What does economics mean to me

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List of Partners vendors. Share Flipboard Email. Social Sciences Economics U. Mike Moffatt. Professor of Business, Economics, and Public Policy. Mike Moffatt, Ph. Featured Video. Cite this Article Format. Moffatt, Mike. What Is Fiscal Policy? Definition and Examples. What Is Socialism? Economics for Beginners: Understanding the Basics. The Slope of the Aggregate Demand Curve. What Is Neoliberalism?

What Is a Traditional Economy? The Differences Between Communism and Socialism. An Introduction to Environmental Sociology. Learning about economic concepts can help you to understand the news, make financial decisions, shape public policy, and see the world in a new way.

If you are a student , you might be wondering about how much economists earn or how to apply to graduate school in economics.

We have resources on everything from learning more about economics to preparing for a career in economics. If you are a journalist , you might want research summaries and complimentary access to our journal publications — both reliable sources of current economic information. If you are an educator , you might be looking for ways to make economics more exciting in the classroom , get complimentary journal access for high school students, or incorporate real-world examples of economics concepts into lesson plans.

Or, you might just want to learn more ; our Research Highlight series is a great place to start. No matter why you are interested in economics, the American Economic Association is here to help. We are dedicated to helping the public discover the field of economics. Economists at the AEA Annual Meeting said there are a number of misperceptions about what they do, but there's one false assumption that they tend to hear all the time.

Much more than finance, banking, business and government, a degree in economics is useful to all individuals and can lead to many interesting career choices.

These four diverse individuals offer their insights on how a background in economics can be a tool for solving very human problems. Economists can study a wide variety of topics. The following articles highlight some of the ways economists use data to explore everything from college sports to the impact of good teachers.

This website uses cookies. Yet most of us never have enough to buy all the things we want. This is because of scarcity. So how do we solve it? Visit this website to read about how the United States is dealing with scarcity in resources. Every society, at every level, must make choices about how to use its resources. Families must decide whether to spend their money on a new car or a fancy vacation.

Towns must choose whether to put more of the budget into police and fire protection or into the school system. Nations must decide whether to devote more funds to national defense or to protecting the environment. So why do we not each just produce all of the things we consume? The simple answer is most of us do not know how, but that is not the main reason. When you study economics, you will discover that the obvious choice is not always the right answer—or at least the complete answer.

Studying economics teaches you to think in a different of way. Think back to pioneer days, when individuals knew how to do so much more than we do today, from building their homes, to growing their crops, to hunting for food, to repairing their equipment.

Most of us do not know how to do all—or any—of those things. It is not because we could not learn. Rather, we do not have to. The reason why is something called the division and specialization of labor , a production innovation first put forth by Adam Smith , Figure 2 , in his book, The Wealth of Nations. The formal study of economics began when Adam Smith — published his famous book The Wealth of Nations in Many authors had written on economics in the centuries before Smith, but he was the first to address the subject in a comprehensive way.

In the first chapter, Smith introduces the division of labor , which means that the way a good or service is produced is divided into a number of tasks that are performed by different workers, instead of all the tasks being done by the same person. To illustrate the division of labor, Smith counted how many tasks went into making a pin: drawing out a piece of wire, cutting it to the right length, straightening it, putting a head on one end and a point on the other, and packaging pins for sale, to name just a few.

Smith counted 18 distinct tasks that were often done by different people—all for a pin, believe it or not! Modern businesses divide tasks as well. Even a relatively simple business like a restaurant divides up the task of serving meals into a range of jobs like top chef, sous chefs, less-skilled kitchen help, servers to wait on the tables, a greeter at the door, janitors to clean up, and a business manager to handle paychecks and bills—not to mention the economic connections a restaurant has with suppliers of food, furniture, kitchen equipment, and the building where it is located.

A complex business like a large manufacturing factory, such as the shoe factory shown in Figure 3 , or a hospital can have hundreds of job classifications. When the tasks involved with producing a good or service are divided and subdivided, workers and businesses can produce a greater quantity of output.

In his observations of pin factories, Smith observed that one worker alone might make 20 pins in a day, but that a small business of 10 workers some of whom would need to do two or three of the 18 tasks involved with pin-making , could make 48, pins in a day. How can a group of workers, each specializing in certain tasks, produce so much more than the same number of workers who try to produce the entire good or service by themselves?

Smith offered three reasons. First, specialization in a particular small job allows workers to focus on the parts of the production process where they have an advantage.

In later chapters, we will develop this idea by discussing comparative advantage. People have different skills, talents, and interests, so they will be better at some jobs than at others. The particular advantages may be based on educational choices, which are in turn shaped by interests and talents. Only those with medical degrees qualify to become doctors, for instance. For some goods, specialization will be affected by geography—it is easier to be a wheat farmer in North Dakota than in Florida, but easier to run a tourist hotel in Florida than in North Dakota.

If you live in or near a big city, it is easier to attract enough customers to operate a successful dry cleaning business or movie theater than if you live in a sparsely populated rural area. Whatever the reason, if people specialize in the production of what they do best, they will be more productive than if they produce a combination of things, some of which they are good at and some of which they are not.

Second, workers who specialize in certain tasks often learn to produce more quickly and with higher quality. This pattern holds true for many workers, including assembly line laborers who build cars, stylists who cut hair, and doctors who perform heart surgery.

In fact, specialized workers often know their jobs well enough to suggest innovative ways to do their work faster and better. A similar pattern often operates within businesses.