Scott H Young

Adam Smith’s Definition of Productivity


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I recently finished reading Adam Smith’s landmark book, The Wealth of Nations. It was written in 1776 and is widely considered to be the basis of the study of economics. One of the few interesting points I grabbed from the book was how Adam Smith defined productivity.

Smith divided up labor into two broad categories, productive and unproductive labor. Productive labor, according to Smith, was any work which fixed itself in a tangible object. Unproductive labor, was any work where the value was consumed as soon as it was created. Smith contrasted the role of laborers in a manufacturing plant (productive work) with the tasks of a servant (unproductive work).

I hadn’t seen productivity defined this way before, and it struck me as an interesting idea. The idea that unless your efforts fasten themselves in some investment, the work is unproductive.
How Much of Your To-Do List is Unproductive?

After reading this definition, I was surprised by how much of my time is spent on activities Smith would have described as being unproductive. Answering emails, eating, sleeping, finishing assignments, reading and exercising would all be considered unproductive labor. The effort spent doesn’t fix itself in an investment.

Certainly, many of those activities are still valuable. Just because Smith says exercising is unproductive, doesn’t mean you should sit on the couch all day. But this more limited definition of productivity calls into question the real value of how you spend your time.

Is your time being consumed or invested? Are you working on activities that will return value, or finishing tasks that won’t matter when you’re done? Is your energy devoted to things you’ll care about 5-10 years from now, or will none of it matter?

What’s Your Productivity Ratio?

Add up the amount of time you spend that gets fixed into an investment you own. This could be time working on a new product for a business, time spent increasing your education, time invested in improving your health. Divide this by the total amount of time you aren’t sleeping. This would be your productivity ratio.

Improving your productivity ratio should be your goal. If you’re only spending 1% of your time on tasks that will fix themselves in an investment, you’ll never see any returns. You might be incredibly efficient at completing work. But unless that work is productive, it won’t make a difference in the long-run.

Productivity shouldn’t be limited to just quickly completing your to-do list. Ask yourself if your efforts will fasten themselves to an investment. If they aren’t, perhaps you’re not as productive as you think.


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16 Responses to “Adam Smith’s Definition of Productivity”

  1. Mark Griep says:

    Those are very interesting thoughts on productivity. I’m curious how you think Adam Smith would categorize intangibles such as writing a speech? The speech you can see on paper. Once it’s out of your mouth it’s vanished.
    And, how would his thoughts apply to the technological world we live in? I spend most of my days working with software. I change magnetic fields on a spinning hard drive platter.
    I suppose you could value it by how it produces affects on those around you.

  2. Basu says:

    I don’t understand why exercising is classified as unproductive. I think that by exercising I am investing in something very tangible: my body and health.

  3. Katie says:

    Since eating, sleeping, relaxing and recharging energy is not labour, I found it a far stretch to declare them as unproductive labour and therefore devaluating them in a sense. Smith never looked at the individual people and their time spent.
    Today, when a clear separation of work and private life is vanishing, this definition cannot be just transferred for individuals.
    How would you look at cooking for instance? It takes time, but it gives you pleasure, it provides you with pleasurable food, that energises your body. This way you might get twice as much done in a certain time than without having recoverd.
    Recharging your creative spirit is worth more than you can count in a fractional score. But then, if you are an industrial worker, you still need to go to work.

  4. Jackmo says:

    “I don’t understand why exercising is classified as unproductive. I think that by exercising I am investing in something very tangible: my body and health.” Basu

    I was going to say the exact same thing.

    Also I like the interesting point you raise about assuming that just because you’re doing productive work, you can’t assume that you’re being productive according to the bigger picture.

  5. Scott Young says:

    Thanks for the comments,

    I’d like to remind everyone that this is Adam Smith’s definition of productive labor, not mine.

    I’ve made some adjustments by describing it as activities that fix themselves into an investment, but Smith technically described it as something that fixes itself into an end good. So exercise would still be considered “unproductive”.

    Obviously times have changed and with so many intangible investments, the same advice doesn’t really apply. But the principle is an interesting one, so I decided to share.

    -Scott

  6. Diego says:

    …um, Adam Smith was a product of the eighteenth century and I find it interesting he defined the labor of servants as unproductive since he couldn’t have done any of his work without them. This isn’t the class system I am talking about, but a view that would seem to indicate the world view that less tangible labor has little or no value. So much for the arts! This was the same world view that outlawed poverty, but couldn’t come up with a way to enforce that law except workhouses, etc.

    I sure hope, as you say, that times have changed! But it makes me wonder how much of our economy is still based in Smith’s work.

    Thanks Scott! You’ve spoiled another perfectly beautiful day and made me want to read Adam Smith!

  7. Kenny says:

    Definitely not the basis of economics. Don’t know if you’ve ever heard of the Vedas but one of the books from the set makes up the basis of economics and much more, and of course they date back to as far as man can think.

    Look into it.

  8. Scott Young says:

    Kenny,

    Many other books about wealth and economics were written before Smith made an appearance, and many other economists admit this. But, The Wealth of Nations was the book that happened to spur on the academic discipline.

    Diego,

    Just be glad you didn’t have to read the entire 900 pages…

    -Scott

  9. Scott, you are by no means the first nor the last, who has got hold of an idea from Adam Smith and arrived at conclusions different from what he was getting at.

    However, it is a useful hook upon which to account for what Adam Smith was talking about in respect of the categories of productive and unproductive labour, which is relevant for his understanding of how economies work.

    “Productive labor, according to Smith, was any work which fixed itself in a tangible object. Unproductive labor, was any work where the value was consumed as soon as it was created. Smith contrasted the role of laborers in a manufacturing plant (productive work) with the tasks of a servant (unproductive work).”

    This is about where most people impute conclusions about misleading distinctions.

    So what was Adam Smith getting at? I have explained this on my blog, http://www.adamsmithslostlegacy.com but it may be too long to reproduce here as a comment.

    Gavin Kennedy
    Emeritus Professor, Heriot-Watt University

  10. Scott Young says:

    Gavin,

    I’m sure I’ve probably made some misleading statements about Adam Smith.

    I wasn’t really trying to explain his thoughts on the difference between productive and unproductive labor as it affects an economy. I was just using his somewhat interesting definition as a starting point for my own discussion.

    But thanks for clarifying.

    -Scott

  11. David Safar says:

    Scott,

    I agree with several of the above, and must disagree with your conclusion that, by the definitions you provided, eating, sleeping, and exercising are unproductive activities.

    First, these definitions (“Productive labor, according to Smith, was any work which fixed itself in a tangible object. Unproductive labor, was any work where the value was consumed as soon as it was created.”) do not cover all cases. It is possible to create intangibles whose value are not immediately consumed — see Mark’s comments about software above.

    Second, let us recall that in Smith’s day, slavery was still an accepted practice, and as such, some human beings were considered goods to be traded. A healthy human being was more useful and thus worth more than an unhealthy one, so I suspect activities that maintain one’s health (and more particularly, activities that maintain the health of one’s slaves) would be considered very productive! The end product of a healthy, strong laborer was more valuable than the end product of a sickly, weak servant.

    Third, setting aside the idea of slavery, as we now recognize that it is an unacceptable way of treating other human beings, I believe the key points Smith was getting at were the permanence of the result and its economic value, not its tangibility. As a healthy, happy human being, you are capable of creating much more value for others and of deriving more income from the sale of that value than if you exhaust yourself, malnourish yourself, or fail to keep yourself in shape. Time invested in yourself creates a very tangible benefit: a healthier body, which can be measured in several ways.

    Similarly, finishing assignments should eventually result in a tangible result (a degree), and reading (depending on the material) can result in a better-educated mind capable of more economically feasible activities. Answering emails is tougher to defend, but even that can result in a stronger business network which has its own economic benefits.

    I find it extremely difficult to claim that in any of these cases, “The effort spent doesn’t fix itself in an investment.” And I certainly don’t believe that in any of these cases, “the value was consumed as soon as it was created.”

    I certainly agree, however, that it is an interesting subject of discussion, and I enjoyed reading your post and seeing the comments that it prompted. And I certainly agree with your thoughts about the differing amounts of value that can be derived from your time — I wrote about wasting, spending, or investing time in my LiveJournal at http://talonstrike.livejournal.com/76033.html last year (and followed up at http://talonstrike.livejournal.com/78216.html). I consider even recreation to be time well-invested if done in moderation — time invested in avoiding burn-out.

    Question: What do you think is the ideal ratio of productive work? Do you think a productivity ratio of 100% should be the goal?

  12. Scott Young says:

    David,

    As I said, this is Smith’s definition, not mine. I also believe exercising is important.

    Ideal Ratio? Not sure. It would depend on what you define as productive.

    100% probably isn’t ideal. There are things worth doing that aren’t productive at all. ;)

    -Scott

  13. […] definition of productivity calls into question the real value of how you spend your time. …http://www.scotthyoung.com/blog/2008/04/17/adam-smiths-definition-of-productivity/switched away from Mac OS X OS News”I kept my Linux desktop, but moved most of my daily work to the […]

  14. DonnaMatrix says:

    Reading Adam Smith and getting others to read Adam Smith is productive.

    Blogging about Adam Smith when one has not read Adam Smith is non-productive.

  15. Scott Young says:

    Donna,

    I’ve read On The Wealth of Nations, Adam Smith’s most influential writing. While I don’t proclaim to be an expert on the man, I think I’ve read enough to write a short blog article quoting some of his thoughts.

    -Scott

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