Specialization and Division of Labor

by Panzer
Remember when you were a kid and your mom told you that you’re special?
Well she was right.
You are special.
Everyone is special.
But how does this apply to economics?
Well, in this tutorial we’ll take a look at specialization, and why it is so important
to consider in order for an economy to function properly and prosper.
As we learned in the previous tutorial, we get many things through trade.
This is because most people consume very little of what they produce and produce very little
of what they consume.
In other words, it is far more sensible to specialize in a few things and get the rest
from trade.
Think about it.
Most of us will likely only become really good at one, maybe two things.
After you graduate from high school, you don’t pursue twenty different careers.
Most people generally pursue one career.
In addition, if you’re really good at something, you’ll typically want to share those skills
with a community, because apart from the sense of purpose, you are likely to be appropriately
compensated for it.
Let’s look at an example.
Sue is an auto mechanic.
She specializes in fixing cars.
Not only that, but she specializes in repairing old Hondas.
However, Sue owns just one 1986 Honda Civic, and it’s in great shape, so she opens up
a shop to fix other Hondas.
This is how she ends up earning an income.
Now Frank is a plumber.
Frank does not know much about how to repair old Hondas, but he likes to drive them, and
he takes his 1989 Honda Prelude to Sue’s shop to get repaired.
Later, when Sue’s bathroom sink is spraying out dirty water, she calls Frank to her shop
to repair it.
This is because Frank is a plumber who specializes in fixing faulty sinks.
That was a very obvious and relatable example of specialization.
In essence, specialization is when an individual, company, or country, focuses on producing
one thing or performing one part of a task, and relies on others to produce everything
else or to complete the other parts of that task.
So because specialization causes an individual, company, or country to concentrate their productive
efforts on producing a limited variety of goods or services, they must rely on obtaining
other goods or services through trade.