EH.Net Abstracts in Economic History

      ABSTRACTS IN ECONOMIC HISTORY
                    (c) 1999 EH.Net
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Name:  Chi-Chu Chou
Email:  ccchou at ms2.hinet.net
Institution:  Feng Chia University

Co-author:

Title:  Adam Smith versus James Buchanan's Internal Increase in Market
Size: An Extension of the Division of Labor?

Internet Address of abstracted work:

By mail:
Chi-Chu Chou
Department of Economics
Feng Chia University
100 Wen Hwa Rd.
Taichung, Taiwan R.O.C.

Language:  English

Abstract:
One of the core implications of Adam Smith's argument that the division of
labor is limited by the extent of market is that there must exist an
economy-wide increasing return. James Buchanan furthers this line of
thinking by incorporating the supply of labor based on individual optimal
choice among work and leisure time. Buchanan finds that an increase in
individual supply of labor has a positive externality and increasing
returns, which is called "internal increase" in market size. In addition,
without the presence of work ethic, a resulting decrease in work supply
will have a negative external effect. This source of market expansion was
neglected by Adam Smith and other classical economists. This paper examines
closely the five interrelated subjects of Adam Smith's view on individual
work and investment in human capital: including productive and unproductive
labor, the stage of development, capital accumulation and labor
productivity, on-the-job investment and human capital accumulation, and the
division of labor and human life. A tentative conclusion is that if one
further extends the degree of the division of labor to include household
production, then an optimal decrease in individual work hours may not cause
negative externalities as implied in Buchanan's analysis. Moreover, the
inclusion of household production is not inconsistent with overall
implications derived from Adam Smith.

Bibliography:  Chou, Chi-Chu.  "Adam Smith versus James Buchanan's Internal
Increase in Market Size: An Extension of the Division of Labor?"  Paper
presented at the Conference on Methodology and History of Economic Thought,
Feng Chia University, May 15, 1999.

Subject:  L
Geographical Area:  0
Country/Region:
Time Period:  6, 7

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