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No mere tautology: the division of labour is limited by the division of labour

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  • Andrew Smyth
  • Bart J Wilson

Abstract

We explore the intersection of growth theory and the theory of the firm with an experiment. Economic growth is possible in our experiment when agents specialize to exploit increasing returns. We find that low opportunity costs are sufficient for Marshallian internal economies, but that Marshallian external economies are slow to emerge in four probing treatment conditions. Transaction costs do not hamper external economies as we anticipated prior to collecting data. When external economies falter, it is because new ideas of more extensive specialization fail to emerge. Ideas make further divisions of the division of labour—and thus economic growth—possible. Conversely, a lack of ideas make further divisions of labour and economic growth impossible. Our data reveal how the likelihood of new ideas is inseparably tied to the existing extent of specialization.

Suggested Citation

  • Andrew Smyth & Bart J Wilson, 2021. "No mere tautology: the division of labour is limited by the division of labour," Oxford Economic Papers, Oxford University Press, vol. 73(1), pages 371-398.
    • Handle: RePEc:oup:oxecpp:v:73:y:2021:i:1:p:371-398.
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    File URL: http://hdl.handle.net/10.1093/oep/gpz067
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    References listed on IDEAS

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    1. Sean Crockett & Vernon L. Smith & Bart J. Wilson, 2009. "Exchange and Specialisation as a Discovery Process," Economic Journal, Royal Economic Society, vol. 119(539), pages 1162-1188, July.
    2. McCloskey, Deirdre Nansen, 2006. "The Bourgeois Virtues," University of Chicago Press Economics Books, University of Chicago Press, number 9780226556635, January.
    3. Nick Feltovich, 2003. "Nonparametric Tests of Differences in Medians: Comparison of the Wilcoxon–Mann–Whitney and Robust Rank-Order Tests," Experimental Economics, Springer;Economic Science Association, vol. 6(3), pages 273-297, November.
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    Cited by:

    1. Klockmann, Victor & von Schenk, Alicia & von Siemens, Ferdinand A., 2021. "Division of labor and the organization of knowledge in production: A laboratory experiment," Games and Economic Behavior, Elsevier, vol. 130(C), pages 196-210.
    2. Wilson, Bart J. & Farese, Gian Marco, 2022. "A Universally Translatable Explication Of Adam Smith’S Famous Proposition On “The Extent Of The Market”," Journal of the History of Economic Thought, Cambridge University Press, vol. 44(3), pages 393-412, September.

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    More about this item

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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