An Overview Of Economic Studies

There is so much discussion around what economic is and what it is not. Understanding the term needs one to know how scarcity affects consumer decisions. Hence, economics can be easily defined as the study of how people react when faced with scarcity. It is all about the decisions people make in such a scenario. These decisions may be individual, family, business, or society. When you consider your environment carefully, you will notice that scarcity is all around. It is one of the faces of human existence. Scarcity is human wants in terms of goods, services, and resources exceeding what can be provided. There are all types of resources around us, including labor, tools, land, and raw materials that are used in the production of human needs.

Resources play an important role in the production of what we need to survive. However, these resources exist in limited supply. When you dig out oil, for instance, it takes a long time for more oil to build in the same area. We all know how long it takes for fossils to turn into oil. And most importantly, we understand the importance of oil in the modern world. When scarcity hits, it affects time- everyone, the rich and the poor, all who have 24 hours in a day to get the goods they desire. At this any given time, there is only a finite amount for resources for use. This is true, especially when talking about natural resources.

Think of this example. In 2015 the U.S Bureau of Statistics recorded that the labor force contained 158.6 million works. The whole United States sits on an area of 3,794, 101 square miles. This area contains a vast number of important resources, which are, however, limited. And because of this, the production of goods and services becomes limited. Now, since humans want for the large number of works mentioned above seem to be infinite, there is no way we can avoid the issue of scarcity.

Now consider this too, everyone needs food to eat. They need a nice place to live, access to healthcare, and other things. However, some people are hungry, homeless, and in need of healthcare, just to mention a few. This happens because of scarcity.

To understand economics, it is vital to know what scarcity is and how it affects human beings. The best way to know the problem with scarcity is to consider the things we consume daily. These include transportation, shelter, food, healthcare, and entertainment. We have to pay for these things. And to get the money to pay, one must be ready to work for them. And yet, many people don’t have enough to afford these things. It is all because we have limited resources.

Dealing with Scarcity, and Division and Specialization Of Labor

As stated above, economics is directly linked to scarcity. This is why, for a society to grow, they must learn how to handle scarcity. It is the decisions we make during this time that make the change. Every society makes choices about the use of natural resources. In the homes, people must make decisions whether to use savings on a car or for a vacation they have desired. Cities must decide where to focus their energy, in the police and fire protection, or in the schools. A country must decide where they want to focus their investments in the military, infrastructure, schools, or health sector. Unfortunately, there is never enough money to go around in these things.

But why do we not produce these things ourselves, from our home? Simply, most of us don’t know how to, and we don’t have the resources to make these things. As an economic student, you will come to learn that the obvious choice is not always the best. It teaches you to have a different way of thinking and look at things more critically. In the old days, individuals knew how to do things with their own hands. They could build homes, grows, go hunting, and repair their equipment. Many of us today don’t know how to do such things, not because we don’t want to but because we just don’t see the need. Adam Smith, in his book The Wealth of Nations, states that the reason is because of “the division and specialization of labor.”

The modern study of economics in schools was introduced by Adam Smith (1723-1790) with the publication of the book mentioned above. Today, many authors have written on the topic in which Smith introduced the division of labor. This term means the way a product (good or service) is produced and divided into different tasks that are done by varying entities, as opposed to one person doing everything. 

Smith uses the recount of how many tasks went on during the making of a pin. First, there is drawing on a piece of wire, cutting, straightening, making ahead, packaging, and supplying, among other things. in this case, there are more than 18 different works that were necessary for the pin. This means a single pin may have gone through the hands of 18 people before it comes out on the market. Hard to believe, right? Well, this is the reason why the division of labor has become very crucial for economic development.

To understand economics, note that modern business understands how to divide tasks. Even the smallest business, like a restaurant, must divide and share tasks fairly to achieve the desired output. Someone who can work well on in the kitchen is left to cook where serving is left to the waiters. There are a greeter and the door, janitors to clean the place, business managers to control the whole business, and a clerk to handle cash flow, among other tasks. And we have not even mentioned the interaction between the restaurant and other entities like suppliers and neighbors in the same business building. In a large organization, division of labor is more defined. This is critical even for a government, which needs different people to run its operations.

Division of labor increase production. When a group of people works together, each in their area of specialization, they have higher chances of success. According to Smith, there are three reasons why this is true:

- Specialization allows works to focus on a specific part of the production process. Since people have different skills, talents, and interests, focusing on a particular field, allow them to do what they love. Such qualification can be because of academic choices, which may shape interests and talents. For instance, those who qualify with medical certificates become doctors. In some cases, specialization is affected by geographical area. For instance, it is easier to become a wheat farmer in Dakota and success than in Florida. On the other hand, one can succeed in the tourism business in Florida than they would in Dakota. In other words, when people do what they are specialized in, they become more successful.

- Specialization in specific tasks helps people learn faster production with higher quality features. This is very true and important for many workers in any sector. It is all about developing core competencies to create the best product.

- The third reason that Smith gives is that specialization allows firms to tap into the benefits of economies of scale. This means, for most products, the average cost increase with an increase in production. For example, if a motorbike company produces one thousand motorbikes per year, the cost of production becomes high. But when they make 50 000, it can create an assembly line with each worker performing specialized tasks, hence reducing the production cost per device in terms of time and cash.

The division of labor has been one of the main approaches to handling the problem of scarcity. And this results in a better economy, which is what every nation seeks.

Specialization, trade, and Markets

We can only say specialization has been successful if workers use their pay to but the goods and services they needed. Hence, trade is required for specialization to be successful.

Do you play music a lot? And do you know anything about electronics and sound systems? Well, no. All you need is to, but an iPod or MP3 player, down the music and you are good to go. You don’t need to learn anything about artificial fibers or how sewing machines are constructed if you need a jacket; you just get one and put on.

This means consumers don’t need to spend time acquiring knowledge about how certain things are made. Instead, the markets allow one to learn only the necessary skills and then use them to offer and receive goods and services. This is what contemporary society has such a strong economy. It is all in the way division of labor has been effectively achieved.

The importance of studying economics

Economics is a vast subject. It needs one to be very careful and understand the simplest things that determine the economy of a country. And as we have seen, scarcity is a single term that can be used to explain economics in the easiest way. But it is more important to know what studying economics is important today, more than ever. First, note that economics is not a bunch of facts and ideas to be memorized. Even though it carries many great concepts to be learned, it is better to look at it as a collection of questions that need answers. Also, one can look at it as puzzles that need to work out. This way, it becomes easier to dig deeper into the reasons for economic studies and how it affects humanity in general. Economics gives individuals the tools to work with and resolve these puzzles.

Every problem nations and the whole world is dealing with right now, from global warming to world poverty, and from world conflicts in Syria, Somalia and other areas have a link to economics. And every human being has a role to play in resolving these issues. When they strike, funds are directed from other important things and take to resolving such cases. And if you want to be part of the team that makes the difference, then studying economics should be one of your desires.

Economics is one of the most important aspects of citizenship, and it can never be overemphasized. This is why citizens are asked to vote intelligently on budgets, regulations, and any other laws that affect human life. In 2012, for instance, there was a “fiscal cliff” in the USA that almost brought the country to a standstill. Many people did not know the issues that were involved, but as you may have already guessed, it was money. Issues with the economy of a country, citizens suffer the most with the scarcity of commodities and surging prices. They need to learn and understand how the government spends its revenues in terms of development, which includes the creation of more job opportunities.

The study of economics leads to the creation of individuals who can challenge the causes of action. For instance, when there is a misappropriation of funds by a government body, economic knowledge can help you take a stand and ask the right questions. It is all about having an idea of what you are talking about and being able to express yourself. This, of necessity, means economic is a career subject that contributes largely to the growth of the business realm.

Understanding the basics of economics makes one a well-round thinker. When one reads, for instance, and article about national or global economic issues, they will be able to evaluate a writer’s argument and include their views based on facts. Also, they can find new ways of thinking about contemporary issues that affect economic growth.

We must have economists in the world. These are individuals who contribute largely to the direction of the global economy. When you start a company, you may not have economic analysis knowledge, but you can hire the service of a person who does so that they can help you create a more stable business. Economics runs the world, and those who understand how it works are luckier because the skills help them to tap into opportunities others may never know about.

Author: James Hamilton