One of the most famous concepts in modern economics is that of specialization – the process of concentrating your efforts on what you do best, and paying someone else to do other tasks that they can do more efficiently than you. This is a powerful concept that has been responsible for some of the biggest increases in living standards in history – but it is not without its drawbacks.

What is specialization?

The benefits of specialization can be seen by examining a hypothetical economy of a primitive society where everyone has to be self-sufficient. If the people in a village have to grow their own food, make their own clothes, and build their own houses, then the amount of time they have to devote to each task is very limited. If one person is growing food, they cannot also be making clothes or building houses, and if they can’t make clothes or build houses, they must find other ways to make money in order to buy the things they need.

Specialization allows people to concentrate on what they do best, and find ways to make a profit by doing things other people cannot do as well. This causes the economy to grow faster, and helps everyone to have more things than they would if they spent all their time growing their own food and being completely self-sufficient.

Comparative advantage

Adam Smith, the ‘father of economics’, was the first person to describe the benefits of specialization systematically. He did this by introducing the concept of ‘comparative advantage’. The idea is very simple: if you are able to produce something more efficiently than someone else, you should specialize in producing that thing and trade for the things you cannot produce as efficiently.

For example, let us say that I am very good at growing corn, and you are very good at making clothes. If we both grow corn, and both make clothing, we both do it as well as each other. However, if I grow corn and you make clothes, we can both make more of both items than if we tried to do both tasks. This is because you would be better at making clothes than I would be at growing corn, and I would be better at growing corn than you would be at making clothes.

The modern economy

In 2021, all modern economies are extremely specialized. Things have moved beyond paying someone else to grow corn while you make clothing. If I want someone to wash my dog, I can pay someone to do it and they’ll probably do a better job than me. There are services for commercial power washing, for example, if you need your building cleaned. If you need a custom-made sweater, you can pay someone on Fiverr to do it. The possibilities seem endless. Eventually, everyone will be able to do what they are best at, and they will never have to worry about the things they do not like doing – right? But it is not that simple.

One major trend is that of automation – as jobs become more specialized, they become easier to automate. For example, even the most talented dog washer might not be able to do the job as well as a robot. The robot will be able to perform that job for years without needing to take a break. The robot will never complain, and will never need to take a vacation. The robot will never ask for a raise, and it will never be sick. If the robot breaks, it can be fixed easily. And if someone can make a better, more cost efficient dog washing robot, the old robot can be replaced for very little money.

In the same way, the best sweater maker in the world might not be able to make sweaters as well as a machine. It’s certainly not easy to make a machine that can knit sweaters. But it is getting easier, and it will get easier as time goes on.

The point is that once a task is automated, it is very difficult to un-automate it. In the past, new technology has made some jobs obsolete, but once the technology is implemented, it does not go away. The economy continues to grow, and people who have lost their jobs can find new jobs doing things that machines cannot do as well.

Specialization leads to dependence

Over-specialization can also lead to economic dependence on imports from other countries. If a country does not produce goods that it needs, it has to import them from other countries. This can lead to collapse of domestic industries that are important for national security and prosperity in the long term.

For example, the United States has lost most of its domestic textile manufacturing capacity. Textiles are a low-tech industry, and it used to be that most people in the US made their own clothes. Now that clothing is so cheap to make overseas, it is very difficult to make clothes here. This is good for consumers, but it might be bad for the long-term health of the US economy.

The same is true of food. Some countries have a large number of people who are starving because they do not have access to food. Some argue that this situation is caused by over-specialization. If a country grows all its own food, it can feed itself. If it depends on other countries to provide it with food, it will starve if the other countries decide not to help.

The tricky thing is that people should have the right to choose what they want to buy. It should be their right to decide whether they want to buy US-made clothing, or clothing made in another country. And if they choose to buy clothing made in another country, that is their right. The problem comes when people are not aware of the consequences of their decisions.

Conclusion

Specialization is a very powerful force. It increases the efficiency of an economy, and it allows people to specialize in things they enjoy doing. However, it can also lead to dependency on imports from other countries as the economy as a whole becoms increasingly specialized. Specialization can be a very powerful tool, but it can also be a double-edged sword.