Abstract
Adam Smith, who criticized mercantilists for their wrong concept of the wealth of nations, considered that the real wealth is the annual produce of the land and labor of the society (Smith 1776, p. 12). According to Smith, furthermore, the high productivity of labor in civilized and thriving nations seems to have been the effects of the division of labor. International trade certainly pre-supposes the division of labor among different countries. As for the nature and causes of international trade, therefore, we can expect to learn very much from Smith’s theory of the divisions of labor.
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Notes
- 1.
Smith defined capital as the stock which is used to obtain profit.
- 2.
The natural rates of wages, rents, and profits are considered to reflect, respectively, the demand and supply conditions of labor, land, and stock, since the natural rate of wages is, for example, defined as high in a progressive society and low in a declining one.
- 3.
For example, Smith argued that returns to capital is higher in agriculture than in manufacture, since the nature works along with men in the former (Smith 1776, p. 363).
- 4.
Comparative advantage determines which country can export which commodity in international trade. See Chap. 4.
- 5.
As for the latter division of labor, the explanation of the increasing returns is not so simple, as is argued by Negishi (2000).
- 6.
Walras (1834–1910) is the founder of the neo-classical general equilibrium theory, while Sraffa (1898–1983) was critical to the mainstream neo-classical economics and a leader of the so-called neo-Ricardian school of economics.
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Negishi, T., Negishi, T. (2014). Adam Smith and Division of Labor. In: Developments of International Trade Theory. Advances in Japanese Business and Economics, vol 2. Springer, Tokyo. https://doi.org/10.1007/978-4-431-54433-3_3
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