Melissa has a Masters in Education and a PhD in Educational Psychology. She has worked as an instructional designer at UVA SOM.
Economy and Society
Economy, in this lesson, refers to the ways people use and interact with their environment to meet their needs. Economy includes how goods are produced, exchanged, distributed, and consumed. The economy is an important aspect of society, and as the economy has evolved over time, societies have, too.
This lesson will walk you through the evolution of economy from the agricultural revolution through the postindustrial era. We will look specifically at how technology and settlement changes have impacted the economy. We will also discuss the three sectors of a modern economy: primary, secondary, and tertiary.
The second agricultural revolution initiated the beginning of the evolution of economy. This period, between the 18th century and end of the 19th century, experienced rapid improvements in agricultural production and farm technology.
During this time, inventions like the plow, the wheel, and the number system, allowed humans to perform tasks more efficiently. These changes had both positive and negative effects on society. Farmers learned more practical and efficient farming practices, like rotating crops and using fertilizer, which led to better and bigger surpluses of food.
Tools were crafted out of longer lasting materials, and new agricultural technologies made human work more efficient. During this agricultural age, towns and cities grew, and certain regions became commerce and trade centers.
The benefits of these inventions included a greater surplus of food due to efficient processes (for example, a plow pulled by animals could cover far greater areas of land than one operated by a human).
Another benefit included more time for people to pursue and engage in other activities that were not directly related to the survival of the people. More time could be spent on activities like music and philosophy, which led people to discover different means of supporting themselves.
However, during this period we also saw some negative impacts, including a greater division of labor and status in which the wealthy gained control of the surplus resources and power became more centralized. Those that were wealthy were able to gain control over surplus resources and could afford a better living quality. Differences in social classes by ethnicity and gender increased.
The Industrial Revolution brought about a rapid and significant change in the economy due to the introduction of power-driven machinery and other energy sources. Societies developed from agricultural to industrial rapidly. Work that was previously done by individuals was now being performed in centralized settings in cities with large factories and on equipment capable of producing massive amounts of products quickly. The steam engines, textile mills, and other large-scale equipment are products of this era.
The Industrial Revolution allowed for faster and larger production of goods and more diverse populations, but also led to negative factors, including:
- Overcrowding in cities due to the large number of people moving to urban settings to be closer to factories.
- Skilled workers were replaced with low-skilled workers who left agricultural work. The low-skilled workers were underpaid and overworked.
- The inequality gap between the rich and the poor established in the Agricultural Age persisted and widened in the Industrial Age as the rich continued to stockpile and control resources while the poor faced overcrowded and poverty-ridden situations.
The postindustrial society is a more recent development. The previous revolutions discussed were established on the production of goods, but the postindustrial society is rooted in information and services. In the postindustrial society, we see a shift from products to ideas and knowledge, from hands-on skills to literacy skills, and the decentralization of the workforce because work is not centralized around city factories.
The shift in the economy is most obvious in its workforce. In the U.S., half of the workforce is currently employed in service industries, including government, sales, banking, and education.
In the postindustrial society, also sometimes known as the information society, the power resides with people in charge of storing and distributing information. An educated workforce excels, while those without higher degrees are still underpaid and overworked as in the industrial society.
Three Economic Sectors
As we have discussed throughout this lesson, the U.S. economy has evolved from one built on agriculture to one built on information and services. We can also discuss this evolution by differentiating between three types of economic sectors: primary, secondary, and tertiary.
The primary sector involves the extraction of raw materials from the earth. This extraction results in raw materials and basic foods, such as coal, wood, iron, and corn. The types of workers in this sector include farmers, coal miners, and hunters. Currently, only 3% of the nation's labor force is engaged in primary sector activity.
The secondary sector involves the transformation of raw materials into goods. This transformation results in wood being made into furniture, steel being made into cars, or textiles being made into clothes, as examples. The types of workers in this sector include a seamstress, factory worker, or craftsman. Currently, 20% of the U.S. labor force is involved in the secondary sector.
The tertiary sector involves the supplying of services to consumers and businesses. This sector provides services to the general population and business, including retail, sales, transportation, and restaurants. The types of workers in this sector include restaurant bartenders, accountants, and pilots. The service industry makes up 80% of the labor force today.
The economy has undergone an evolution from one reliant on agricultural resources to one that is based on information, knowledge, and services.
The second agricultural revolution was the beginning of the economic evolution in which improvements in agricultural methods and equipment resulted in a greater surplus of supplies and food and allowed for people to spend their time pursuing other activities. The time period also resulted in increased inequality between the rich and the poor.
The Industrial Revolution, based on new technology and energy sources, allowed for faster and larger productions of goods and more diverse populations, but also led to overcrowding in cities, a wider gap between the rich and the poor, and unpaid and overworked people.
The postindustrial society shifts away from industry and goods and is based on information and knowledge distribution and services. The power resides with people in charge of the storing and distribution of information. An educated workforce excels, while those without higher degrees are still underpaid and overworked as in the industrial society.
The primary sector is the part of the economy generated by extracting raw materials directly from the earth for consumption or sale. The secondary sector is the part of the economy that transforms the raw materials into goods for sale and consumption. The tertiary sector is the part of the economy that involves the sale or trade of services instead of goods.
When this lesson is done, you should be able to:
- Define economy and understand the significance of the economy in shaping society
- Recognize the agricultural revolution as the beginning of the evolution of economy and explain the changes that took place during this time
- Summarize the changes that occurred during the Industrial Revolution
- Describe the postindustrial society and the shifts from industry to information
- Detail the three sectors of the economy
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