can produce a greater quantity of output. In his observations of pin factories, Smith noticed that one worker

alone might make 20 pins in a day, but that a small business of 10 workers (some of whom would need to

complete two or three of the 18 tasks involved with pin-making), could make 48,000 pins in a day. How can a

group of workers, each specializing in certain tasks, produce so much more than the same number of workers

who try to produce the entire good or service by themselves? Smith offered three reasons.

First, specialization in a particular small job allows workers to focus on the parts of the production process

where they have an advantage. (In later chapters, we will develop this idea by discussing comparative

advantage.) People have different skills, talents, and interests, so they will be better at some jobs than at others.

The particular advantages may be based on educational choices, which are in turn shaped by interests and
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