One of the famous anecdotes in economics is about division of labor in a pin factory, as told in the third paragraph of The Wealth of Nations.
(One suspects the fame of the story is partly related to the fact anyone who cracks open the book will find it at the very beginning.) Adam Smith notes in the text that his example was already common at the time he used it. But those who specialize in this area have pointed out that Smith’s example was based on second- and third-hand reporting, while actual studies of pin-making in the 18th century suggest that it may not be a great example of the gains from division of labor.
As a starting point, here’s how Adam Smith tells the pin factory story in the third paragraph of The Wealth of Nations:
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 manufacturer 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 indifferently accommodated with the necessary machinery, they could, when they exert themselves, make among them about twelve pounds of pins in a day. There are upwards of four thousand pins of a middling size. Those ten persons, therefore, could make 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.
When Smith writes at the start that pin manufacturing is “one in which the division of labour has been very often taken notice of,” what does he have in mind? The standard answer seems to be an entry in Denis Diderot’s Encyclopedia, published in 1755, which seems partially correct. Jean-Louis Peaucelle and Cameron Guthrie dig deeper in “How Adam Smith Found Inspiration in French Texts on Pin Making in the Eighteenth Century” (History of Economic Ideas, 2011, 19: 3, pp. 41-67, available via JSTOR). They write:
Adam Smith used four French sources on pin-making: Journal des sçavans, 1761, Delaire’s article «Pin» in Diderot’s Encyclopaedia (1755), Duhamel’s The pinmaker’s art (1761), and Macquer’s Portative arts and crafts dictionary (1766) … We will see that the original texts do not support Smith’s analysis. The workers were specialized in eight or nine trades, and not eighteen as Smith understood. In a workshop there were many workers for heading but very few for cutting the pins, for example. Attempts to divide this latter operation further were unsuccessful. One of the original texts that Smith did not consult also provides an example of production without specialisation where productivity was a hundred times higher than Adam Smith believed.
However, the works on which Smith was drawing were often second-hand, based on earlier research. Apparently, the studies of pin-making in France apparently started around 1675, King Louis XIV asked the French Academy of Sciences to write up a detailed description of the arts and crafts. After some local efforts along these lines by trade inspectors, the first of these reports by Gilles Filleau des Billette was completed in 1702, but never published. However, he described 12 operations involved in making pins, calculated a speed of production for 10 of the operations, and provided a picture of the tools used for each one, with four workers carrying out the tasks.
Thus, Mathieu de Guéroult de Boisrobert, known as Guéroult, did a new study in 1715. He describes seven occupations involved in pin-making, although it’s not clear that they are done by seven different people.
“The first printed text about pin making is an article in the Universal trade dictionary, published in 1723 by Savary. Jacques Savary des Bruslons (1657-1715) was director of customs and collected for his own use all available information from the central Royal Administration and Academy. This information formed the basis of his dictionary.” He wrote that pin-making involved “more than 25 laborers, working in succession.” But this seems to involve an assumption that there was a different laborer for each task named in the earlier reports, rather than each laborer taking on multiple tasks.
Next in line was Jean-Rodolphe Perronet, who wrote an unpublished manuscript in 1739, which although it was a new work had a description quite similar to that of Guéroult–perhaps not surprising, given that Perronet succeeded Guéroult as an engineer in Avignon.
All of this leads up to the article in Diderot’s Encyclopedia by Alexandre Delaire: “Delaire wrote as if he had personally observed workshop activity: «this article is written by Mr. Delaire who describes the manufacture of pins in the workshops with the workers themselves» (Delaire 1755, 807). But this was not true. An analysis of the parts of Delaire’s article reveals his sources. The technical vocabulary was copied from previous descriptions of pin making, authored by Savary, Guéroult, Perronet, and Réaumur.” Apparently what happened here was that in an earlier version of the Encyclopedia, the Jesuits accused Diderot of copying their article on pins. So Diderot hired Delaire, who ‘had studied literature and knew very little about technology,” to write up a blend of the earlier sources in a way that wouldn’t be susceptible to the accusation of copying.
There’s more about all these linkages, but for the purposes of economists referring to this example today, perhaps the more interesting question is not the interrelationship between all the sources, but whether Adam Smith is basically telling the truth about pin manufacturing. There is reason for doubt.
1. At a basic level, the count of operations in pin-making is suspect. Delaire is the one who came up with 18 “operations,” but in most places, these did not involve separate workers. At most, there seem to be 8 or 9 different types of workers.
2. Smith’s estimate of the number of pins to be made by a single person in a day is made up. The 1723 report from Savary suggests: “The productive power of labour would be some 2,000 pins per day and per pin-maker working without any division of labour. Productivity im provements would not have been as spectacular as Adam Smith imagined. They would have been closer to a factor of 2.4 rather than 240.”
3. In pin-making around Smith’s time, pin-makers with fewer employees seemed to compete with those with more employees on an equal basis. They all seemed to draw from the same pool of unskilled labor, and to pay similar wages. In that sense, pin-making firms with greater division of labor did not seem more efficient, and workers often switched between tasks rather than specializing in a certain task.
In 1794 an inventory of workshops was undertaken in Bourth, 10 km from Laigle. 500 pinmakers worked in 70 workshops. The average of 7 workers per workshop however is misleading. 40% of workers were employed in small workshops of 6 people of less, 40% in workshops of 7 to 9 workers, and 20% in large workshops with 10 to 20 workers (Marchand 1966, 35). Workshops of different sizes coexisted. The organisation of labour varied according to the size of the workshop. It was not standardized. There were no economies of scale, nor any productivity gains in large workshops where pin makers could be more specialized. No workshop would have had a significant advantage over another. The productivity of labour and the level of wages were the same. More di vided labour wasn’t more productive. The theory of the division of labour does not hold true in Smith’s first example, that of pin making.
4. The most important division of labor in pin-making during the 18th century may have been that certain tasks were reserved for men or for women. In his 1715 study, Guéroult noted that there were roughly twice as many women as men in the pin-making firms, focused on certain tasks (like putting the heads on pins), and typically paid less than half as much. This particular aspect of the division of labor typically goes unmentioned in modern pedagogy.
A few years ago, John Kay looked at this evidence and argued that teaching about the division of labor was useful, even if Smith’s use of the historical evidence was oversimplified at best. Kay wrote:
We might conclude that neither Smith nor Ferguson, neither Diderot nor Delaire, knew anything about the pin factories they claimed to describe. But does it matter? The two Frenchmen are more worthy of censure, because their readers might have been misled into thinking that their description provided guidance as to how you made pins. The two Scotsmen were making an important, and justly influential, argument even if the particular illustration they used in its support was wrong. In business schools, I have sometimes engaged in arguments over whether the case studies that teachers use to illustrate issues need to be true. The lesson of the pin factory is that it probably doesn’t matter. My students needed to understand the division of labour. Few if any needed to understand techniques of manufacturing pins in eighteenth century France.
In a similar spirit, Peaucelle and Guthrie conclude their article by writing: “The weak probative value of his [Adam Smith’s] pin-making example takes nothing away from the reach of his economic ideas.”
I have qualms on this point. Examples should stand and fall, at least to some extent, on their actual merits, not on whether they are picturesque. At very least, when using an historical example that is vivid and imperfect, it seems important to know something of the strengths and weaknesses that lurk in the background.
Timothy Taylor is an American economist. He is managing editor of the Journal of Economic Perspectives, a quarterly academic journal produced at Macalester College and published by the American Economic Association. Taylor received his Bachelor of Arts degree from Haverford College and a master's degree in economics from Stanford University. At Stanford, he was winner of the award for excellent teaching in a large class (more than 30 students) given by the Associated Students of Stanford University. At Minnesota, he was named a Distinguished Lecturer by the Department of Economics and voted Teacher of the Year by the master's degree students at the Hubert H. Humphrey Institute of Public Affairs. Taylor has been a guest speaker for groups of teachers of high school economics, visiting diplomats from eastern Europe, talk-radio shows, and community groups. From 1989 to 1997, Professor Taylor wrote an economics opinion column for the San Jose Mercury-News. He has published multiple lectures on economics through The Teaching Company. With Rudolph Penner and Isabel Sawhill, he is co-author of Updating America's Social Contract (2000), whose first chapter provided an early radical centrist perspective, "An Agenda for the Radical Middle". Taylor is also the author of The Instant Economist: Everything You Need to Know About How the Economy Works, published by the Penguin Group in 2012. The fourth edition of Taylor's Principles of Economics textbook was published by Textbook Media in 2017.