Modelling the Pin Factory – The Origin of the Division of Labour Theory – Part 2

Apologies a bout of malaria has delayed this second part for a week.

In this series (part 1 here) we intend to construct a stock-flow model of the Division of Labour to test some fundamental propositions in political economy. We will be modelling a sweat shop, no apologies for that they are not historically redundant being legion in emerging markets.

But first a short note on the origins of the concept.

Of course the actual division of labour was actively carried out in many early factories, such as those in the Venice Arsenal, stretching back into antiquity. It was not until the C18th that writers moved beyond the moral philosophy/grand process of mankind view – held by Plato, Cicero, Mandelville (who coined the term division of labour as far as we know) and Smith’s teacher Hutchinson.

Schumpeter held the very harsh view that all of the key ideas in Wealth of Nations, including the division of labour, were in writers prior to Smith

Adam Smith was notoriously prickly about academic priority. He rarely published sources, unusual even for the C18th. In one incident he accused Adam Ferguson of plagiarisim

Adam Ferguson’s Essay on the History of Civil Society was published in 1767, Smith accused Ferguson of “having borrowed some of his ideas without owning them, ‘to which Ferguson is said to have replied that he had borrowed nothing from Smith, but much from some unnamed French source “where Smith had been before him.” (Hamowy 1968)

The general view is that the key idea ‘borrowed’ was the division of labour. Certainly the importance of the division of labour was explored in French Physiocratic thinking (and the origins of this thinking in Petty) , and in the Wealth of Nations he admitted that it and the pin factory example, were not novel, but Adam Smith was right to claim that he had priority in highlighting its central causal power in economic growth and crucially the reasons why the division of labour led to economic efficiency.

The specific example of the Pin Factory was most likely taken from Diderot’s Encyclopédie, (vol V 1755) which has an article Épingle, liberally illustrated with images of different degree of the division of labour, where the manufacture of a pin is reported to consist of eighteen operations, the same number of operations described in the Wealth of Nations.

The first extensive treatment of the division of labour comes from William Petty in his Political Arithmetik, who broke with the moral philosophy perspective and so truly may be regarded as the father of political economy. He set out the productivity advantages of the division if labour in watchmaking, cloths manufacture and shipbuilding.

The productivity advantages were also set out in Physiocratic writings such as from Turgot – a correspondent of Smith’s who also stated the productivity enhancements without explanation but crucially linked the division of labour to the need to advance capital

A vast number of arts, and even of those arts indispensable for the use of the most indigent members of society, require that the same materials should pass through many different hands, and undergo, during a considerable space of time, difficult and various operations. I have already mentioned the preparation of leather, of which shoes are made. Whoever has seen the workhouse of a tanner, cannot help feeling the absolute impossibility of one, or even several indigent persons providing themselves with leather, lime, tan, utensils, &c. and causing the requisite buildings to be erected to put the tan house to work, and of their living during a certain space of time, till their leather can be sold… Who shall now collect the materials for the manufactory…How shall that multitude of workmen subsist till the time of their leather being sold, …It must then be one of those proprietors of capitals, or moveable accumulated property that must employ them, supplying them with advances in part for the construction and purchase of materials, and partly for the daily salaries of the workmen that are preparing them (Turgot)

This was a feature stressed by the Says (father and son) and we shall model it explicitly in a future part

Adam Smith’s specific contribution that he was the first to develop a theory that the division of labour was the principle cause of the growth in capitalism. He also (albeit briefly) set out the reasons. Though these reasons for productivity improvement seem to be taken from Diderot.

It cannot be denied that that it is Smith who made the greatest contribution even in the light of penetrating forerunners…for only in Smith’s hand was the division of labour assigned the central role in the system of economic analysis and did economic analysis per-se emerge as a systematic scientific enterprise under such an overarching theme.(Sun 2005)

Smith first set out the pin factory model in his lectures on Jurisprudence in 1763 and continued to refine the concept until the publication of the Wealth of Nations

It is the great multiplication of the productions of all the different arts, in consequence of the division of labour, which occasions, in a well-governed society, that universal opulence which extends itself to the lowest ranks of the people. Every workman has a great quantity of his own work to dispose of beyond what he himself has occasion for; and every other workman being exactly in the same situation, he is enabled to exchange a great quantity of his own goods for a great quantity, or, what comes to the same thing, for the price of a great quantity of theirs. He supplies them abundantly with what they have occasion for, and they accommodate him as amply with what he has occasion for, and a general plenty diffuses itself through all the different ranks of the society. I.1.10

To take an example, therefore from a very trifling manufacture; but one in which the division of labour has been very often taken notice of, the trade of the pin-maker; a workman not educated to this business (which the division of labour has rendered a distinct trade), nor acquainted with the use of the machinery employed in it (to the invention of which the same division of labour has probably given occasion), could scarce, perhaps, with his utmost industry, make one pin in a day, and certainly could not make twenty. But in the way in which this business is now carried on, not only the whole work is a peculiar trade, but it is divided into a number of branches, of which the greater part are likewise peculiar trades. 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 by 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. I have seen a small manufactory of this kind where ten men only were employed, and where some of them consequently performed two or three distinct operations. But though they were very poor, and therefore but indifferently accommodated with the necessary machinery, they could, when they exerted themselves, make among them about twelve pounds of pins in a day. There are in a pound upwards of four thousand pins of a middling size. Those ten persons, therefore, could make among them upwards of forty-eight thousand pins in a day. Each person, therefore, making a tenth part of forty-eight thousand pins, might be considered as making four thousand eight hundred pins in a day. But if they had all wrought separately and independently, and without any of them having been educated to this peculiar business, they certainly could not each of them have made twenty, perhaps not one pin in a day; that is, certainly, not the two hundred and fortieth, perhaps not the four thousand eight hundredth part of what they are at present capable of performing, in consequence of a proper division and combination of their different operations. I.1.3 (Smith 2001)

Why the Pin Factory? Why not a more typical industrial operation of the C18? One possibility is that the pin factory was well known till the mid C19 as an industrial process which resisted mechanisation. Then the flattening of the head of a pin could only be done by hand. One of Smith’s key ideas was that the division of labour drives mechanisation and not vice versa.

I have been informed, that in the metropolis each pin-maker can make nearly double four thousand pins a day; and also, that the attempts hitherto made to manufacture pins by machinery have all failed. For this purpose no machine has yet been invented which equals the dexterity and despatch of the workman: and in general, those machines which have been used, form the head of the pin by compressing a small portion of the metal, which renders the tiny instrument brittle, and, when complete, less fit for the many purposes to which pins are put. (Thomas Hodgskin 1827)

And Smith was adamant that it was the division of labour that spurs invention and not vice –versa, an issue that John Rae later took Smith to task for (ill cover this debate in a future part).

All the improvements in machinery, however, have by no means been the inventions of those who had occasion to use the machines. Many improvements have been made by the ingenuity of the makers of the machines, when to make them became the business of a peculiar trade (book 1 chapter 1)

Adam Smith specifically gave three reasons for why the division of labour led to productivity increases.

first, to the increase of dexterity in every particular workman; secondly, to the saving of the time which is commonly lost in passing from one species of work to another; and lastly, to the invention of a great number of machines which facilitate and abridge labour, and enable one man to do the work of many. (I.I.6)

Two others may be added, and we will model and look in detail at each in future parts, firstly the ability to use cheaper labour, a matter which Babbage laid particular stress upon. Secondly the ability of a fixed succession of processes to set and speed up the metre of production – which has been termed Fordism.

In subsequent parts we will model each of these, both in terms of physical productivity and value creation, inventory and value realisation. We are fortunate to have to hard numbers on cost from a C19th Pin Factory from Babbage. There will be a few surprises on the way in particular looking at how rapid employment creation in growth industries depends upon highly inefficient stages within the division of labour and under what conditions it is possible to have a ‘well behaved’ production function and in what circumstances not which question how we conceptualise ‘capital’.


Hamowy, R. (1968). “Adam Smith, Adam Ferguson, and the Division of Labour ” Economia(Thu Aug 1st ).

Smith, A. (2001). Wealth of Nations, Hayes Barton Press.

Sun, G. Z. (2005). Readings in the Economics of the Division of Labor: The Classical Tradition, World Scientific.

Thomas Hodgskin (1827). Popular Political Economy. Four lectures delivered at the London Mechanics Institution London:, Charles and William Tait.

Turgot, A.-R.-J. Reflections on the Formation and the Distribution of Riches, trans. William J. Ashley New York, The Macmillan Co.


3 thoughts on “Modelling the Pin Factory – The Origin of the Division of Labour Theory – Part 2

  1. ” firstly the ability to use cheaper labour,”…….if a division of labor results in more production…why would labour be cheap…..since there is more to sell…..labor should be given more money/rewards..

  2. Regarding your post on The Profits (& Growth) Puzzle

    Your theory simultaneously mirrors Social Credit Theory and shows incomplete research and analysis of its ideas and policy mechanisms. The intangible asset of a Banking license of Keen and your Franchise Value of Equity are Social Credit’s Cultural Heritage of Productive Potential (Innovation), a communal asset whose value has been completely usurped by the Financial system. Douglas cannot simply be pigeon holed into the crank “interest is the whole problem” monetary reformers. His insights go much deeper than that and actually precede your own and the analysis of others you site. Finally, velocity theory is clearly invalidated by the ever present commercial and monetary realities of cost accounting’s conventions. A good synopsis of Social Credit can be found here:

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