Jul 9, 2013

Specialization and Trade: Because We Can’t Be Good At Everything

Prof. Carden is able to mow his lawn, build a fence, and install a faucet all at one time. How? He does it by employing others to do this work for him. He uses the money he earns doing what he does best and hires people to do this work for him because that is what they specialize in doing. This is an example of specialization through trade. In this example, Prof. Carden is made better off because he has more time to do what he does best or free time to spend doing things he enjoys. The people he hires are made better off because they are able to earn money doing the work they do best. Everybody wins. This shows some of the logic behind a key principle in economics: Trade creates wealth. How has trade benefited you? Can you identify areas in your life where trade has made you wealthier than you would otherwise be? What are they?