The theory of the division of labor is one of the cornerstones of economics. It is the very foundation of the scientific analysis of society and the market.
According to this theory, cooperation among any number of persons is more productive than the individual efforts of the same persons in isolation from one another. It follows that all individuals have an economic incentive to join forces with others, even if they do not like them for various other reasons. Such an incentive to seek association exists even for supermen or superwomen who are in all respects more productive than everyone else. Even they personally benefit from coordinating their activities with those of their less efficient associates.
The economic incentives springing from the division of labor explain the origin and nature of human societies. The basic economic laws that here come into play are therefore the starting point of Mises’s entire social philosophy, just as it has been the starting point of the greatest social philosophers before him. Which brings us to our subject and to a little quiz for our readers:
Who was the very first theorist of the division of labor?
Saint Thomas Aquinas?
Juan de Mariana?
Ludwig von Mises?
The answer will come as a surprise to readers who have not yet picked up a copy of the Republic (Politeia), written more than 2,400 years ago. The book purports to deal with the nature and conditions of a just republic, as well as with the perversions of justice in man and society. However, its discussion of these normative topics is squarely built upon a positive theory of the origin and nature of society. And at the heart of this theory, as we shall see, is a sophisticated account of the division of labor.
The author is the great Plato himself. A disciple of Socrates and teacher of Aristotle, Plato is the godfather of all western philosophers, good and bad. Libertarians heartily despise him as the arch-champion of totalitarian political schemes and the mentor of no less than nine Greek tyrants. Yet the fact is that he did pioneer the theory of the division of labor, and it is instructive to see precisely where he went wrong.
In book II of the Republic, Plato follows a macro approach to the analysis of justice. He deals with social organization because he expects to see here a larger image of the very same problems of justice that also exist on the micro level of individuals. This is why he deals, by way of a mental experiment, with the natural or spontaneous emergence of the political community or city (polis). He first deals with “simple cities” and then turns to “opulent cities.”
Plato starts off by identifying the better satisfaction of human needs as the root cause of association. Citizens live together with, and provide mutual support to associates and “assistants” such as slaves, because each citizen believes this to be in his individual self-interest. But how shall the productive efforts of the associates be organized? Without further ado, Plato pleads for a division of labor and gives three reasons:
there are natural productive differences between the individuals, which make one person a better tailor, while another one might be a better farmer, and so on;
the daily exercise resulting from specialization improves the workmanship;
many jobs need to be done at the right moment in time and therefore require permanent availability of some person charged with this task.
The overall result of the division of labor is therefore to increase the physical productivity of individual human effort, to facilitate this effort, and to make it more beautiful.
Thus Plato identifies the salient points that would come to be stressed by all major social philosophers after him, and he also reminds us not to indulge in a crudely materialistic conception of the benefits of association. But he does much more. He goes on to point out that the division of labor not only concerns consumers’ goods, but also producers’ goods. It extends to the production of tools for agriculture, construction, and the making of clothes, and it also pertains to the production of materials in forestry, forges, cattle breeding, and so on. Thus the division of labor grows; and the number of citizens grows too.
Moreover, Plato argues that the citizens need to cooperate not only among themselves, but also with people from other cities. This is because of the natural imperfections of the place where the city is built. In order to get merchandise from strangers, one needs to pay them with merchandise that is in short supply in their place. Therefore it is necessary for our citizens to produce in excess of their own needs.
Let us pause here for a moment to appreciate this fundamental insight, addressing the Greek philosopher in the immortal words of our greatest poet: “A word momentous calmly hast thou spoken!” (Iphigenia in Tauris, act I, scene 3)
Plato here brings up a crucial consideration. It is not the case, as Aristotle and most western social thinkers until the early 18th century had it, that exchange only concerns the “surplus” of production. If it did concern just an unplanned surplus, exchange would be merely superadded to production, and not be one of its driving forces. But Plato sees that exchange is a driving force of production, and he also sees the further implications of this fact. He realises that what is at stake here is, ultimately, the exchange of real goods and services. Like the classical economists, he penetrates beyond the surface of monetary payments and analyzes the underlying real forces that are here at work. To get merchandise from abroad, our citizens need to extend their production of certain domestic merchandise beyond their own needs of these products, and thus our city will further grow, because more people can be employed in the larger international division of labor. Furthermore, international cooperation entails the emergence of entirely new professions such as large-scale trade and shipping.
Even more than the classical economists, however, Plato neglects and even despises all monetary aspects of exchange. Markets and money are mere conveniences for distributing the products of the citizens. Hanging out on the market prevents the citizens from pursuing their main task. They therefore send out their most dispensable, physically feeble assistants to the market place, clearly implying that buying and selling are a pastime for the handicapped. And sure enough, neither these assistants nor the large-scale traders operating on international markets merit citizenship.
At the end of his analysis of the simple city, Plato brings up an interesting question: where in this story is the government—those charged with enforcing justice? His answer: “Probably in the dealings of these citizens with one another. I cannot imagine that they are more likely to be found anywhere else.” In other words, the definition and enforcement of justice is here very much a matter of private initiatives, as are all other productive efforts.
Plato now turns to the discussion of the opulent city, which comes into being when people give in to the temptation of the pleasures of life. They deviate from the simple ways of their ancestors to indulge in the satisfaction of new needs that require new products. Thus they sit on cushions and at tables, eat desserts, use pomades and fragrances, visit with prostitutes, and enjoy pastry, theater, and music concerts. Even their old needs are now satisfied with the help of more sophisticated products: walls are painted, tissues are colored, utensils are made out of gold and ivory, and so on. The economic implication is that the division of labor further increases. There are now much more professions than before, and the city grows in inhabitants.
At this point comes the fateful turn in Plato’s argument. He assumes, very much ad hoc, that the city now suddenly reaches the limits of its growth. It can be extended no further without expanding onto the land of neighboring individuals or cities. And these neighbors too, if their city grows as our city did under the impulse of opulence, will be able to grow only by occupying our land. Obviously, it was quite out of the question for Plato even to consider the possibility of buying land, or of creating a market for land, if none existed before. Rather, he concluded that the necessary land could only be taken by force. Opulence was therefore not just the cause of the decadence of individuals and society; it was the driving force of war.
Again Plato points out the economic consequences. To wage war, the division of labor must be further extended. Another profession comes into being: the very numerous profession of the armed forces—the “guardians.” Yet the presence of these people immediately raises a logical puzzle. Who guards the guardians?
After all, to be excellent in their job, these people need to have a bellicose mentality. But then how can one prevent them from fighting one another, rather than foreign enemies? Most importantly, how can one prevent them from fighting the citizens and turning themselves from guardians into tyrants? Plato’s solution is to select very special human beings for this job. He suggests selecting people with the mentality of dogs, who are soft on their master and his flock, but hard on any stranger. And he insists that dogs have a “philosophical nature,” because they are soft toward those whom they know (their master and his flock), but aggressive against those whom they do not know—a clear sign, in Plato’s eyes, that they love knowledge and hate ignorance.
Thus Plato prepares the ground for his famous plan of government by philosopher kings. It is not necessary for us to dwell on the obvious shortcomings of his analysis of the economic causes of war, and of the deductions which lead him to philosophical dogs and from there to philosopher kings.
In conclusion, let us rather stress that Plato was a great analyst of the division of labor, more pertinent on this question than Aristotle, and by and large unsurpassed until the 18th century. And let his example also stand as a warning that the slightest error in positive analysis may entail the most disastrous political misconceptions.
This article was originally published February 28, 2007.