Eastern Economic Journal

, Volume 38, Issue 3, pp 310–318 | Cite as

A Benefit from the Division of Labor that Adam Smith Missed

  • Wenli Cheng
Article
First Online:

Abstract

This paper argues that there is an important benefit from the division of labor that Adam Smith failed to mention, that is, the division of labor shortens the time required for capital formation and makes continuous roundabout production possible. The paper presents a simple model to demonstrate this benefit, which is referred to as the “continuity-in-capital-formation” benefit of the division of labor.

Keywords

the division of labor time structure of production capital formation 

JEL Classifications

D92 O10 O30 
This is a preview of subscription content, log in to check access.

Notes

Acknowledgements

The author thanks Professor Gilbert L. Skillman, Professor Yew-Kwang Ng, and an anonymous referee for very helpful comments.

References

  1. Cheng, Wenli, and Xiaokai Yang . 2004. Inframarginal Analysis of Division of Labor: A Survey. Journal of Economic Behavior and Organization, 55 (2): 137–174.Google Scholar
  2. Cheng, Wenli, and Xiaonan Zhao . 2008. Economic Performance through Time: A General Equilibrium Model. Division of Labor and Transaction Costs, 3 (1): 7–16.CrossRefGoogle Scholar
  3. Kydland, Finn E., and Edward C. Prescott . 1982. Time to Build and Aggregate Fluctuations. Econometrica, 50 (6): 1345–1370.CrossRefGoogle Scholar
  4. Leijonhufvud, Alex . 1986. Capitalism and the Factory System, in Economics as a Process: Essays in the New Institutional Economics, edited by R.N. Langlois. Cambridge, New York: Cambridge University Press.Google Scholar
  5. Ng, Yew-Kwang . 2004. Welfare Economics: Towards a More Complete Analysis. Basingstoke: Palgrave Macmillan.CrossRefGoogle Scholar
  6. Read, Leonard . 2008. I, Pencil: My Family Tree as Told to Leonard E. Read, 50th Anniversary Edition. Irvington-on-Hudson: Foundation for Economic Education.Google Scholar
  7. Smith, Adam . 1776. An Inquiry into the Nature and Causes of the Wealth of Nations, vols. Chicago: University of Chicago Press.CrossRefGoogle Scholar
  8. Stigler, George . 1976. The Successes and Failures of Professor Smith. Journal of Political Economy, 84 (6): 1199–1213.CrossRefGoogle Scholar
  9. Yang, Xiaokai . 2002. The Division of Labor, Investment and Capital. Metroeconomica, 50 (3): 301–324.CrossRefGoogle Scholar

Copyright information

© Eastern Economic Association 2011

Authors and Affiliations

  • Wenli Cheng
    • 1
  1. 1.Department of EconomicsMonash UniversityAustralia

Personalised recommendations