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Division of labor is immensely important in our economic system because it allows for work to be done much more quickly and efficiently than it would be without the division of labor.
Division of labor is when tasks are split up into specialized separate tasks. For example, instead of having one skilled person make an entire shoe by themselves, we have an assembly line of people, each of whom does one part of the shoe-making task. This allows each person to get good at doing one thing over and over.
Division of labor is essential to our economy because it allows for the highly specialized, assembly line production systems that allow us to have such inexpensive goods available to us.
Division of labor is important in any economic system because it allows for the maximization of efficiency in a manufacturing process, as well as in other economic sectors. By breaking a process down into components, with each component assigned to the individual(s) best suited to that task, the entirety of the process is rendered more efficient. As Adam Smith postulated in Wealth of Nations:
"The division of labour, however, so far as it can be introduced, occasions, in every art, a proportionable increase of the productive powers of labour. . .First, the improvement of the dexterity of the workman necessarily increases the quantity of the work he can perform; and the division of labour, by reducing every man's business to some one simple operation, and by making this operation the sole employment of his life, necessarily increases very much the dexterity of the workman."
A division of labor improves efficiency and, consequently, productivity. While Smith was principally interested in a free market economic system, the concept is not alien to Smith's antithesis, socialism. The socialist mantra, mistakenly attributed to Karl Marx (who popularized the phrase but didn't invent it) of "From each according to his ability, to each according to his need" is conceptually related to the concept of a division of labor insofar as it allows for specialization ("from each according to his abilities") as an intrinsic part of an economic system. There is no question, however, that the concept is more closely associated with capitalist economic systems. The association of individuals possessed of particular skills with components of a process for which those skills are best suited presented, according to Smith, the greatest potential for economic growth.
On a different level, the concept of a division of labor has its parallel in international trade, in which countries focus their productive energies on those areas to which they are best suited while importing from other nations those goods that it can economically produce itself. Economic inefficiency, then, occurs when nations devote resources towards the production of goods that can be more inexpensively purchased abroad. While reasonable, however, the concept of a division of labor when applied internationally ignores the determination of many governments to retain certain manufacturing processes irrespective of cost for reasons of national interest, including security.
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