"Plato's conception of Production is in close connection with this view of Wealth. It is important not that men should have as many wants as possible, and satisfy them all, but that they should find out what their special work is in the world and do it. He illustrates this doctrine in various passages of the Republic, and especially in the clearest of his economic analyses, the account of Division of Labour in the Second Book. A State, he there says, is formed because the individual is not able to supply all his wants by himself, but only when he makes common cause with other men, and devotes himself to one single industry for the common good, on the understanding that the rest are doing the same. Thus arise the separate trades of farming, building, weaving, and shoemaking ; and this division of labour is best for the following reasons : Men and women are not all born alike, but with special powers fitting them for special work. Second, by attention to one occupation alone men will do much better work than when attempting several. Third, because time is saved and opportunities (of season, etc.) are more promptly utilized. In this way articles are made in greater number, of better quality, and with greater ease, than when each man is a Jack-of-all-trades" (Bonar 1992: 14-5).Here the State just means a city or society. Plato gives a different origin for the state in the sense of central government.
It is interesting to note, first, that Plato was clearly aware of the idea of the division of labour and the advantages that follow from it. This was 2000 years before Adam Smith. Next the division of labour gives rise to different industries, and we might infer different "firms": building, weaving, shoemaking etc. We also see the idea that the division of labour gives rise to interdependence. A man "devotes himself to one single industry for the common good, on the understanding that the rest are doing the same". So, roughly, everybody gains as long as everybody specialises. And this must give rise to trade where you trade whatever you produce for all the other things you want.
So here we see production being driven and organised in response to the division of labour. One can expand on this point by arguing that a firm is an entrepreneurial response that allows the entrepreneur to create a greater division of labour within the firm than is possible across the market.
- Bonar, James (1992). Philosophy and Political Economy, New Brunswick: Transaction Publishers. Original publication 1893.