The importance of trade between people and nations to the economic specialization

Prehistory[ edit ] Trade originated with human communication in prehistoric times. Trading was the main facility of prehistoric people, who bartered goods and services from each other before the innovation of modern-day currency. Peter Watson dates the history of long-distance commerce from circayears ago.

The importance of trade between people and nations to the economic specialization

Plato[ edit ] In Plato 's Republicthe origin of the state lies in the natural inequality of humanity, which is embodied in the division of labour. Well then, how will our state supply these needs? It will need a farmer, a builder, and a weaver, and also, I think, a shoemaker and one or two others to provide for our bodily needs.

So that the minimum state would consist of four or five men Silvermintz notes that, "Historians of economic thought credit Plato, primarily on account of arguments advanced in his Republic, as an early proponent of the division of labour.

The importance of trade between people and nations to the economic specialization

Just as the various trades are most highly developed in large cities, in the same way food at the palace is prepared in a far superior manner. In small towns the same man makes couches, doors, ploughs and tables, and often he even builds houses, and still he is thankful if only he can find enough work to support himself.

And it is impossible for a man of many trades to do all of them well. In large cities, however, because many make demands on each trade, one alone is enough to support a man, and often less than one: In his Muqaddimahhe states: The power of the individual human being is not sufficient for him to obtain the food he needs, and does not provide him with as much as he requires to live.

Even if we assume an absolute minimum of food Thus, he cannot do without a combination of many powers from among his fellow beings, if he is to obtain food for himself and for them.

Through cooperation, the needs of a number of persons, many times greater than their own number, can be satisfied. Classically the workers in a shipyard would build ships as units, finishing one before starting another.

Simplified theory of comparative advantage

But the Dutch had it organized with several teams each doing the same tasks for successive ships. People with a particular task to do must have discovered new methods that were only later observed and justified by writers on political economy.

Petty also applied the principle to his survey of Ireland. His breakthrough was to divide up the work so that large parts of it could be done by people with no extensive training.

Bernard de Mandeville[ edit ] Bernard de Mandeville discusses the matter in the second volume of The Fable of the Bees This elaborates many matters raised by the original poem about a 'Grumbling Hive'.

Amplification of the theory

But if one will wholly apply himself to the making of Bows and Arrows, whilst another provides Food, a third builds Huts, a fourth makes Garments, and a fifth Utensils, they not only become useful to one another, but the Callings and Employments themselves will in the same Number of Years receive much greater Improvements, than if all had been promiscuously followed by every one of the Five.

David Hume[ edit ] When every individual person labors apart, and only for himself, his force is too small to execute any considerable work; his labor being employed in supplying all his different necessities, he never attains a perfection in any particular art; and as his force and success are not at all times equal, the least failure in either of these particulars must be attended with inevitable ruin and misery.

Society provides a remedy for these three inconveniences. By the conjunction of forces, our power is augmented: By the partition of employments, our ability increases: And by mutual succor we are less exposed to fortune and accidents.

We are going to go through these operations in a few words to stimulate the curiosity to know their detail; this enumeration will supply as many articles which will make the division of this work.

Adam Smith[ edit ] In the first sentence of An Inquiry into the Nature and Causes of the Wealth of NationsAdam Smith foresaw the essence of industrialism by determining that division of labour represents a substantial increase in productivity.

Division of labour - Wikipedia

Like du Monceau, his example was the making of pins. Unlike PlatoSmith famously argued that the difference between a street porter and a philosopher was as much a consequence of the division of labour as its cause.

Therefore, while for Plato the level of specialization determined by the division of labour was externally determined, for Smith it was the dynamic engine of economic progress. However, in a further chapter of the same book Smith criticizes the division of labour saying it can lead to "the almost entire corruption and degeneracy of the great body of the people.

Smith saw the importance of matching skills with equipment — usually in the context of an organization. For example, pin makers were organized with one making the head, another the body, each using different equipment.

Similarly he emphasised a large number of skills, used in cooperation and with suitable equipment, were required to build a ship. In modern economic discussion, the term human capital would be used.

Smith's insight suggests that the huge increases in productivity obtainable from technology or technological progress are possible because human and physical capital are matched, usually in an organization. See also a short discussion of Adam Smith's theory in the context of business processes.

Babbage wrote a seminal work "On the Economy of Machinery and Manufactures" analyzing perhaps for the first time the division of labour in factories.International trade is the exchange of goods and services between countries.

This type of trade gives rise to a world economy, in which prices, or supply and demand, affect and are affected by. Now that companies can source capital, goods, information, and technology from around the world, often with the click of a mouse, much of the conventional wisdom about how companies and nations.

Economy - Nahhas, Eichhorst tackle buttressing bilateral ties Thu 3/05/ NNA - 3/5/ - Economy and Trade Minister Nicolas Nahhas Thursday engaged in talks concerning bolstering economic ties with the EU during his meeting with Ambassador Angelina Eichhorst. Imagine a scenario where there is no trade between countries.

This would imply that: 1. Each country would have to produce and consume the entire gamut of products and services that are required by its people. The Theory of Comparative Advantage - Overview. Historical Overview. The theory of comparative advantage is perhaps the most important concept in international trade theory.

Globalization, as a concept, refers both to the "shrinking" of the world and the increased consciousness of the world as a whole. It is a term used to describe the changes in societies and the world economy that are the result of dramatically increased cross-border trade, investment, and cultural exchange.

Advantages and Disadvantages of Foreign Trade