Wealth of Nations, Chapter 3

  1. The power of trading gives rise to the division of labor (as we saw in chapter 2).
  2. The extent of the division of labor is limited by the extent of trade, or, in other words, by the extent of the market.
  3. When the market is small an individual must do multiple tasks because there aren't enough others he can trade with to obtain the goods he desires or needs.
  4. There are some jobs that are available only in a large city.
    1. Example: a person who carries baggage at a hotel or railroad (i.e. a porter) can only find work in a large city. Porter is an occupation much too marrow for any place other than a large city.
  5. In the scattered settlements of the Highlands of Scotland every farmer must be a butcher, baker and brewer. There are not enough people to keep, say, a brewer occupied full-time. So, there are few brewers. A typical family lives far from a brewer. So the family does its own brewing, which reinforces the inability to keep a brewer occupied full-time, and the cycle repeats:

    Insufficient business reinforces itself

  6. Conversely, if there are many people in need of a brewer then there will be numerous brewers. Likely a brewer will live nearby, so a person will patronage the brewer rather than doing it themselves. This reinforces the ability of the brewers to specialize:

    Sufficient business reinforces itself

  7. At what population density level does a switchover from doing it yourself to using a specialist occur?
  8. In a big city a carpenter can specialize to a high degree. For example, my brother is a carpenter in a big city, he only does framing. Others lay the foundation, roofing, and finishing.
  9. A country carpenter would do all tasks related to carpentry - framing, laying the foundation, roofing, and finishing.
  10. Consider a nailer in the inland parts of the Highlands of Scotland. Such a workman at the rate of a thousand nails a day, and three hundred working days a year, will make 300,000 nails in the year. But in such a scattered location it would be impossible to dispose of even 1,000 nails in a year.
  11. By means of water-carriage a more extensive market is opened to every sort of industry than what land-carriage alone can afford.
  12. It is upon the sea-coast, and along the banks of navigatable rivers that industry of every kind naturally begins to subdivide and specialize.
  13. Inland parts of a country see the subdividing and specializing a long time after.
  14. Let's take an example which illustrates how waterways open a market
    1. A semi-trailer truck, attended by two men, in about a week's time carries and brings back between Boston and Miami nearly 16 tons of goods. In about the same time a ship navigated by 6-8 men, and sailing between Boston and Baltimore, carries and brings back 200 tons of goods.
    2. 6-8 men, therefore, by the help of a ship, can carry and bring back in the same about of time the same quantity of goods as 14 semi', attended by 28 men:
      Water Transport Land Transport
      200 tons 200 tons
      6-8 men 14 men
      wear and tear of a ship burdened at 200 tons wear and tear of 14 semi's,each burdened at 16 tons
    3. Few goods could bear the expense of a long land-carriage. However, the cost of a water-carriage would be much lower.
  15. Throughout history the seacoast cities have developed much faster than inland cities.