I was always under the impression that the division of labor referred to the system in which each person specializes in a particular occupation such as farming, doctoring, or business rather than trying to provide all of these goods for themselves. And a quick glance (via Google) at some of the classical economists seems to suggest the same. However, internet articles like Wikipedia and certain textbooks seem to refer to it solely as the specialization that occurs within a single production process – like the type that occurs in the pin factory that Adam Smith describes at the start of Wealth of Nations. So I want to know: can the term “division of labor” refer to both of these things? Is it more one than it is the other?
This ambiguity in the phrase “division of labor” has existed since Adam Smith used the pin factory example to illustrate the concept. David Ricardo did much to clear up the ambiguity with his exposition of comparative advantage. He demonstrated that specialization of labor according to efficiency raises productivity. Since Ricardo, then, economists tend to refer to the division of labor as the social arrangement of labor in which each person specializes in his area of comparative advantage. The assignment of tasks among different workers working with a given capital capacity is not, strictly speaking, the division of labor, but a technical condition of the capital capacity itself. An assembly line with six working stations is designed to operate with six workers, each one working at one station.
So, you are correct. The division of labor refers to a society in which each person forgoes self-sufficiency and produces for the consumptive ends of other people by specializing in his area of efficiency.