Front Page Titles (by Subject) Exchange and the Division of Labor - The Economic Point of View
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Exchange and the Division of Labor - Israel M. Kirzner, The Economic Point of View 
The Economic Point of View: An Essay in the History of Economic Thought, ed. with an Introduction by Laurence S. Moss (Kansas City: Sheed Andrews McMeel, 1976).
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Exchange and the Division of Labor
However, the significance of an economics defined as a science of exchanges may be seen, not in the nature of the act of exchange itself, but in its wide consequences. The market may be viewed, not as an institution facilitating the indirect fulfilment of individual desires (in Wicksteed’s sense of disregarding the competitive interests of other people), but on the contrary, as an institution through which individuals may cooperate to satisfy their wants at higher general levels of satisfaction. As Smith pointed out, each individual, by indulging his propensity to truck, unconsciously helps society as a whole to benefit through the increased division of labor. The “general opulence” associated with specialization is a consequence of this propensity to truck and may arise without any knowledge on the part of the barterers of the “extensive utility” that they promote.
This idea is, of course, related to Smith’s “invisible hand,” which directs each member of the economic community to produce that which is most urgently required by the consumers. Looking at the market, the observer recognizes that the benefits of the division of labor in increasing the nation’s output would, at least in principle, be obtained if the producers and consumers could be induced to specialize by any means whatsoever. A system in which productive effort was inspired by the hope of being accorded public honor, such as Marshall has imagined,20 or by the communistic ideal, in which the sole incentive is the desire to promote social welfare, or by a system of police compulsion, can be imagined as directing individual effort into channels sufficiently specialized to increase the total product far beyond what could be achieved by a primitive autarky. The exchange system embodied in the market is only one of several conceivably efficient mechanisms to attain this end; and its distinctive feature in Smith’s view is that this “end” need never be consciously aimed at by any participant in the market.
This remarkable property of the exchange system may thus well be seen as the central thread uniting all economic endeavor. Since of all the possible devices capable of attaining economic specialization only the market system can evolve spontaneously, and it alone is compatible with conventional notions regarding private property rights, the act of exchange emerges as the key to all social cooperation. There seem grounds for suggesting that the early proponents of catallactics did, in fact, have this aspect of exchange in mind. Whately was not thinking of the act of exchange as merely an expression of a more sophisticated avarice. The unwillingness to accord Crusoe the edification of being made the subject of economic analysis was simply the expression of the belief that political economy was primarily interested in the exciting new vistas of social cooperation made possible by the division of labor that was being encouraged by the rise of modern capitalism. Whately’s interest in man as an exchanging animal arises from the tendency of individuals to become associated through acts of exchange and thus to pool their human and acquired resources for the ultimate benefit of all. It is of some interest to note that two eminent sociologists, Gabriel Tarde and Max Weber, saw this aspect of exchange as the central feature of economic life.21 The charge raised against the catallactic definitions that they have failed to eliminate the concept of wealth from their subject undoubtedly has some validity on such an interpretation. The recognition, in the existence of a system of exchange, of a factor favorable to the expansion of total production does presuppose concepts of measurements that, again, imply some form of the idea of wealth.
[]A. Marshall, The Present Position of Political Economy (London, 1885), pp. 22–25.
[]See especially G. Tarde, Psychologie économique (Paris, 1902), pp. 151 f., for the use of this aspect of exchange to distinguish between economics and politics. On Weber's position, see above, n. 16; see also shils and Finch, eds., Max Weber on the Methodology of the Social Sciences (Glencoe, 1949), p. 63; M. Weber, Gesammelte Aufsätze zur Wissenschaftslehre (Tübingen, 1922), pp. 365–366.