Chris House has a post connecting Adam Smith’s Wealth of Nations to inequality. Specifically, he notes that the flipside to the division of labo(u)r that Smith attributes for an increase in productivity is that workers become more specialized and therefore more exposed to economic shocks specific to their industry. House notes that the typical economic response to risk is insurance, but that such “career insurance” is not available. Mark Thoma points out that this market failure suggests a role for government.
Having just re-read the relevant portion of Wealth of Nations for my Urban Policy course, I want to highlight another section:
The difference of natural talents in different men is, in reality, much less than we are aware of; and the very different genius which appears to distinguish men of different professions, when grown up to maturity, is not upon many occasions so much the cause, as the effect of the division of labour. The difference between the most dissimilar characters, between a philosopher and a common street porter, for example, seems to arise not so much from nature, as from habit, custom, and education. When they came into the world, and for the first six or eight years of their existence, they were perhaps, very much alike, and neither their parents nor playfellows could perceive any remarkable difference. About that age, or soon after, they come to be employed in very different occupations. The difference of talents comes then to be taken notice of, and widens by degrees, till at last the vanity of the philosopher is willing to acknowledge scarce any resemblance. But without the disposition to truck, barter, and exchange, every man must have procured to himself every necessary and conveniency of life which he wanted. All must have had the same duties to perform, and the same work to do, and there could have been no such difference of employment as could alone give occasion to any great difference of talents.
Smith is obviously on the “nurture” side of the nature vs. nurture debate, arguing that people are “very much alike” but become differentiated by “habit, custom, and education.” These differences are necessary for the division of labor that makes society as a whole more productive, but often come to be mistaken for natural abilities (I would also argue they may become mistaken for the natural consequence of effort and hard work). The differences continue to widen to the degree that “the vanity of the philosopher is willing to acknowledge scarce any resemblance” to the common street porter.
Smith isn’t denying the success of the philosopher, but arguing that it was made possible through specialization that depends on other individuals, even the common porter. It is the “You Didn’t Build That” argument in 1776 and still has clear relevance in the age the 1% vs. the 99%.