In Chapter 3 of Book II of The Wealth of Nations (available here), Adam Smith draws yet another fundamental distinction, [1] this one between so-called “productive” and “unproductive” professions or pursuits. Smith does not use these terms in a judgmental or normative sense. Both types of labour are, for Smith, “useful” but only one produces durable goods with a definite lifespan (like cars, furniture, houses, etc.), while the other type, by contrast, produces transitory services that are consumed on the spot (like a play or puppetshow, to borrow two of Smith’s own examples).

In brief, Smith’s paradigmatic example of a productive worker is “the labour of the manufacturer”: his labor is productive in a literal sense because it “fixes and realizes itself in some particular subject or vendible commodity, which lasts for some time at least after that labour is past.” (WN, II.ii.1) Consider, for instance, Smith’s famous pin factory example in Chapter 1 of Book 1 of The Wealth of Nations: the workers on the floor of the pin factory are “productive” (again, in a literal sense) because they are manufacturing long-lasting products that can then be used for sewing and other productive activities.

By the same token, Smith’s textbook example of an unproductive worker is “the menial servant.” (WN, II.ii.1) His work is “unproductive” in the Smithian sense because it “does not fix or realize itself in any particular subject or vendible commodity.” (ibid.) Instead, the work product of domestic servants (butlers, cooks, maids, etc.) are transitory and ethereal; their efforts “generally perish in the very instant of their performance, and seldom leave any trace or value behind them for which an equal quantity of service could afterwards be procured.” (ibid.)

But aside from “the menial servant”, who else is unproductive (in the Smithian sense)? Although Smith begins with “the menial servant”, he doesn’t stop there. He classifies all government officials — from the king on down! — as unproductive. Although Smith concedes that government officials like judges and police provide an essential public service (law and order), they are nevertheless “unproductive” in a literal sense since they do not produce durable goods:

“The sovereign, for example, with all the officers both of justice and war who serve under him, the whole army and navy, are unproductive labourers. They are the servants of the public, and are maintained by a part of the annual produce of the industry of other people. Their service, how honourable, how useful, or how necessary soever, produces nothing for which an equal quantity of service can afterwards be procured. The protection, security, and defence of the commonwealth, the effect of their labour this year will not purchase its protection, security, and defence for the year to come.” (WN, II.ii.2)

Indeed, Smith goes even further. He puts “churchmen, lawyers, physicians, men of letters of all kinds; players, buffoons, musicians, opera-singers, opera-dancers, etc.” into the unproductive category because “the work of all of them perishes in the very instant of its production.” (WN, II.ii.2; my emphasis) But why does it matter how a worker is classified? Why is this distinction between productive and unproductive labor so crucial for Adam Smith? And regardless of how these questions are answered, does this distinction still make economic sense today? (To be continued …)

[1] By way of example, some of the previous distinctions we have seen made by Adam Smith thus far include the distinction between value in use and value in exchange (WN, I.iv.13), between real and nominal prices (I.v.7), between actual and natural prices (I.vii.7), between fixed and circulating capital (II.i.4-5), and between money and revenue (II.ii.14).