One great challenge to today's university economics teachers is to find a way to arouse students' interests in economics. I say today's teachers because I suppose that students in the past were more interested in economics and so university teachers did not need to worry about this very much. Why is this a problem today? I may be biased but, based on my interactions with students, I guess today's high-school economics is not very interesting, and emphasizes memorizing things (at least as far as DSE economics is concerned; I will discuss some more about this later). It cannot arouse much interest in the subject. Even if students are interested in economics in high school, when they go to university, discovering that economics are quite different from what they have learned in high schools, they may quickly lose interests in economics. Thus, again, this poses a challenge to university economics teachers.
As such, in a recently held orientation day, I asked students which topics in high-school economics interested them most. Answers like demand and supply, money and banking, etc have been received, and these are not unexpected answers. One answer, to me, is somewhat unexpected: division of labour. At that time, my reply to the student is: this is a tasteful choice. I hadn't elaborated but actually this was also my choice: When I was a high school student, I found "division of labour" one of my most interested topic. I first encountered this topic in a subject called Social Studies in Form 3. Sadly, the topic was a small topic in high school. Not much I was told about it. Worse still, the topic can (almost) never be found again in university economics education. Normally, economists may mention it when they mention Adam Smith, the father of economics who is a well known advocate of this concept, but almost never mention it elsewhere. Does it mean what is considered important in high school (division of labour) is no longer considered important in higher level of economics?
My answer is: Not really. Although division of labour is not explicitly listed as a topic or subject anymore, it has been discussed in another name: international trade. Obviously, trade is a popular subject in university economics. Every economics department offers such an elective course. It is also a big topic in high school. In both contexts, the central concept in trade is comparative advantage, not division of labour. However, division of labour is effectively the underlining principle of comparative advantage and trades.
What does it mean? First, why is there benefit from division of labour? The concept is originally used to describe a worker's job. A worker can do everything in order to produce, say, a shoe, or he can do only a small part in the whole process, for example, just for making the leathers, or only for the heels, or only the shoelaces, etc. Of course, some workers are responsible for combining these parts into a shoe. Concentrating on only one small part of the whole process makes the job easier done and thus can be quickly finished. As such, division of labour greatly enhances productivity, given the same labour resource.
Understood. But why is this related to trade? The relation is not very clear as trade is often about the whole nation, not about individuals. Furthermore, a new concept of comparative advantage is introduced here. For example, England is relatively good at producing cloth while Portugal is relatively good at producing wine. If England specializes in cloth production while Portugal specializes in wine, and England trades with Portugal for getting wine by cloth, this enables both countries to have more clothes and wines, and both are better off. Here, jobs have not been divided into smaller parts. There does not appear to be a division of labour in trade.
But this difference is only apparent. The principle behind is essentially the same. A nation can produce both cloth and wine for the well being of its citizens. It is very much like a worker doing all the steps in producing a shoe. Now, the "whole job" of satisfying citizens can be "divided" into two parts: producing cloth and producing wine, and one nation does not do all the parts of this job: England does only the cloth part and Portugal does only the wine part. Finally, the two parts must be combined to produce the final product, "the well being of its citizens". Here, this final step goes through the process called "trade".
So, you can see: the structure of the problem is almost completely the same between trade and division of labour. Although one is concerned with the whole nation while another one is concerned with individuals, they are not so different in essence. In fact, division of labour between nations (one specializing in only one production activity) requires international trade: if there is no trade, each nation will not specialize but must produce both goods. Otherwise, they cannot get both goods, each of which deemed essential for their citizens' well being.
Of course, nowadays we understand more about how nations are engaged in the international division of labour and trade network. Therefore, the relation between trade and division of labour is indeed much closer than what is illustrated above. For instance, production of an iPhone involves international division of labour: US does only the product development and marketing part, its camera may be produced in Japan, batteries in South Korea, chips in Taiwan, and China does the assembly job, etc. When one part moves to another country for doing the remaining jobs, international trades are involved. From this perspective, not imaginable in the time of Adam Smith, the relation between the two aspects is actually very close.
Furthermore, why division of labour enhances productivity? At the individual level, we believe that a smaller part of the job is easier and so can be done more effectively. But if so, why this logic can't be used in the context of the whole nation? When one nation is doing only one job (producing either cloth or wine), this nation will find it easier to finish the job. Thus, division of labour in fact offers an extra reason (other than comparative advantage) to explain why nations should specialize and then trade.
On the other hand, if comparative advantage can explain why a nation should concentrate on doing only one job (producing one good), why this logic can't be used in the context of individuals? Different individuals, indeed, have different comparative advantage: strong and powerful persons may be more suitable for the part involving strength while patient and careful persons may be more suitable for the part involving details. Individuals' comparative advantage offers an extra reason (other than small jobs being easier) why division of labour enhances productivity.
Lastly, at the individual level, the final job of combining parts into the whole product is not achieved through "trade". But, again, this is only an apparent (not an essential) difference. Nowadays, many economists consider a firm is a place for "internal trade". When a worker hands over a part to another for completing the job, it is much like trades in market where suppliers offers intermediate goods to another firm for producing a final good. "Internal trade" saves the negotiation cost and risks involved in two workers' trades (if a firm did not exist). But this is sort of another form of trade. The essence between "internal trade" and "external trade" is not greatly different.
So, economists in fact do not forget division of labour. Just that they emphasize more on trade and will not bother build up these close links for the sake of students. This practice is not good for education purpose: students may find something emphasized very much in their early stage of study no longer taught again. The impression is that their knowledge is not accumulated progressively. If this is one reason why they do not like university economics, and sooner or later lose interests in economics, I think this practice should be changed: there should be more linkages built between high-school and university economics by adjusting either the former or the latter.
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