Chapter III

That the Division of Labour is Limited by the Extent of the Market
As it is the power of exchanging that gives occasion to the division of labour, so the extent of this division must always be limited by the extent of that power, or, in other words, by the extent of the market. When the market is very small, no person can have any encouragement to dedicate himself entirely to one employment, for want of the power to exchange all that surplus part of the produce of his own labour, which is over and above his own consumption, for such parts of the produce of other men’s labour as he has occasion for.

There are some sorts of industry, even of the lowest kind, which can be carried on no where but in a great town. A porter, for example, can find employment and subsistence in no other place. A village is by much too narrow a sphere for him; even an ordinary market town is scarce large enough to afford him constant occupation. In the lone houses and very small villages which are scattered about in so desert a country as the Highlands of Scotland, every farmer must be butcher, baker and brewer for his own family. In such situations we can scarce expect to find even a smith, a carpenter, or a mason, within less than twenty miles of another of the same trade. The scattered families that live at eight or ten miles distance from the nearest of them, must learn to perform themselves a great number of little pieces of work, for which, in more populous countries, they would call in the assistance of those workmen. Country workmen are almost every where obliged to apply themselves to all the different branches of industry that have so much affinity to one another as to be employed about the same sort of materials. A country carpenter deals in every sort of work that is made of wood: a country smith in every sort of work that is made of iron. The former is not only a carpenter, but a joiner, a cabinet maker, and even a carver in wood, as well as a wheelwright, a ploughwright, a cart and waggon maker. The employments of the latter are still more various. It is impossible there should be such a trade as even that of a nailer in the remote and inland parts of the Highlands of Scotland. Such a workman at the rate of a thousand nails a day, and three hundred working days in the year, will make three hundred thousand nails in the year. But in such a situation it would be impossible to dispose of one thousand, that is, of one day’s work in the year.

As by means of water-carriage a more extensive market is opened to every sort of industry than what land-carriage alone can afford it, so it is upon the sea-coast, and along the banks of navigable rivers, that industry of every kind naturally begins to subdivide and improve itself, and it is frequently not till a long time after that those improvements extend themselves to the inland parts of the country. A broad-wheeled waggon, attended by two men, and drawn by eight horses, in about six weeks time carries and brings back between London and Edinburgh near four ton weight of goods. In about the same time a ship navigated by six or eight men, and sailing between the ports of London and Leith, frequently carries and brings back two hundred ton weight of goods. Six or eight men, therefore, by the help of water-carriage, can carry and bring back in the same time the same quantity of goods between London and Edinburgh, as fifty broad-wheeled waggons, attended by a hundred men, and drawn by four hundred horses.
*49 Upon two hundred tons of goods, therefore, carried by the cheapest land-carriage from London to Edinburgh, there must be charged the maintenance of a hundred men for three weeks, and both the maintenance, and, what is nearly equal to the maintenance, the wear and tear of four hundred horses as well as of fifty great waggons. Whereas, upon the same quantity of goods carried by water, there is to be charged only the maintenance of six or eight men, and the wear and tear of a ship of two hundred tons burthen, together with the value of the superior risk, or the difference of the insurance between land and water-carriage. Were there no other communication between those two places, therefore, but by land-carriage, as no goods could be transported from the one to the other, except such whose price was very considerable in proportion to their weight, they could carry on but a small part of that commerce which at present subsists
*50 between them, and consequently could give but a small part of that encouragement which they at present mutually afford to each other’s industry. There could be little or no commerce of any kind between the distant parts of the world. What goods could bear the expence of land-carriage between London and Calcutta?
*51 Or if there were
*52 any so precious as to be able to support this expence, with what safety could they be transported through the territories of so many barbarous nations? Those two cities, however, at present carry on a very considerable commerce with each other,
*53 and by mutually affording a market, give a good deal of encouragement to each other’s industry.

Since such, therefore, are the advantages of water-carriage, it is natural that the first improvements of art and industry should be made where this conveniency opens the whole world for a market to the produce of every sort of labour, and that they should always be much later in extending themselves into the inland parts of the country. The inland parts of the country can for a long time have no other market for the greater part of their goods, but the country which lies round about them, and separates them from the sea-coast, and the great navigable rivers. The extent of their market, therefore, must for a long time be in proportion to the riches and populousness of that country, and consequently their improvement must always be posterior to the improvement of that country. In our North American colonies the plantations have constantly followed either the sea-coast or the banks of the navigable rivers, and have scarce any where extended themselves to any considerable distance from both.

The nations that, according to the best authenticated history, appear to have been first civilized, were those that dwelt round the coast of the Mediterranean sea. That sea, by far the greatest inlet that is known in the world, having no tides, nor consequently any waves except such as are caused by the wind only,
*54 was, by the smoothness of its surface, as well as by the multitude of its islands, and the proximity of its neighbouring shores, extremely favourable to the infant navigation of the world; when, from their ignorance of the compass, men were afraid to quit the view of the coast, and from the imperfection of the art of ship-building, to abandon themselves to the boisterous waves of the ocean. To pass beyond the pillars of Hercules, that is, to sail out of the Streights of Gibraltar, was, in the antient world, long considered as a most wonderful and dangerous exploit of navigation. It was late before even the Phenicians and Carthaginians, the most skilful navigators and ship-builders of those old times, attempted it, and they were for a long time the only nations that did attempt it.

Of all the countries on the coast of the Mediterranean sea, Egypt seems to have been the first in which either agriculture or manufactures were cultivated and improved to any considerable degree. Upper Egypt extends itself nowhere above a few miles from the Nile and in Lower Egypt that great river breaks itself into many different canals,
*55 which, with the assistance of a little art, seem to have afforded a communication by water-carriage, not only between all the great towns, but between all the considerable villages, and even to many farm-houses in the country; nearly in the same manner as the Rhine and the Maese do in Holland at present. The extent and easiness of this inland navigation was probably one of the principal causes of the early improvement of Egypt.

The improvements in agriculture and manufactures seem likewise to have been of very great antiquity in the provinces of Bengal in the East Indies, and in some of the eastern provinces of China; though the great extent of this antiquity is not authenticated by any histories of whose authority we, in this part of the world, are well assured. In Bengal the Ganges and several other great rivers form a great number of navigable canals
*56 in the same manner as the Nile does in Egypt. In the Eastern provinces of China too, several great rivers form, by their different branches, a multitude of canals, and by communicating with one another afford an inland navigation much more extensive than that either of the Nile or the Ganges, or perhaps than both of them put together. It is remarkable that neither the antient Egyptians, nor the Indians, nor the Chinese, encouraged foreign commerce, but seem all to have derived their great opulence from this inland navigation.

All the inland parts of Africa, and all that part of Asia which lies any considerable way north of the Euxine and Caspian seas, the antient Scythia, the modern Tartary and Siberia, seem in all ages of the world to have been in the same barbarous and uncivilized state in which we find them at present. The sea of Tartary is the frozen ocean which admits of no navigation, and though some of the greatest rivers in the world run through that country,
*57 they are at too great a distance from one another to carry commerce and communication through the greater part of it. There are in Africa none of those great inlets, such as the Baltic and Adriatic seas in Europe, the Mediterranean and Euxine seas in both Europe and Asia, and the gulphs of Arabia, Persia, India, Bengal, and Siam, in Asia, to carry maritime commerce into the interior parts of that great continent: and the great rivers of Africa are at too great a distance from one another to give occasion to any considerable inland navigation. The commerce besides which any nation can carry on by means of a river which does not break itself into any great number of branches or canals, and which runs into another territory before it reaches the sea, can never be very considerable; because it is always in the power of the nations who possess that other territory to obstruct the communication between the upper country and the sea. The navigation of the Danube is of very little use to the different states of Bavaria, Austria and Hungary, in comparison of what it would be if any
*58 of them possessed the whole of its course till it falls into the Black Sea.

[This word, with ‘annually’ just below, at once marks the transition from the older British economists’ ordinary practice of regarding the wealth of a nation as an accumulated fund. Following the physiocrats, Smith sees that the important thing is how much can be produced in a given time.]

[Cp. with this phrase Locke,
Some Considerations of the Consequences of the Lowering of Interest and Raising the Value of Money, ed. of 1696, p. 66, ‘the intrinsic natural worth of anything consists in its fitness to supply the necessities or serve the conveniencies of human life.’]

[The implication that the nation’s welfare is to be reckoned by the average welfare of its members, not by the aggregate, is to be noticed.]

[Ed. 1 reads ‘ with which labour is generally applied in it’.]

[This second circumstance may be stretched so as to include the duration and intensity of the labour of those who are usefully employed, but another important circumstance, the quantity and quality of the accumulated instruments of production, is altogether omitted.]

[Ed. 1 reads ‘and’.]

[Only one cause, the division of labour, is actually treated.]

[For the physiocratic origin of the technical use of the terms ‘distribute’ and ‘distribution’ see the Editor’s Introduction.]

[This word slips in here as an apparently unimportant synonym of ‘useful,’ but subsequently ousts ‘useful’ altogether, and is explained in such a way that unproductive labour may be useful; see esp. below

[See the index for the examples of the use of this term.]

[Ed. 1 does not contain ‘to explain’.]

[Ed. 1 reads ‘ what is the nature’.]

[Ed. 1 reads ‘is treated of in’.]

[Ed. 1 reads ‘of the society’.]

[Read in conjunction with the first two paragraphs, this sentence makes it clear that the wealth of a nation is to be reckoned by its
per capita income. But this view is often temporarily departed from in the course of the work: see the index,
s.v. Wealth.]

[This phrase, if used at all before this time, was not a familiar one. Its presence here is probably due to a passage in Mandeville,
Fable of the Bees, pt. ii. (1729), dial. vi., p. 335: ‘CLEO. . . . When once men come to be governed by written laws, all the rest comes on apace. . . No number of men, when once they enjoy quiet, and no man needs to fear his neighbour, will be long without learning to divide and subdivide their labour. HOR. I don’t understand you. CLEO. Man, as I have hinted before, naturally loves to imitate what he sees others do, which is the reason that savage people all do the same thing: this hinders them from meliorating their condition, though they are always wishing for it: but if one will wholly apply himself to the making of bows and arrows, whilst another provides food, a third builds huts, a fourth makes garments, and fifth utensils, they not only become useful to one another, but the callings and employments themselves will, in the same number of years, receive much greater improvements, than if all had been promiscuously followed by every one of the five. HOR. I believe you are perfectly right there; and the truth of what you say is in nothing so conspicuous as it is in watch-making, which is come to a higher degree of perfection than it would have been arrived at yet, if the whole had always remained the employment of one person; and I am persuaded that even the plenty we have of clocks and watches, as well as the exactness and beauty they may be made of, are chiefly owing to the division that has been made of that art into many branches. The index contains, ‘Labour, The usefulness of dividing and subdividing it’. Joseph Harris,
Essay upon Money and Coins, 1757, pt. i. § 12, treats of the ‘usefulness of distinct trades,’ or ‘the advantages accruing to mankind from their betaking themselves severally to different occupations,’ but does not use the phrase ‘division of labour’.]

[Ed. 1 reads ‘improvements’.]

[Ed. 1 reads ‘Though in them’.]

[Another and perhaps more important reason for taking an example like that which follows is the possibility of exhibiting the advantage, of division of labour in statistical form.]

[This parenthesis would alone be sufficient to show that those are wrong who believe Smith did not include the separation of employments in ‘division of labour’.]

[In Adam Smith’s
Lectures p. 164, the business is as here, divided into eighteen; operations. This number is doubtless taken from the
Encyclopédie, tom. v. (published in 1755)
, s.v. Épingle. The article is ascribed to M. Delaire, ‘qui décrivait la fabrication de l’épingle dans les ateliers même des ouvriers,’ p. 807. In some factories the division was carried further. E. Chambers,
Cyclopædia, vol. ii., 2nd ed., 1738, and 4th ed., 1741,
s.v. Pin, makes the number of separate operations twenty-five.]

[Ed. 1 reads ‘the’.]

[Ed. 1 reads ‘the lands’ here and line preceding.]

[Ed. 1 reads ‘because the silk manufacture does not suit the climate of England’.]

Lectures, p. 164, the comparison is between English and French ‘toys,’
i.e., small metal articles.]

[Ed. 1 places ‘in consequence of the division of labour’ here instead of in the line above.]

[‘Pour la célérite du travail et la perfection de l’ouvrage, elles dépendent entièrement de la multitude des ouvriers rassemblés. Lorsqu’une manufacture est nombreuse, chaque opération occupe un homme différent. Tel ouvrier ne fait et ne fera de sa vie qu’une seule et unique chose; tel autre une autre chose: d’o� il arrive que chacune s’exécute bien et promptement, et que l’ouvrage le mieux fait est encore celui qu’on a à meilleur marché. D’ailleurs le goût et la façon se perfectionnent nécessairement entre un grand nombre d’ouvriers, parce qu’il est difficile qu’il ne s’en rencontre quelquesuns capables de réfléchir, de combiner, et de trouver enfin le seal moyen qui puisse les mettre audessus de leurs semblables; le moyen ou d’épargner la matière, ou d’allonger le temps, ou de surfaire l’industrie, soit par une machine nouvelle, soit par une manœuvre plus commode.’—
Encydopédie, tom. i. (1751), p. 717,
s.v. Art. All three advantages mentioned in the text above are included here.]

Lectures, p. 166, ‘a country smith not accustomed to make nails will work very hard for three or four hundred a day and those too very bad’.]

Lectures, p. 166, ‘a boy used to it will easily make two thousand and those incomparably better’.]

Lectures, p. 255, it is implied that the labour of making a button was divided among eighty persons.]

[The same example occurs in
Lectures, p. 166.]

[Examples are given in
Lectures, p. 167: ‘Two men and three horses will do more in a day with the plough than twenty men without it. The miller and his servant will do more with the water mill than a dozen with the hand mill, though it too be a machine.’]

[Ed. 1 reads ‘I shall, therefore, only observe’.]

[Ed. 1 reads ‘machines employed’.]

[Ed. 1 reads ‘of common’.]

I.e., steam-engines.]

[This pretty story is largely, at any rate mythical. It appears to have grown out of a misreading (not necessarily by Smith) of the following passage: ‘They used before to work with a buoy in the cylinder enclosed in a pipe, which buoy rose when the steam was strong, and opened the injection, and made a stroke; thereby they were capable of only giving six, eight or ten strokes in a minute, till a boy, Humphry Potter, who attended the engine, added (what he called scoggan) a catch that the beam Q always opened; and then it would go fifteen or sixteen strokes in a minute. But this being perplexed with catches and strings, Mr. Henry Beighton, in an engine he had built at Newcastle-on-Tyne in 1718, took them all away, the beam itself simply supplying all much better.’—J. T. Desaguliers,
Course of Experimental Philosophy, vol. ii., 1744, p. 533. From pp. 469, 471, it appears that hand labour was originally used before the ‘buoy’ was devised.]

Lectures, p. 167, the invention of the plough is conjecturally attributed to farmer and that of the hand-mill to a slave, while the invention of the water-wheel and the steam engine is credited to philosophers. Mandeville is very much less favourable to the claims of the philosophers: ‘They are very seldom the same sort of people, those that invent arts and improvements in them and those that inquire into the reason things: this latter is most commonly practised by such as are idle and indolent, that a fond of retirement, hate business and take delight in speculation; whereas none succeed oftener in the first than active, stirring and laborious men, such as will put their hand to the plough, try experiments and give all their attention to what they are about.—
Fable of the Bees, pt. ii. (1729), dial. iii., p. 151. He goes on to give as examples the improvements in soap-boiling, grain-dyeing, etc.]

[The advantage of producing particular commodities wholly or chiefly in the countries most naturally fitted for their production is recognised below,
IV.2.15, but the fact that division of labour is necessary for its attainment is not noticed. The fact that division of labour allows different workers to be put exclusively to the kind of work for which they are best fitted by qualities not acquired by education and practice, such as age, sex, size and strength, is in part ignored and in part denied below,
I.2.3-4,5. The disadvantage of division of labour of specialisation is dealt with below, vol. ii.,

[This paragraph was probably taken bodily from the MS. of the author’s lectures. It appears to be founded on Mun,
England’s Treasure by Forraign Trade, chap. iii., at end; Locke,
Civil Government, § 43; Mandeville,
Fable of the Bees, pt. i., Remark P, 2nd ed. 1723, p. 182, and perhaps Harris,
Essay upon Money and Coins, pt. i., § 12. See
Lectures, pp. 161-162 and notes.]

I.e., it is not the effect of any conscious regulation by the state or society, like the ‘law of Sesotris,’ that every man should follow the employment of his father, referred to in the corresponding passage in
Lectures, p. 168. The denial that it is the effect of individual wisdom recognising the advantage of exercising special natural talents comes lower down,

[It is by no means clear what object there could be in exchanging one bone for for another.]

[Misprinted ‘intirely’ in eds. 1-5. ‘Entirely’ occurs a little lower down in all eds.]

[The paragraph is repeated from
Lectures, p. 169. It is founded on Mandeville,
Fable of the Bees, pt. ii. (1729), dial. vi., pp. 421, 422.]

Lectures, pp. 169-170.]

[This is apparently directed against Harris,
Money and Coins, pt. i., § 11, and is in accordance with the view of Hume, who asks readers to ‘consider how nearly equal all men are in their bodily force, and even in their mental powers and faculties, ere cultivated by education’.—’Of the Original Contract,’ in
Essays, Moral and Political, 1748, p. 291.]

[‘Perhaps’ is omitted in eds. 2 and 3, and restored in the errata to ed. 4.)

Lectures, pp. 170-171.]

[The superiority of carriage by sea is here considerably less than in
Lectures, p. 172, but is still probably exaggerated. W. Playfair, ed. of
Wealth of Nations, 1805, vol. i., p. 29, says a waggon of the kind described could carry eight tons, but, of course, some allowance must be made for thirty years of road improvement.]

[Ed. 1 reads ‘ which is at present carried on’.]

op. cit., p. 30 says that equalising the out and home voyages goods were carried from London to Calcutta by sea at the same price (12
s. per cwt.) as from London to Leeds by land.]

[Ed. 1 reads ‘ was’.]

[Ed. 1 reads ‘carry on together a very considerable commerce’.]

[This shows a curious belief in the wave-producing capacity of the tides.]

[It is only in recent times that this word has become applicable especially to artificial channels; see Murray,
Oxford English Dictionary, s.v.]

[Ed. 1 reads ‘break themselves into many canals’.]

[The real difficulty is that the mouths of the rivers are in the Arctic Sea, so that they are separated. One of the objects of the Siberian railway is to connect them.]

[Ed. 1 reads ‘any one’ here.]

[The passage corresponding to this chapter is comprised in one paragraph in
Lectures, p. 172.]

[The paragraph has a close resemblance to Harris,
Money and Coins, pt. i., §§ 19, 20.]

Iliad, vi. 236; quoted with the same object in Pliny,
Hist. Nat., lib. xxxiii., cap. i.; Pufendorf,
De jure naturæ et gentium, lib. v., cap. v., § 1; Martin-Leake,
Historical Account of English Money, 2nd ed., 1745 p. 4 and elsewhere.]

Esprit des lois, liv. xxii., chap i., note.]

[W. Douglass,
A Summary Historical and Political of the First Planting, Progressive Improvements and Present State of the British Settlements in North America, 1760, vol. ii., p. 364. Certain law officers’ fees in Washington were still computed in tobacco in 1888.—J. J. Lalor,
Cyclopædia of Political Science, 1888,
s.v. Money, p. 879.]

[Playfair, ed. of
Wealth of Nations, 1805, vol. i., p. 36, says the explanation of this is that factors furnish the nailers with materials and during the time they are working give them a credit for bread, cheese and chandlery goods, which they pay for in nails when the iron is worked up. The fact that nails are metal is forgotten at the beginning of the next paragraph in the text above.]

[For earlier theories as to these reasons see Grotius,
De jure belli et pacis, lib. ii., cap. xii., § 17; Pufendorf,
De jure naturæ et gentium, lib. v., cap. i., § 13; Locke,
Some Considerations 2nd ed., 1696, p. 31; Law,
Money and Trade, 1705, ch. i.; Hutcheson,
System of Moral Philosophy, 1755, vol. ii., pp. 55, 56; Montesquieu,
Esprit des lois, liv. xxii., ch. ii.; Cantillon,
Essai sur la Nature du Commerce en général, 1755, pp. 153, p. 355-357; Harris,
Money and Coins, pt. i., §§ 22-27, and cp.
Lectures, pp. 182-185.]

Plin. Hist. Nat. lib. 33. cap. 3. [‘Servius rex primus signavit aes. Antea rudi usos Romæ: Timæus tradit.’ Ed. 1 reads ‘authority of one Remeus, an ancient author,’ Remeus being the reading in the edition of Pliny in Smith’s library, cp. Bonar’s
Catalogue of the Library of Adam Smith, 1894, p. 87. Ed. 1 does not contain the note.]

[Ed. 1 reads ‘ weighing them’.]

[Ed. 1 reads ‘ with the trouble’.]

Politics, 1257a, 38-41; quoted by Pufendorf,
De jure naturæ et gentium, lib. v. cap. 1., § 12.]

[The aulnager measured woollen cloth in England under 25 Ed. III., st. 4, c. 1. See John Smith,
Chronicon Rusticum-Commerciale or Memoirs of Wool, 1747, vol. i., p. 37. The stampmasters of linen cloth in the linen districts of Scotland were appointed under 10 Ann., c. 21, to prevent ‘divers abuses and deceits’ which ‘have of late years been used in the manufactories of linen cloth. . . with respect to the lengths, breadths and unequal sorting of yarn, which leads to the great debasing and undervaluing of the said linen cloth both at home and in foreign parts.’—
Statutes of the Realm, vol. ix., p. 682.]

[Genesis xxiii 16.]

[‘King William the First, for the better pay of his warriors caused the
firmes which till his time had for the most part been answered in victuals, to be converted
in pecuniam numeratam.’—Lowndes,
Report containing an Essay for the Amendment of the Silver Coins, 1695, p. 4. Hume, whom Adam Smith often follows, makes no such absurd statement,
History, ed. of 1773, vol. i., pp. 225, 226.]

[Lowndes, Essay, p. 4.]


[The Assize of Bread and Ale, 51 Hen. III., contains an elaborate scale beginning, ‘When a quarter of wheat is sold for xii
d. then wastel bread of a farthing shall weigh vi
l. and xvi
s.‘ and goes on to the figures quoted in the text above. The statute is quoted at second-hand from Martin Folkes’
Table of English Silver Coins with the same object by Harris,
Essay upon Money and Coins, pt. i., § 29, but Harris does not go far enough in the scale to bring in the penny as a weight. As to this scale see below,
I.11.100, 114-116.]

[Ed. 1 reads ‘twenty, forty and forty-eight pennies’. Gamier,
Recherches sur la nature et les causes de la richesse des nations, par Adam Smith, 1802 tom. v., p. 55, in a note on this passage says that the sou was always twelve deniers.]

History of England, ed. of 1773, i. p. 226. Fleetwood,
Chronicon Preciosum, 1707, p. 30. These authorities say there were 48 shillings in the pound, so that 240 pence would still make £1.]

Money and Coins, pt. i., § 29.]

[‘It is thought that soon after the Conquest a pound sterling was divided into twenty shillings.’—Hume,
History of England, ed. of 1773, vol. i., p. 227.]

Hist. Nat., lib. xxxiii., cap. iii.; see below, vol. ii., pp. 468, 469.]

Money and Coins, pt. i., § 30, note, makes the French livre about one seventieth part of its original value.]

[The subject of debased and depreciated coinage occurs again below,
I.5.11-13,I.11.143-144; vol. ii.,
IV.6.16-32,V.3.61-65. One of the reasons why gold and silver became the most usual forms of money is dealt with below,
I.11.79-83. See Coin and Money in the index.]

Lectures, pp. 182-190, where much of this chapter is to be found, money is considered ‘first as the measure of value and then as the medium of permutation or exchange’. Money is said to have had its origin in the fact that men naturally fell upon one commodity with which to compare the value of all other commodities. When this commodity was once selected it became the medium of exchange. In this chapter money comes into use from the first as a medium of exchange, and its use as a measure of value is not mentioned. The next chapter explains that it is vulgarly used as a measure of value because it is used as an instrument of commerce or medium of exchange.]

Lectures, p. 157. Law,
Money and Trade, 1705, ch. i. (followed by Harris,
Money and Coins, pt. i., § 3 ), contrasts the value of water with that of diamonds. The cheapness of water is referred to by Plato
Euthydem. 304 B., quoted by Pufendorf,
De jure naturæ et gentium, lib. v., cap. i., § 6; cp. Barbeyrac’s note on § 4.]

[Ed. 1 reads ‘subject which is’.]