First, individual abilities differ, and specialization allows individuals to do
what they can do relatively well while leaving everything else to be done
by others. The economy’s total production is greater when people
specialize than when they all try to be self-sufficient. This is true for
individuals, but it is also true for entire countries, and it is one of the most
fundamental principles in economics: the principle of comparative
advantage. A much fuller discussion of comparative advantage is found in
Chapter 32 , where we discuss the gains from international trade.
The second reason why specialization is more efficient than self-
sufficiency concerns improvements in people’s abilities that occur because
they specialize. A person who concentrates on one activity becomes
better at it as they gain experience through their own successes and
failures. If you watch an experienced electrician or plumber at work, you
will see that they are much better at their jobs than a “handyman” who
only does this kind of work occasionally. This is due to their learning by
doing and it is an important form of knowledge acquisition.
The Division of Labour
Throughout most of history each artisan who specialized in making some
product made the whole of that product. But over the last several
hundred years, many technical advances have made it efficient to
organize production methods into large-scale firms organized around
what is called the division of labour. This term refers to specialization
within the production process of a particular product. For example, in
mass-production car manufacturing facilities, work is divided into highly