The Labor Theory of Adam Smith - Assignment Example

Topic: Markets and Society: Why is Smith’s work on the division of labour still of interest after almost 250 years? Division of labor has been considered as an improvement in the systematization of production. It categorizes the skills of human resources and distributed them in accordance to their absorptive capacity in the performance of their corporate functions. Get to Know Smith & Influence Division of labour has been theorized by Adam’s Smith which aided in the advancement for manufacturers, industries, and agri-industrial plantation to meet the qualifications inherent in economic relations focused on supply and demand. But who is Smith? Adam Smith contributes to the Scottish Enlightenment in the 18th century. He was born in born in 1723 in Kirkcaldy, Fife, Scotland and later enjoyed scholarship at the University of Glasgow (Smith, 1994). At 14, he continued his studies at Balliol College at Oxford (Smith, 1994). He became a professor at the University of Glasgow teaching logic course in 1751 and extolled later as the chair of moral philosophy in 1752 (Smith, 1994). Some of Smith’s academic studies were inked in his work of Theory of Moral Sentiments publicized in 1759 (Smith, 1994). In 1764, Smith decided to leave the academe and tutor the Duke of Buccleuch. Only after he retired whence he started writing the book on Wealth of Nations. Smith remained single all his life and died in Edinburgh in 1790 (Henderson, 2007). Although Smith was considered as economist by heart, he was primarily a philosopher and his teachings are inspired by philosophy. Since the theory is philosophically explicated, the contemporary economic disciplined remained applicable up to these days (Smith, 1994). Smith is considered by economists worldwide as the “father of economics”. He wrote the most integrated and influential book “An Inquiry into the Nature and Causes of the Wealth of Nations” in 1776 (Smith, 1994). The book is considered as still the most quintessential writing on business and economic science. Smith however focused his explication about the economic gaps between rich and poor nations. Crowley and Sobel (2010) described that this book have “have a broad applicability, and are especially relevant to contemporary management (p. 1).” Smith was the first author who viewed the significance of the specialization and division of labor as primary source of productivity and the principle of “invisible hand” to illustrate the potential tendency of self-interest-motivated individuals to be directed to undertake works and collaborative activities in accordance to free market system and based on legislated economic and market policies (Smith, 1994; Henderson, 2007). Division of Labor & Contemporary Implications The increase of population, peoples’ migration, and increasing needs of urbanization found division of labor as mechanism to address problems on scarcity of goods and needs for trading. With labor being categorized based on their expertise and skills, companies created branches or divisions to meet its peculiar production needs with the use of technology. For instance, in the production of microSD chips, the ten persons are expected to produce at least a specific number per day. Hence, the division of labor remained significant up to these days because companies are still bound by targeted results with the highest level of industry as desired consequence. This is also true to agro-industrial company. For example, in a pineapple company, the farm-workers are divided into managers, ploughman, harrower, sower, reaper or harvester, pealer, cutter, canning, and labeling. The work forcers will also have that in-charge for marketing, distribution, and accountants. All of these functions are technologically assisted to keep pace with the improvement of trading relations; supply-demand factors; and by the drive for profit. Modern economists call this systematization of labor forces as optimization of performance management. In this theory, workers are subjected to company targets and quality control. Thus, it wouldn’t be surprising to note that companies would prefer skilled, professional, motivated, and knowledgeable too about the use of info-technology and other machineries to abridge labour and become more productive of goods in masse. The use of machineries hastens their works and made company optimize results. Thus, it can be observed these days that agriculture is not solely focused on agronomy but have also attached with it about the use of modern technology for plowing, in harvesting, in processing, in marketing, in distribution and in accounting. Even workers salaries these days are distributed via automated machines. Such meant that technological advancement are warranted to assist workers in the production of goods at a given scale of time. Hence, human resources report to work on time and are paid by the number of hours rendered in service. The loss of hours means deduction of salary commensurate the hours of absence or tardiness. This systematization of labor is perceived very helpful in understanding human resource and the need about performance management in business management in a growing liberalizing economy. Smith himself posits that division of labor is significant in understanding and in examining the role of states in international relations and trading. are examined. (Berdell, 1998). This is because state provides all the regulations and control in economic and market relations, as well as, in the conception of the gains from international trade liberalization (Berdell, 1998). Smith’s division of labor has also direct correlation with the dynamics of international conflict caused by varying business interests, resource access, and its utilization thus, inspire dramatic transformation international business relations to accommodate multiculturalism and diversity in economic praxis (Berdell, 1998). Smith have contented that as market is governed by rules of conduct that promote fair and cooperative behaviors, that moral imagination from an objective and emphatic business manager may bridge and integrate experimental economic explanations about how people generalize economic relations within open market (Jackson , 2005). Thus, it is very important to understand too the relations of economic inputs and resources (from skilled labor force, technology and infrastructure, capital and financing) with economic policies, and its contribution to outcomes. The policies may include the taxation structure, business policies, existing legal system and about resource acquisition and security (Crowley & Sobel, 2010) while economic outcomes may refer to the salaries and incomes growth, business formation and establishment, job creation, patent rights, and those goods or serviced delivered (Crowley et al., 2010). As empirically evident, these factors associated to labor and market relations remained the significant variables considered by economists at the macro and micro level. The policies regulate the rights of labors and their cases as well as in regulating market development, in export-import relations, in quality control, and in business management or the utilization of capital as infused investments. Policies are still used to govern human resources in their performances, in hiring-and-firing, and in accruing their benefits pursuant to labor and other related policies where business operates. Smith’s theory, as father of modern economy, remained helpful on understanding the extensive implications inherent in labor management and work generation. The division of labor has helped managers to simplify the operational processes in all discipline citing the benefits of the specialization and division of labor however, must be sensitized to the correlation between individual self-interest and group’s well-being (Crowley et al., 2010). Although Smith consider division of labor as the engine for economic progress development but business managers but maintain creativity in the decentralization and specialization of human resources that could lead to increase in output and wages (Crowley et al., 2010) albeit the limits impose by the market. In modern economy, it is therefore the role of the manager to learn from Smith’s theory and to mitigate the impact of limiting factors. Smith posit that amid the complexity of contemporary business management, business managers must “establish an appropriate incentive structure which aligns worker and firm interests (Crowley et al., 2010, p. 8),” hence, allows that ‘invisible hand’ to direct and funnel self-interested labor towards achieving goals that are considered beneficial to the whole company. Crowley et al., (2010) perceived that those who are able to specialize Smith’s theory about the Wealth of Nations will be more effective than those who perceives them as medievalists amid contemporary management. Conclusion Smith’s theory remained helpful up to these days because corporations or companies’ strength, opportunities and threats are still dependent on business management and with policies used to regulate the market relations as well as the performance of human resources. Up to these days, companies operate logically and systematically based on the capacities, skills, knowledge, and other strength of employees. This is because the company’s operation remained pliant to the capacity of these human resources to work in cooperation and collaboration with each other. Significantly, the world economy is still governed by the relation of human resource, capital, technologies, and laws. The laws are inclusive too about company policies for quality control, performance management, and about regular appraisal for a more improved working relations. The interplay of these factors or variables are scientific evidences. Such strongly influence business management and systematization of operation to meet the needs articulated in supply-and-demand relations. Smith perceived that urbanization and development largely depend on the professional and intelligible discourse amongst human capital to attain favorable judgment toward a genuine and fair development. References George Crowley & Russell S. Sobel, (2010). Adam Smith: Managerial Insights from the Father of Economic. Working Papers 10-13, Department of Economics, West Virginia University. Henderson, D.R. (ed.) (2007), “Adam Smith”, The Concise Encyclopedia of Economics Second Edition, Library of Economics and Liberty, available at: http://www.econlib.org/library/Enc/bios/Smith.html Accessed: February 12, 2012. John Berdell, (1998). "Adam Smith and the Ambiguity of Nations," Review of Social Economy, Taylor and Francis Journals, vol. 56(2), pages 175-189. Mark Jackson, (2005). "Liberty and Economic Growth in Adam Smith’s Possible World," Constitutional Political Economy, Springer, vol. 16(3), pages 277-284, 09. Paganelli, Maria Pia, (2011). "The same face of the two Smiths: Adam Smith and Vernon Smith," Journal of Economic Behavior & Organization, Elsevier, vol. 78(3), pages 246-255, May. Smith, A. ([1776] 1994), An Inquiry into the Nature and Causes of the Wealth of Nations, Edwin Cannan (ed.), Modern Library Edition, Random House, New York. Read More