Introduction to Industrial Engineering
By Jane M. Fraser
The past and the future
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In 1776, Adam Smith published An Inquiry Into the Nature and Causes of the Wealth of Nations (available on line. Smith opened his book with a description of the specialization of labor, using a pin factory as an example. I quote this passage at length because it is a classic description, but also because it makes clear the increase in production that can be achieved.
To take an example, therefore, from a very trifling manufacture; but one in which the division of labour has been very often taken notice of, the trade of the pin-maker; a workman not educated to this business (which the division of labour has rendered a distinct trade), nor acquainted with the use of the machinery employed in it (to the invention of which the same division of labour has probably given occasion), could scarce, perhaps, with his utmost industry, make one pin in a day, and certainly could not make twenty. But in the way in which this business is now carried on, not only the whole work is a peculiar trade, but it is divided into a number of branches, of which the greater part are likewise peculiar trades. One man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations; to put it on, is a peculiar business, to whiten the pins is another; it is even a trade by itself to put them into the paper; and the important business of making a pin is, in this manner, divided into about eighteen distinct operations, which, in some manufactories, are all performed by distinct hands, though in others the same man will sometimes perform two or three of them. I have seen a small manufactory of this kind where ten men only were employed, and where some of them consequently performed two or three distinct operations. But though they were very poor, and therefore but indifferently accommodated with the necessary machinery, they could, when they exerted themselves, make among them about twelve pounds of pins in a day. There are in a pound upwards of four thousand pins of a middling size. Those ten persons, therefore, could make among them upwards of forty-eight thousand pins in a day. Each person, therefore, making a tenth part of forty-eight thousand pins, might be considered as making four thousand eight hundred pins in a day. But if they had all wrought separately and independently, and without any of them having been educated to this peculiar business, they certainly could not each of them have made twenty, perhaps not one pin in a day; that is, certainly, not the two hundred and fortieth, perhaps not the four thousand eight hundredth part of what they are at present capable of performing, in consequence of a proper division and combination of their different operations.
As you read this passage, you should be struck by the idea that Smith is describing a system as it would be organized by an industrial engineer. Part of the job of the IE is to decide how to use specialization to organize the production of goods. Thus, the concept of specialization is central to industrial engineering; it is also central to questions about the economic organization of society.
Specialization, or division of labor, leads to enormous benefits for society.
This enormous division of labor enhances our capacity a thousandfold, for it enables us to benefit from other people's skills as well as our own. (Heilbroner and Milbert, page 3)
As individuals, we don't need to know how to make a pin, fish, catch game, make bread, or fly a plane, but we can benefit from the skills of people who do know how to do those tasks. On the other hand,
Our abundance is assured only insofar as the organized cooperation of huge armies of people is to be counted upon. Indeed, our continuing existence as a rich nation hinges on the tacit precondition that the mechanism of social organization will continue to function effectively. We are rich, not as individuals, but as members of a rich society, and our easy assumption of material sufficiency is actually only as reliable as the bonds that forge us into a social whole. (Heilbroner and Milbert, page 3)
Although specialization produces enormous wealth, individuals are no longer able to provide for themselves. A failure of the economic system, such as the Great Depression in the 1930s, can leave people unfed and unhoused. While the struggle for existence is often thought of as a struggle with nature, this economic failure was not caused by an act of nature.
We are by no means the only nation that has, on occasion, failed to find work for large numbers of willing workers. In the very poorest nations, where production is most desperately needed, we frequently find that mass unemployment is a chronic condition. The streets of many Asian cities are thronged with people who cannot find work. But this, too, is not a condition imposed by the scarcity of nature. There is, after all, an endless amount of work to be done, if only in cleaning the filthy streets or patching up the homes of the poor, building roads or digging ditches. What is lacking is a social mechanism to mobilize human energy for production purposes. And this is the case just as much when the unemployed are only a small fraction of the work force as when they constitute a veritable army. (Heilbroner and Milbert, page 5)
Economics is the study of how societies organize themselves to produce and to distribute goods. In a traditional society, before specialization of labor, each individual or family unit provides for itself. Even if labor becomes specialized, traditional societies solve the organizational issues by, for example, having sons take on the trades of their fathers. Rules of kinship, for example, might determine the distribution of the game from a hunt. Such traditions or customs, however, can support only a static economy, not economic progress (Heilbroner and Milbert, pages 7-9).
Besides tradition, the other ways society has organized to produce and distribute goods are, broadly described, command and market. In authoritarian economic organization, an individual or group commands people where to work. For example, the United States has used such methods during war time or during natural disasters.
Even in America, we commonly declare martial law when an area has been devastated by a great natural disaster. On such occasions we may press people into service, requisition homes, impose curbs on the use of private property such as cars, or even limit the amount of goods a family may consume. (Heilbroner and Milbert, page 10)
Unlike tradition, which cannot support economic change, command, it can be argued, is an effective way to enforce economic progress, as seen in communist China or Russia (Heilbroner and Milbert, page 10).
We live, of course, in an economy that is primarily based on the market; that is, an economy based on individual choice. Specialization of labor means that individuals offer differ skills and work at different jobs.
Helibroner and Milbert's book The Making of Economic Society explains much more about how our economic system developed and how it worked; I highly recommend the book.
My short presentation here has one more point: notice the two meanings of the work economic or economy. The industrial engineer is concerned with finding the most economical way to perform a task in a production process; "economy" here means wise use of resources within the organization. The economist is concerned with understanding how the national economy works; "economy" here means the system for producing and distributing goods.