Specialization and Economies of Scale: is there a limit?
Written by: Ian F.
Ford’s assembly line utilizes an economic theory called specialization. While it would take a long time and a lot of skill for a single worker to create an entire car alone, it takes minimal effort to perform a single task in the manufacturing process. For a simple example, compare two factories each producing cars. One factory hires a single worker to produce cars one at a time, while the second factory hires two workers for the same task. You might expect the second factory to produce cars twice as fast as the first factory, since it has twice the number of workers. But in reality, something amazing happens. While the worker at the first factory has to complete all steps of the car making process, the workers at the second factory can divide up the work. One worker can be assigned the task of putting together the engine, while the other worker can be assigned to install the wheels. The first worker will soon become very experienced at making the engine, while the second worker will become experienced with the wheels, and they will both be able to work faster than their designated roles.
This process is called specialization. The single worker at the other factory, however, must become experienced with performing every step in the process. In this way, the second factory will produce cars at over twice the rate of the first factory, with only hiring double the number of workers. This is called economies of scale, and it is the fundamental reason why assembly lines are so efficient. On an assembly line, each worker specializes in a very specific process, and becomes very experienced with it. Because of this specialization, the factory can produce cars at a rate far faster than it could if it had the same number of workers each trying to build an entire car alone.
But what happens when we bring specialization to its limit? What if a third factory hired 10,000
workers for an assembly line? Well, just as a company can experience economies of scale during specialization, it can also experience diseconomies of scale as it faces coordination issues. To see an example of how diseconomies of scale works, watch the video below!
Video part 1: https://drive.google.com/file/d/1HsCFH5IbL2_x3IntAtwE5K6VwvBej_CM/view
Video part 2: https://drive.google.com/file/d/1JU6CCGL94cFuprMGCC8CdeAxu6mR7igb/view
Works Cited
Brock, Thomas. “Henry Ford's Assembly Line.” Omeka RSS, projects.leadr.msu.edu/makingmodernus/exhibits/show/henry-ford-assembly-line/henry-ford-s-assembly-line.
“Henry Ford's Assembly Line.” Omeka RSS, projects.leadr.msu.edu/makingmodernus/exhibits/show/henry-ford-assembly-line/henry-ford-s-assembly-line.
Kenton, Will. “When Specialization Matters.” Investopedia, Investopedia, 13 Sept. 2020, www.investopedia.com/terms/s/specialization.asp.
Welker, Jason. Econclassroom.com, econclassroom.com/long-run-average-total-cost-and-economies-of-scale/.
I was surprised with the information you gave on this essay! I was aware of the effect that Fords’ assembly line left on the automobile world but I didn’t know how much of that can be implemented into the economy as a whole. I was also impressed with the fact that this specialization model can’t be used forever and increase the number of workers. It’s almost like why we can't just print more money to satisfy National debts!
ReplyDeleteWow Ian, I never gave much thought to how a factory's assembly line effects the economy and speed of production before. It's also interesting how there's a sweet spot with it and that once you go over that ideal number it just goes down hill from there. Thanks for the information pal!
ReplyDeleteI never understood the concept of specialization until this piece so thanks! The story about Henry Ford developing this without even trying was a great touch, and really helped me understand. Specialization has had a much larger impact on our society and factories than I originally thought.
ReplyDeleteI think that comparative advantage affects many things other than economics and production. It also affects school, job positions, sports, and international trade and politics. By utilizing specialization, we can rapidly increase the effectiveness of many of our teams, organizations, and countries.
ReplyDeleteThat's very interesting Ian, I wonder if there is a math formula to find when production will hit a standstill and then a diseconomy of scale will occur.
ReplyDeleteI think the only real limitations of an economy is the amount of laborers and capital. Without workers, the capital is not being used, and without capital, the laborers have nothing to do.
ReplyDelete"Too many cooks will spoil the broth" I think one thing that's super interesting to me at least is how much this concept can be pushed going to the future with robots and artificial intelligence. The limits of the assembly line system can theoretically be pushed infinitely because of how coordinated robots can theoretically be.
ReplyDeleteThis concept of specialization was extremely foreign to me before this article. Thank you for effectively writing and using examples such as Henry Ford's so that I could understand the topic better.
ReplyDeleteThe concept of specialization was very different for me to understand but thanks for informing me!
ReplyDeleteYeah I never thought the reason for instate tuition was because of taxes. i thought it was just and incentive to stay instate for collage. I wounder how much of the tuition cost could be reduced to try and reduce student debt. posture trainer
ReplyDeleteI understood your point about the assembly line, but I didn't realize that there was a whole theory made from it (specialization). You gave a lot of detail, and that's good I wouldn't have understood what you were trying to say without it.
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