 1 Smith ends the chapter comparing variations among dog breeds with variations among people.  While the differences between mastiffs and greyhounds, and those between spaniels and shepherd dogs, are greater in magnitude than those between a porter and a philosopher, there is no medium through which the dogs can take advantage of their different strengths.  A sleek greyhound has no way of turning the strength of the mastiff to its advantage.  Humankind maximizes the utility of individual talents and proclivities through its propensity to truck, barter, and exchange.  The porter can, through exchange, turn the intellect of the philosopher to his advantage.

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