TRADE, SPECIALIZATION, AND DIVISION OF LABOR

As compared to the economies of the 17005,today’s economies depend heavily on the specialization of individuals and firms, connected by an extensive network of trade. Western economies have enjoyed rapid economic growth as increasing specialization has allowed workers to become highly productive in particular .occupations and to trade their output for ‘ the commodities they need.

specialization occurs when people and countries concentrate their efforts on a particular set of task sit permits each person and country to use to its best advantage its specific skills and resources. One of the facts of economic life is that, rather than have everyone do everything in a mediocre way,it is better to establish a division of labor-dividing production into a number of small specialized steps or tasks. A division of labor permits tall people to play basketball, numerate people to teach, and persuasive people to sell cars. It sometimes takes many years to receive the training for particular careers-it usually takes 14 postgraduate years to become a certified neurosurgeon.

Capital and land are also highly specialized. Land can be’ specialized, as in the vineyard lands of California and France, which it has taken decades to cultivate. The computer software that went along with . the labor to write this textbook took over a decade to be developed, but it is useless at managing an oil refinery or solving large numerical problems. One of the most impressive examples of specialization is the computer chip that manages automobiles, increases ‘their efficiency,and can even serve as a “black box” to record accident data.

The enormous efficiency of specialization allows the intricate network of.trade among people and nations that we see today. Very few of us produce a single finished good; we make but the tiniest fraction of what we consume. We might teach a small part of one college’s curriculum, or empty coins from parking meters, or separate the genetic material of fruit flies. In exchange for this specialized Labor, we will receive an income adequate to buy goods from all over the world.

The idea of gain forms trade from one of the central insights of economics, Different people or countries tend to specialize in certain areas; they then engage in the voluntary exchange of what they produce for what they need. Japan has grown enormously productive by specializing in manufacturing goods such as automobiles and consumer electronics; it exports much of its manufacturing output to pay for imports of raw materials. By contrast, countries which have tried the strategy of becoming self sufficient,attempting to produce most of what they consume, have discovered that this is the road to stagnation. Trade can enrich all nations and increase everyone living standards.

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