The division of labor and the introduction of machinery together with the closely related extension of the size of the markets have done much to increase the size of the typical business unit. Where the size of the market warrants it, goods can, as a general thing, be produced more cheaply on a large scale. A machine can be used only when an operation is to be repeated in exactly the same way a great number of times. With the growth of markets it becomes even more economical to introduce machinery. A large establishment turning out a great number of articles daily can employ machinery in many operations where a small business turning out only a few articles cannot afford to install the machines. In these cases the large establishment will produce the article more cheaply and the small establishment with the higher cost may not be able to remain in the competition. Moreover, in the employment of the labor force, on account of the division of labor, the large establishment can practice many economies in production which are not open to the smaller business. High-grade superintendents may find an outlet for their energies in the large establishment. High-priced experts may be employed. Division of labor among the lower grade workers may be introduced on a larger scale in the larger business unit.

There are economies in the handling of the material which the large business may practice but which are denied to the small business. By-products of various kinds which would be thrown away by the small business may be utilized in the large business. In the purchase of materials, the large business is often able to buy cheaper than the small business. In the selling of the product other economies are possible. Advertising represents such a possibility, as does also the fact that the selling force may be more economically utilized where the volume of sales is large. The possibility of. experimenting with new methods and devices is open to the large business where their employment would be impracticable for the small business. From these considerations it follows that in many lines of enterprise the small business is driven out of the competition with the large business and the larger business unit remains the type for the enterprise. 78. Small scale business. - The advantages of large scale production are seen at their best in the manufacturing field. In agriculture, on the other hand, these advantages are at a minimum. This is due to the fact that the division of labor is more elaborate in manufacturing industries than in farming. In fact, one might speak of union of labor as more characteristic of farm work than division of labor. On the farm, on account of changes in seasons and weather, it is impossible to keep each man doing a particular kind of work all the time, and in the course of the day it may be necessary to change from one occupation to another. In the factory, where the worker is performing one task over and over again all day, it is easy to check up his work and to see that he does not waste time, whereas on the farm, where the tasks are varied, oversight over the laborer is difficult. One foreman cannot superintend the work of a large number of men on the farm as he can in a factory. As a general thing in those occupations where oversight over the labor is difficult, small scale operation of business will be preferable to large scale operation.

Questions

1. What is the problem of industrial organization?

2. Name the three stages in the movement towards labor specialization and show how they differ from each other.

3. Define division of labor and explain the different forms of division of labor.

4. Why is divided labor more productive than undivided labor?

5. How does the division of labor affect the introduction of machinery?

6. What is the relation between the division of labor and the extension of the market?

7. Of what importance is the principle of interchangeable parts in machinery?

8. Name the principal advantages derived from the division of labor. The principal disadvantages.

9. What are the advantages of large scale production? Of small scale production?

Supplementary Reading

Bucher, Industrial Evolution, Chaps. vii. and viii. Johnson, Introductory Economics, Chap. vii. Marshall, Principles, Book IV., Chap. ix. Seager, Principles, Chap. x. Seligman, Principles, Chap. xix. Taussig, Principles, Chap. iii.