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
In this lecture we begin our investigation
of social institutions by focusing on the
economy, specifically…
 Elements that define a society’s economic system.
 Types of economic exchange.
 World economic systems.
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
All life forms must secure resources from
their environment and distribute them to
life-sustaining parts.
 Life forms that depend on organization rely on
coordination in the pursuit of resources.

Coordinated efforts toward securing
resources are group rather than individual
phenomena; these efforts become an
economy.
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 An economy is…
 A system of producing goods and
services, involving the following:
1. The gathering of resources.
2. The conversion of resources into usable
commodities.
3. The distribution of these commodities to members
of a population.
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
Why is a society’s economy so important?
 Gathering, conversion, and distribution of resources
are fundamental processes in the survival of our
species.
 These processes create a social structure of status
positions, normative expectations, and roles.

If we know how a society’s economy operates,
we can make accurate predictions about other
institutions in that society.
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
Economies have the following elements:
1. Technology
▪ Knowledge of how to control natural and social
environments.
▪ The more technology in an economy, the greater the
control of the environment.
2. Physical capital
▪ Implements used to gather, produce, and distribute.
▪ Tools, etc.
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3. Human capital
▪ Knowledge, skill, and motivations among those who occupy
positions and play roles in the economy.
4. Property
▪ Socially constructed rights to own, possess, and use
physical and symbolic objects of value.
5. Entrepreneurship
▪ The way elements 1-4 are organized for gathering,
producing, and distributing.
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
As economies evolved over time, the medium of
exchange also evolved.
 Barter (the direct exchange of one item for another)
defines early types of exchange (hunter/gatherers).
 Money comes to define the type of exchange in
agrarian societies.
▪ Money is an item that represents value toward an exchange
(e.g. salt, gold).
▪ Currency (paper money) comes to define later agrarian
societies.
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
Exchange in industrial societies is based on…
 The gold standard (paper currency representing gold
value).
 Fiat money (currency not backed by stored value).

Modern governments have a practical limit on
the amount of currency they can distribute.
 Inflation occurs when currency is issued at a greater
rate than the gross domestic product.
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 The two main economic systems in
the world today are capitalism and
socialism.
 Capitalism is defined by…
1. Private ownership of means of production
2. Market competition
3. Pursuit of profit
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 Socialism is defined by…
1. Public ownership of means of production
2. Central planning
3. The distribution of goods without profit
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
Capitalists believe…
 Market forces should determine products and prices.
 Profit is good.

Socialists believe…
 An item’s value is based on the work that went into it.
 The government should protect workers from
exploitation.
 Profit is immoral.
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
Forms of capitalism include…
1. Laissez-faire capitalism (pure capitalism)
2. Welfare (or state) capitalism (controlled
capitalism)

Forms of socialism include…
1. Socialism (pure socialism)
2. Democratic socialism (government controlled
infrastructure, private owned retail and
service industries)
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 Criticisms of capitalism include...
 It creates social inequality.
 The few who own the means of
production reap huge profits.
 A select few at the top of the hierarchy
exploit the majority who exist at the
bottom.
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 Criticisms of socialism include...
 It does not value individual rights.
 The government controls people’s lives.
 It gives everyone an equal chance to be
poor.
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
The U.S. economy has more and more
come to be defined by…
 Oligopoly (the rule of the many by few)
 The decline of union membership
 Professionalization
 The struggle between its capitalist economy
(built on profits) and its government (looking
out for citizen health)
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
The U.S. economy is defined by (cont.)…
 Environmental issues
 Consumer rights
 Growing inequality
▪ 45 million uninsured.
▪ CEO salaries since 1985 have risen nearly 280%,
while bottom 20% of the population’s salaries have
decreased 1% (controlling for inflation).
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Changes
in the U.S.
Workforce
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
One of the key indicators signifying the
change from agrarian to industrial
economy regards agricultural productivity.
 E.g. the labor required to produce a given
quantity of wheat has been reduced 99%.
 72% of labor force in 1820 were farmers.
 2% of the labor force in 2011 are farmers.
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Number of Worker-Hours
Required in…
Production of…
1800
1917
1999 % Reduction
100 bushels of wheat
373
106
4
99
100 bushels of corn
344
135
3
99
1 bale of cotton
601
276
3
99
1,ooo pounds of milk
n/a
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2
95
1,000 pounds of beef
n/a
46
8
83
1,000 pounds of
chicken
n/a
95
1
99
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
A key change in the industrial age regards
the production and consumption of energy.
 In 1850 all sources of energy generated less
than 9 million horsepower.
 In 2011 all sources of energy generate more
than 35 billion horsepower.
▪ The United States consumes energy equivalent to 9
tons of oil per year for every citizen.
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
Industrial societies have experienced many
changes in the nature of their labor force,
including changes regarding:
1. Industry
2. White-collar vs.
blue-collar jobs
3. Women
4. Organization size
5. Occupational
specialization
6. Formation of labor
unions
7. Command and market
economies
8. Outsourcing
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1.
Industrialized societies are defined by the
movement of workers out of primary industries
and into secondary and tertiary industries.
 Primary industries produce raw materials (farming,
fishing, mining, forestry).
 Secondary industries turn raw materials into finished
products (mills and factories).
 Tertiary industries are service oriented (education,
government, police and fire, etc.).
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Year
1840
Primary
Industries
69%
Secondary
Industries
15%
Tertiary
Industries
16%
1870
55%
21%
24%
1900
40%
28%
32%
1930
23%
29%
48%
1960
8%
30%
62%
1990
3%
25%
72%
2005
2%
19%
79%
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2.
The growth of white-collar (nonmanual) jobs.
 17% of U.S. jobs at beginning of the 20th
century were white collar.
 60%+ of U.S. jobs today are white collar.
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3.
Increasing employment of women
outside the household.
 Until the 20th century most women
worked within households.
 Today the majority of women are also
employed outside households.
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4.
The growth in the size of work
organizations.
 The U.S. government employs 2,700,000
 The city of New York employs 400,000
 Wal-Mart employs 1,900,000
 McDonalds employs 465,000
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5.
Occupational specialization.
 E.g. the U.S. Department of Labor lists
28,000 different jobs.
6.
The formation of labor unions.
 Inadequate pay and unsafe working
conditions led to the organization of
labor unions.
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Society
Sweden
United Kingdom
Canada
Japan
United States
France
Percentage in Unions
(2001-2003)
78%
29%
28%
20%
12%
8%
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7.
Command and market economies.
 In the prehistoric past, all economies were
subsistence economies (providing only basic
needs); over time these became command and
market economies:
▪ A command economy is an elitist system where a
select few make choices regarding trade for an
entire community.
▪ In a market economy producers freely trade goods
and services with other producers (based on supply
and demand).
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8.
Outsourcing.
 Outsourcing occurs when a society
transfers their production of goods and
services to industrializing societies
where labor costs are lower.
 Outsourcing is one of the most
controversial developments in industrial
societies in recent years.
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