Specialization and Trade: Because We Can’t Be Good At Everything
Professor Art Carden is able to mow his yard, build a fence, and install a faucet all at the same time. How? He does this by specializing through trade. Rather than try to do those things himself—especially since he isn’t very good at doing them—he uses the money he earns doing what he specializes in to pay others to mow his yard, build a fence for him, and install a faucet.
By employing others to do this work, Prof. Carden benefits because he can spend more time doing what he does best. He may also have more free time available because he does not have to use his spare time to mow his lawn, for example. At the same time, the people he hires to do the work around his house also benefit. They earn money working for him and are able to do what they specialize in, instead of having to spend too much of their time doing other things.
Even if Wes, the man who mows Prof. Carden’s grass, is able to mow lawns and prepare economics lectures faster than Prof. Carden is able to do them, it still may be beneficial to trade. In the example that Prof. Carden uses to illustrate this, both he and Wes save thirty minutes by trading instead of each doing the same work. This frees up valuable time for them to spend as they please. This is a small example to show some of the logic behind a key principle in economics: Trade creates wealth.
I, Pencil [article]: A short story about the life of a pencil and how its creation came about only through the miracle of specialization
Desert Island Game (game, beginner): Can you learn something about trade and cooperation by being marooned on a desert island?
Trade Ruler (game, advanced): As the Supreme Ruler of an island, you want the country to prosper. By engaging in international trade, you can achieve this goal.
I, Pencil Extended Commentary: Specialization and Trade (video): More from Art Carden and other economics professors on the magic of specialization and trade!
Mike Munger on the Division of Labor [podcast]: Mike Munger of Duke University and EconTalk host Russ Roberts talk about specialization, the role of technology in aiding specialization and how the division of labor creates wealth.
Specialization and Wealth [article]: Dwight Lee at the Freeman explains the relationship between specialization, exchange, and productivity