Adam Smith and the Pin Factory

https://www.johnkay.com/2019/12/18/adam-smith-and-the-pin-factory/

by bookofjoe • 7 years ago

45 54 7 years ago

CalChris• 7 years ago

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/

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.

eddieh• 7 years ago

It should remind you of I, Pencil since it is essentially the modern telling of Smith's pin factory.

Milton Friedman described the pencil in his Free to Choose series: https://www.youtube.com/watch?v=67tHtpac5ws

And in 2012 CEI made a movie version: https://www.youtube.com/watch?v=IYO3tOqDISE

I know the rules here are such that we don't talk about voting up/down, but I have no idea why you were voted down. Your post is on-topic and informative. I didn't know their was a book version or the CEI movie version, I had only watched the Free to Choose series. Thanks for sharing.

dredmorbius3• 7 years ago

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

http://crookedtimber.org/2011/04/16/i-pencil-a-product-of-th...

deogeo2• 7 years ago

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.

droitbutch3• 7 years ago

I too was reminded of "I, Pencil" but I prefer Read over Smith simply because, in today's world, a pencil is much more relatable than a pin. I still come into contact with a pencil almost daily, but a pin maybe once a year.

caiocaiocaio• 7 years ago

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.

vageli2• 7 years ago

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.

Things make more sense with the view that The Wealth of Nations is meant to be satirical.

LiquidSky• 7 years ago

Can you provide a source for that? I've never read that it was meant by Smith to be satirical anywhere. It was written as a critique of mercantilist and physiocratic economic theories that had previously dominated European policy but had become antiquated by Smith's time, and to offer a new set of economic ideas for the emerging industrial era.

The parent is right, though, that it's not the Bible of the Free Market that so many people who haven't read it seem to think it is. While it does argue against the older regulatory economic regimes, it's not some ancap laissez-faire anti-government screed.

newfangle• 7 years ago

Only on hacker news do we have individuals wise enough to mock the perspective of someone from the 1700s that is the father of modern economic thought.

partiallypro• 7 years ago

We're not worthy of the great knowledge we have here, likely from a non-economist that read the book and doesn't understand the historical significance or lineage of economic thought that it kicked off.

A book a really enjoy on this topic is "The Mind and the Market" by Jerry Z. Muller. There are other history of economic thought books, but that one is my favorite.

bluGill• 7 years ago

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.

cfmcdonald• 7 years ago

This hasn't been my experience at all. And yes, there were editors more than 100 years ago: https://en.wikipedia.org/wiki/Copy_editing#History

I can say with certainty that your statements don't apply The Wealth of Nations. Its prose is of impeccably high quality.

davidivadavid• 7 years ago

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.

dang• 7 years ago

Any 18th century book written today would be "laughing stock" and they are all "weird to read". This is the sort of shallow dismissal that leads to generic, tedious, and eventually nasty discussion. Please don't post like this to HN.

"Please don't post shallow dismissals, especially of other people's work. A good critical comment teaches us something."

https://news.ycombinator.com/newsguidelines.html

SilasX• 7 years ago

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... p. 166

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

dragontamer• 7 years ago

And then we have single Chinese painters painting 10,000 paintings per month.

https://www.instapainting.com/blog/company/2015/10/28/how-to...

Different forms of manufacturing have different constraints. Trying to generalize everything from a pin-factory (which initially wasn't even abstracted correctly) seems like navel gazing to me.

In the case of painting: it seems like creating a whole slew of blue-paint so that you can do stroke#465 on your 10,000 mass-produced oil paintings is more efficient than spurting out just a little bit of blue paint for stroke#465, then another paint for stroke #466, (etc. etc.)

Its more efficient to perform that individual stroke 10,000 in a row, more efficiently using your paintbrush, paint, and other tools, before moving on to stroke #466.

---------

Now I don't know much about 1700s based pin-making, but apparently Adam Smith didn't either. :-) I'm going to guess that every mass-production line is setup slightly differently, and will have slightly different "parallelization" mechanisms.

aalleavitch• 7 years ago

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• 7 years ago

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• 7 years ago

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.

rossdavidh3• 7 years ago

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.

jariel2• 7 years ago

"(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.

minikites• 7 years ago

https://www.goodreads.com/book/show/23206098-who-cooked-adam...

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• 7 years ago

...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.

dredmorbius3• 7 years ago

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

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

https://adamsmithslostlegacy.blogspot.com/2014/02/dugald-ste...

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.

astine4• 7 years ago

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.

claudiawerner3• 7 years ago

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.

dredmorbius3• 7 years ago

Again, several thoughts.

1. I agree absolutely that Smith's principle value is as an early (though not the first) notable and thoughtful (though often mistaken) commentator on the nature of political oeconomy. As such, he either made several interesting original observations or conclusions, or promoted those of others (notably the Physiocrats, particularly Quesnay, and somewhat famously and controversially, James Steuart (not to be confused with James Mill or John Stuart Mill).

2. He's also been both mischaracterised (the "invisible hand" myth), and curiously ignored: his many cautions about monopolies, joint stock corporations, labour organisation, and the fundamental welfare of basic citizens. To that extent, reading Smith directly is a useful countermeasure to much spin that's been applied since.

3. On the labour theory of value, Smith's observations strike me as more valuable than many critics (particularly those inspired by opposing anything suggested by his mid-19th century German-British antecedent) give proper credit for. I'd argue that the Marginalists' focus on just marginal market cost and value is also fundamentally flawed, though frequently behaviorally accurate, at least in the short term.

Smith's discussion of prices, of the prices of various types of goods (commodities, rents, interest, labour, assets (coinage, though this can be extended) and, coached as "expenses of the sovereign", public goods, is actually quite informative, though it requires some interpretation.

In particular, Smith advances an idea largely ignored since the Marginal Revolution of a natural price, from which the actual observed market price may be higher, lower, or equal to:

When the price of any commodity is neither more nor less than what is sufficient to pay the rent of the land, the wages of the labour, and the profits of the stock employed in raising, preparing, and bringing it to market, according to their natural rates, the commodity is then sold for what may be called its natural price....

The actual price at which any commodity is commonly sold is called its market price. It may either be above, or below, or exactly the same with its natural price.

https://en.wikisource.org/wiki/The_Wealth_of_Nations/Book_I/...

Smith does write that "Labour was the first price, the original purchase-money that was paid for all things," but that's possibly better understood on several bases:

- Where all individuals are self-sufficient, this is fundamentally the case. Cost is time.

- Where there is a means of exchange for the labour of others, paying for that labour is the first and most evident, or manifest, cost.

- But labour is clearly not the only input, and more complete and accurate cost-based accounting systems reflect this. When Alexander Hamilton Church developed the foundations of what became modern cost accounting, his entries reflected the extant purchasing practices of manufacturers, whose major expenses were labour, raw material inputs, and plant capital.

https://archive.org/details/properdistribut02churgoog/page/n...

https://en.wikipedia.org/wiki/Alexander_Hamilton_Church

(And yes, related to the other A.H.)

The question of value in economics is still one that bedevils it, and for which a suggestion of Marx has excellent merits: what's discussed as "value" is actually three distinct constructs:

1). Cost. The requirements of poduction, including labour, rents, capital, and fully-accounted natural resources.

2). The exchange price, or ratio in some maximally-fungible commodity (usually money or an equivalent) by which one party is entirely willing to exchange to another.

3). Value. Most specifically use value or net benefit, which should almost certainly exclude merely short-term compulsion (viz: drug addiction and social media FOMO), but rather some long-term lifetime benefit or quality measure. Healthcare quality-adjusted life years would be an example, or Leslie White's Law of energy throughput as a measure of cultural development.

Note that Smith contradicts his own price theory when discussing rents:

"Rent, considered as the price paid for the use of land, is naturally the highest which the tenant can afford to pay in the actual circumstances of the land."

https://en.wikisource.org/wiki/The_Wealth_of_Nations/Book_I/...

That is: rents are not based on the labour required to provision them, but on the added labour value which can be extracted by way of rents.

So clearly there's more than just labour at play, even within Smith.

The extension of the "cost-of-inputs" model I find most attractive -- that's an "all costs are opportunity costs", extends beyond just presently-realised costs, ultimately taking into account natural resource costs, as energy- or time-of-formation, particularly at a given rate of utilisation vs. replenishment, against total utilisation time, which gives rise to significant revisions of pricing of exhaustible resources (or sinks) well beyond the clearly flawed visions of David Ricard, L.C. Grey, and Harold Hotelling.

jariel2• 7 years ago

This is a good point - but do 'steam engines' matter in terms of economics? Smith was pre-industrial revolution, concerned about the mechanisms of efficiency, pricing etc.. That one piece of the process was able to leverage the energy of coal ... definitely 'changes everything' in terms of output, but perhaps it doesn't change the fundamental economic equation.

But this is a great comment.

rossdavidh3• 7 years ago

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.

astine4• 7 years ago

Considering that concept of the division of labor was brought up millennia ago by Plato, before modern employee/management relationships were common, this is unlikely to be true.

It's also worth noting that each of Adam Smiths pin workers were each highly skilled. They each had to be trained, not just in their particular task, but in how to work with the other pin makers.

sp332• 7 years ago

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

rossdavidh3• 7 years ago

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.

earthboundkid3• 7 years ago

This is my sense of “full stack” development vs specialization. It’s more fun for you to do everything, but it’s better for the company if you’re a replaceable cog.

mempko• 7 years ago

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.

krapp2• 7 years ago

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.

earthboundkid3• 7 years ago

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.

Adam Smith and the Pin Factory

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