Agricultural Policy Review


I N 1776 Scottish philosopher Adam Smith published An Inquiry into the Nature and Causes of the Wealth of Nations, or as it is better known, The Wealth of Nations. In many mundane ways, Smith merely chronicled the burgeoning European industries he was observing; but, in doing so, he helped spread a revolutionary thinking about how factories could take advantage of specialization. Smith’s discussion of a visit to a pin factory has been re-told so often that many people probably know the story without knowing the source. The story goes like this: If you were to make a pin, how would you do it? Well, you need to cut some steel, pound and twist it into a wire, cut the wire, straighten it, sharpen one end, af􀏐ix a tiny ball to the other, and once, say, 100 were ready, box them up for delivery. Smith records 18 distinct tasks involved in making a pin and opines that an untrained 18th century worker Has Specialization Put a Limit on How Far Cattle Contracting Can Go? John M. Crespi and Tina L. Saitone jcrespi@iastate.edu; saitone@primal.ucdavis.edu could at best fashion one pin per day. Specialized training increases the output to a dozen per worker so that a factory of 100 workers might produce 1200 pins. However, in the modern pin factory he visited, instead of training one person to do everything, workers were each trained for just one of the 18 distinct tasks, and the factory produced 48,000 pins per day. From automobiles to computers to packinghouses, specialization increases output while lowering cost per unit. This revolution in specialization also leads to increased demand for inputs. As output increases, more and more inputs must be secured, whether those inputs are steel or soybeans, plastic or pigs. But what happens in industries that compete for those inputs? They often become concentrated