Specialization vs. diversification

In class today, someone asked why more companies are not diversifying their products and services. As a consumer, do we really want them to? When companies operate under a comparative advantage, which is the ability of a firm to produce a particular good at a lower opportunity cost than any other firm, (http://en.wikipedia.org/wiki/Comparative_advantage)consumers get the more for our money. Specialization maintains a certain balance in the market. Under specialization, ideally each firm has something or can do something better and more efficiently than the other, so in turn they are dependent on one another. Here is an example: a produce man depends on fertilizer and pesticide companies and vice-versa. This allows many different firms to make a place for themselves which in turn gives way for more jobs.
On the other hand, let’s say companies begin to efficiently diversify their products and services. They become less dependent on other companies, with no need for these companies they go out of business and people loose their jobs. Efficiently diverse firms are more beneficial to themselves than to consumers or the market as a whole. When companies become independent, competition decreases. This leaves room for more monopolies, and then the consumer suffers due to high prices and a lack of variety. We should consider ourselves lucky that the majority of firms have not found a way to efficiently diversify their business, and that they focus more on specialization.

Desperate America

The economic crisis in the United States has the American people desperate for change. While I won’t argue that a major change is needed, it’s the desperation that scares me. More and more people are starting to look for more government control especially in the business sector. My concern is that government assistance is accompanied by government regulation, and though it may start in the business sector, it has the potential to trickle down to other sectors. (http://www.tnr.com/booksarts/story.html?id=eab3ca7a-f41e-4f94-ba2f-687a87212018&p=1 ) This country is supposedly based on the idea that every citizen has a certain amount of power to some degree that enables the majority to make the decisions. These so called “bail-outs” gives the central government the majority of the power not the consumers. We should be mindful that the decisions that we are making now will shape the scope of how businesses are ran in the future when this economic crisis is over.
The most valued asset for most consumers is their home. If I had to guess I would say that the asset with the next greatest value would be their automobile, and after that their investments such as their stocks and bonds. How do we get money for these houses, and cars, and where do we save our money from? Banks. Coincidently, banks along with the automobile industries, were the main businesses that received the most government aid from the bail out plan. Wall Street also benefitted greatly from the bail out plan. The three main businesses that consumers need and value the most are the ones currently under the greatest government influence. These businesses have the most influence on our lives; it is important that the consumer, us, are not left out of the loop.