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Saturday, July 11, 2020

Standard Industrial Classification

From Wikipedia, the free encyclopedia

The Standard Industrial Classification (SIC) is a system for classifying industries by a four-digit code. Established in the United States in 1937, it is used by government agencies to classify industry areas. The SIC system is also used by agencies in other countries, e.g., by the United Kingdom's Companies House.

In the United States, the SIC code has been replaced by the North American Industry Classification System (NAICS code), which was released in 1997. Some U.S. government departments and agencies, such as the U.S. Securities and Exchange Commission (SEC), continued to use SIC codes through at least 2019.

The SIC code for an establishment, that is, a workplace with a U.S. address, was determined by the industry appropriate for the overall largest product lines of the company or organization of which the establishment was a part. The later NAICS classification system has a different concept, assigning establishments into categories based on each one's output.

Purpose

In the early 1900s, each branch of a United States government agency would conduct business analysis using its own methods and metrics, unknown and meaningless to other branches. In the 1930s, the government needed standardized and meaningful ways in which to measure, analyze and share data across its various agencies. Thus, the Standard Industrial Classification system was born. SIC codes are four-digit numerical representations of major businesses and industries. SIC codes are assigned based on common characteristics shared in the products, services, production and delivery system of a business.

Structure

SIC codes have a hierarchical, top-down structure that begins with general characteristics and narrows down to the specifics. The first two digits of the code represent the major industry sector to which a business belongs. The third and fourth digits describe the sub-classification of the business group and specialization, respectively. For example, "36" refers to a business that deals in "Electronic and Other Equipment." Adding "7" as a third digit to get "367" indicates that the business operates in "Electronic, Component and Accessories." The fourth digit distinguishes the specific industry sector, so a code of "3672" indicates that the business is concerned with "Printed Circuit Boards."

Uses

The U.S. Census Bureau, Bureau of Labor Statistics, Internal Revenue Service and Social Security Administration utilize SIC codes in their reporting, although SIC codes are also used in academic and business sectors. The Bureau of Labor Statistics updates the codes every three years and uses SIC to report on work force, wages and pricing issues. The Social Security Administration assigns SIC codes to businesses based on the descriptions provided by employers under the primary business activity entry on employer ID applications.

Limitations

Over the years, the U.S. Census has identified three major limitations to using the SIC system. The first limitation surrounds its definition and mistaken classification of employee groups. For example, administrative assistants in the automotive industry support all levels of the business, yet the SIC defines these employees as part of the "Basic Sector" of manufacturing jobs when they should be reported as "Non-Basic." Secondly, SIC codes were developed for traditional industries prior to 1970. Business has changed considerably since then from manufacturing-based to mostly service-based. As a result, and thirdly the SIC has been slow to recognize new and emerging industries, such as those in the computer, software, and information technology sectors.

History of the change to NAICS

The Office of Management and Budget, or OMB, was tasked with revising the SIC system to reflect changing economic conditions. The OMB established the Economic Classification Policy Committee in 1992 to develop a new system representative of the current industrial climate. The result was the North American Industry Classification System, or NAICS, a collaborative effort between Canada, the U.S. and Mexico. NAICS expanded the four-digit SIC code to a six-digit code, and it provided more flexibility in handling emerging industries. The new code was implemented in Canada and the United States in 1997 and in Mexico one year later.

NAICS classified establishments (workplace) by their main output, instead of classifying them with the larger firm or organization of which the establishment was a part. This gives more precise information on establishment and worker activities than the SIC system, but changed the meaning of the classifications somewhat, making some time series of data hard to sustain accurately. Fort and Klimek (2016) found using longitudinal data on establishments that the switch from SIC to NAICS reclassified large numbers of workers differently by industry/sector than NAICS does, notably by reclassifying some from the Manufacturing sector into Services.

Codes

Range

The SIC codes can be grouped into progressively broader industry classifications: industry group, major group, and division. The first 3 digits of the SIC code indicate the industry group, and the first two digits indicate the major group. Each division encompasses a range of SIC codes:

Range of SIC Codes Division
0100-0999 Agriculture, Forestry and Fishing
1000-1499 Mining
1500-1799 Construction
1800-1999 not used
2000-3999 Manufacturing
4000-4999 Transportation, Communications, Electric, Gas and Sanitary service
5000-5199 Wholesale Trade
5200-5999 Retail Trade
6000-6799 Finance, Insurance and Real Estate
7000-8999 Services
9100-9729 Public Administration
9900-9999 Nonclassifiable

To look at a particular example of the hierarchy, SIC code 2024 (ice cream and frozen desserts) belongs to industry group 202 (dairy products), which is part of major group 20 (food and kindred products), which belongs to the division of manufacturing.

List

The following table is from the SEC's website, which allows searching for companies by SIC code in its database of filings. The acronym NEC stands for "not elsewhere classified".

SIC Code Industry
0100 (01111...) Agricultural Production-Crops
0200 Agricultural Prod-Livestock & Animal Specialties
0700 Agricultural Services
0800 Forestry
0900 Fishing, Hunting and Trapping
1000 Metal Mining
1040 Gold and Silver Ores
1090 Miscellaneous Metal Ores
1220 Bituminous Coal & Lignite Mining
1221 Bituminous Coal & Lignite Surface Mining
1311 Crude Petroleum & Natural Gas
1381 Drilling Oil & Gas Wells
1382 Oil & Gas Field Exploration Services
1389 Oil & Gas Field Services, NEC
1400 Mining & Quarrying of Nonmetallic Minerals (No Fuels)
1520 General Bldg Contractors - Residential Bldgs
1531 Operative Builders
1540 General Bldg Contractors - Nonresidential Bldgs
1600 Heavy Construction Other Than Bldg Const - Contractors
1623 Water, Sewer, Pipeline, Comm & Power Line Construction
1629 Heavy Construction, Not Elsewhere Classified[9]
1700 Construction - Special Trade Contractors
1731 Electrical Work
2000 Food and Kindred Products
2011 Meat Packing Plants
2013 Sausages & Other Prepared Meat Products
2015 Poultry Slaughtering and Processing
2020 Dairy Products
2024 Ice Cream & Frozen Desserts
2030 Canned, Frozen & Preserved Fruit, Veg & Food Specialties
2033 Canned, Fruits, Veg, Preserves, Jams & Jellies
2040 Grain Mill Products
2050 Bakery Products
2052 Cookies & Crackers
2060 Sugar & Confectionery Products
2070 Fats & Oils
2080 Beverages
2082 Malt Beverages
2086 Bottled & Canned Soft Drinks & Carbonated Waters
2090 Miscellaneous Food Preparations & Kindred Products
2092 Prepared Fresh or Frozen Fish & Seafood
2100 Tobacco Products
2111 Cigarettes
2200 Textile Mill Products
2211 Broadwoven Fabric Mills, Cotton
2221 Broadwoven Fabric Mills, Man Made Fiber & Silk
2250 Knitting Mills
2253 Knit Outerwear Mills
2273 Carpets & Rugs
2300 Apparel & Other Finished Prods of Fabrics & Similar Matl
2320 Men's & Boys' Furnishings, Work Clothing, & Allied Garments
2330 Women's, Misses', and Juniors Outerwear
2340 Women's, Misses', Children's & Infant's Undergarments
2390 Miscellaneous Fabricated Textile Products
2400 Lumber & Wood Products (No Furniture)
2421 Sawmills & Planing Mills, General
2430 Millwood, Veneer, Plywood, & Structural Wood Members
2451 Mobile Homes
2452 Prefabricated Wood Bldgs & Components
2510 Household Furniture
2511 Wood Household Furniture, (No Upholstered)
2520 Office Furniture
2522 Office Furniture (No Wood)
2531 Public Bldg & Related Furniture
2540 Partitions, Shelvg, Lockers, & office & Store Fixtures
2590 Miscellaneous Furniture & Fixtures
2600 Papers & Allied Products
2611 Pulp Mills
2621 Paper Mills
2631 Paperboard Mills
2650 Paperboard Containers & Boxes
2670 Converted Paper & Paperboard Prods (No Containers/Boxes)
2673 Plastics, Foil & Coated Paper Bags
2711 Newspapers: Publishing or Publishing & Printing
2721 Periodicals: Publishing or Publishing & Printing
2731 Books: Publishing or Publishing & Printing
2732 Book Printing
2741 Miscellaneous Publishing
2750 Commercial Printing
2761 Manifold Business Forms
2771 Greeting Cards
2780 Blankbooks, Looseleaf Binders & Bookbinding & Related Work
2790 Service Industries For The Printing Trade
2800 Chemicals & Allied Products
2810 Industrial Inorganic Chemicals
2820 Plastic Material, Synth Resin/Rubber, Cellulos (No Glass)
2821 Plastic Materials, Synth Resins & Nonvulcan Elastomers
2833 Medicinal Chemicals & Botanical Products
2834 Pharmaceutical Preparations
2835 In Vitro & In Vivo Diagnostic Substances
2836 Biological Products, (No Diagnostic Substances)
2840 Soap, Detergents, Cleaning Preparations, Perfumes, Cosmetics
2842 Specialty Cleaning, Polishing and Sanitation Preparations
2844 Perfumes, Cosmetics & Other Toilet Preparations
2851 Paints, Varnishes, Lacquers, Enamels & Allied Prods
2860 Industrial Organic Chemicals
2870 Agricultural Chemicals
2890 Miscellaneous Chemical Products
2891 Adhesives & Sealants
2911 Petroleum Refining
2950 Asphalt Paving & Roofing Materials
2990 Miscellaneous Products of Petroleum & Coal
3011 Tires & Inner Tubes
3021 Rubber & Plastics Footwear
3050 Gaskets, Packg & Sealg Devices & Rubber & Plastics Hose
3060 Fabricated Rubber Products, NEC
3080 Miscellaneous Plastics Products
3081 Unsupported Plastics Film & Sheet
3086 Plastics Foam Products
3089 Plastics Products, NEC
3100 Leather & Leather Products
3140 Footwear, (No Rubber)
3211 Flat Glass
3220 Glass & Glassware, Pressed or Blown
3221 Glass Containers
3231 Glass Products, Made of Purchased Glass
3241 Cement, Hydraulic
3250 Structural Clay Products
3260 Pottery & Related Products
3270 Concrete, Gypsum & Plaster Products
3272 Concrete Products, Except Block & Brick
3281 Cut Stone & Stone Products
3290 Abrasive, Asbestos & Misc Nonmetallic Mineral Prods
3310 Steel Works, Blast Furnaces & Rolling & Finishing Mills
3312 Steel Works, Blast Furnaces & Rolling Mills (Coke Ovens)
3317 Steel Pipe & Tubes
3320 Iron & Steel Foundries
3330 Primary Smelting & Refining of Nonferrous Metals
3334 Primary Production of Aluminum
3341 Secondary Smelting & Refining of Nonferrous Metals
3350 Rolling Drawing & Extruding of Nonferrous Metals
3357 Drawing & Insulating of Nonferrous Wire
3360 Nonferrous Foundries (Castings)
3390 Miscellaneous Primary Metal Products
3411 Metal Cans
3412 Metal Shipping Barrels, Drums, Kegs & Pails
3420 Cutlery, Handtools & General Hardware
3430 Heating Equip, Except Elec & Warm Air; & Plumbing Fixtures
3433 Heating Equipment, Except Electric & Warm Air Furnaces
3440 Fabricated Structural Metal Products
3442 Metal Doors, Sash, Frames, Moldings & Trim
3443 Fabricated Plate Work (Boiler Shops)
3444 Sheet Metal Work
3448 Prefabricated Metal Buildings & Components
3451 Screw Machine Products
3452 Bolts, Nuts, Screws, Rivets & Washers
3460 Metal Forgings & Stampings
3470 Coating, Engraving & Allied Services
3480 Ordnance & Accessories, (No Vehicles/Guided Missiles)
3490 Miscellaneous Fabricated Metal Products
3510 Engines & Turbines
3523 Farm Machinery & Equipment
3524 Lawn & Garden Tractors & Home Lawn & Gardens Equip
3530 Construction, Mining & Materials Handling Machinery & Equip
3531 Construction Machinery & Equip
3532 Mining Machinery & Equip (No Oil & Gas Field Mach & Equip)
3533 Oil & Gas Field Machinery & Equipment
3537 Industrial Trucks, Tractors, Trailers & Stackers
3540 Metalworkg Machinery & Equipment
3541 Machine Tools, Metal Cutting Types
3550 Special Industry Machinery (No Metalworking Machinery)
3555 Printing Trades Machinery & Equipment
3559 Special Industry Machinery, NEC
3560 General Industrial Machinery & Equipment
3561 Pumps & Pumping Equipment
3562 Ball & Roller Bearings
3564 Industrial & Commercial Fans & Blowers & Air Purifying Equip
3567 Industrial Process Furnaces & Ovens
3569 General Industrial Machinery & Equipment, NEC
3570 Computer & office Equipment
3571 Electronic Computers
3572 Computer Storage Devices
3575 Computer Terminals
3576 Computer Communications Equipment
3577 Computer Peripheral Equipment, NEC
3578 Calculating & Accounting Machines (No Electronic Computers)
3579 Office Machines, NEC
3580 Refrigeration & Service Industry Machinery
3585 Air-Cond & Warm Air Heatg Equip & Comm & Indl Refrig Equip
3590 Misc Industrial & Commercial Machinery & Equipment
3600 Electronic & Other Electrical Equipment (No Computer Equip)
3612 Power, Distribution & Specialty Transformers
3613 Switchgear & Switchboard Apparatus
3620 Electrical Industrial Apparatus
3621 Motors & Generators
3630 Household Appliances
3634 Electric Housewares & Fans
3640 Electric Lighting & Wiring Equipment
3651 Household Audio & Video Equipment
3652 Phonograph Records & Prerecorded Audio Tapes & Disks
3661 Telephone & Telegraph Apparatus
3663 Radio & TV Broadcasting & Communications Equipment
3669 Communications Equipment, NEC
3670 Electronic Components & Accessories
3672 Printed Circuit Boards
3674 Semiconductors & Related Devices
3677 Electronic Coils, Transformers & Other Inductors
3678 Electronic Connectors
3679 Electronic Components, NEC
3690 Miscellaneous Electrical Machinery, Equipment & Supplies
3695 Magnetic & Optical Recording Media
3711 Motor Vehicles & Passenger Car Bodies
3713 Truck & Bus Bodies
3714 Motor Vehicle Parts & Accessories
3715 Truck Trailers
3716 Motor Homes
3720 Aircraft & Parts
3721 Aircraft
3724 Aircraft Engines & Engine Parts
3728 Aircraft Parts & Auxiliary Equipment, NEC
3730 Ship & Boat Building & Repairing
3743 Railroad Equipment
3751 Motorcycles, Bicycles & Parts
3760 Guided Missiles & Space Vehicles & Parts
3790 Miscellaneous Transportation Equipment
3812 Search, Detection, Navigation, Guidance, Aeronautical Sys
3821 Laboratory Apparatus & Furniture
3822 Auto Controls For Regulating Residential & Comml Environments
3823 Industrial Instruments For Measurement, Display, and Control
3824 Totalizing Fluid Meters & Counting Devices
3825 Instruments For Meas & Testing of Electricity & Elec Signals
3826 Laboratory Analytical Instruments
3827 Optical Instruments & Lenses
3829 Measuring & Controlling Devices, NEC
3841 Surgical & Medical Instruments & Apparatus
3842 Orthopedic, Prosthetic & Surgical Appliances & Supplies
3843 Dental Equipment & Supplies
3844 X-Ray Apparatus & Tubes & Related Irradiation Apparatus
3845 Electromedical & Electrotherapeutic Apparatus
3851 Ophthalmic Goods
3861 Photographic Equipment & Supplies
3873 Watches, Clocks, Clockwork Operated Devices/Parts
3910 Jewelry, Silverware & Plated Ware
3911 Jewelry, Precious Metal
3931 Musical Instruments
3942 Dolls & Stuffed Toys
3944 Games, Toys & Children's Vehicles (No Dolls & Bicycles)
3949 Sporting & Athletic Goods, NEC
3950 Pens, Pencils & Other Artists' Materials
3960 Costume Jewelry & Novelties
3990 Miscellaneous Manufacturing Industries
4011 Railroads, Line-Haul Operating
4013 Railroad Switching & Terminal Establishments
4100 Local & Suburban Transit & Interurban Hwy Passenger Trans
4210 Trucking & Courier Services (No Air)
4213 Trucking (No Local)
4220 Public Warehousing & Storage
4231 Terminal Maintenance Facilities For Motor Freight Transport
4400 Water Transportation
4412 Deep Sea Foreign Transportation of Freight
4512 Air Transportation, Scheduled
4513 Air Courier Services
4522 Air Transportation, Nonscheduled
4581 Airports, Flying Fields & Airport Terminal Services
4610 Pipe Lines (No Natural Gas)
4700 Transportation Services
4731 Arrangement of Transportation of Freight & Cargo
4812 Radiotelephone Communications
4813 Telephone Communications (No Radiotelephone)
4822 Telegraph & Other Message Communications
4832 Radio Broadcasting Stations
4833 Television Broadcasting Stations
4841 Cable & Other Pay Television Services
4899 Communications Services, NEC
4900 Electric, Gas & Sanitary Services
4911 Electric Services
4922 Natural Gas Transmission
4923 Natural Gas Transmission & Distribution
4924 Natural Gas Distribution
4931 Electric & Other Services Combined
4932 Gas & Other Services Combined
4941 Water Supply
4950 Sanitary Services
4953 Refuse Systems
4955 Hazardous Waste Management
4961 Steam & Air-Conditioning Supply
4991 Co-generation Services & Small Power Producers
5000 Wholesale-Durable Goods
5010 Wholesale-Motor Vehicles & Motor Vehicle Parts & Supplies
5013 Wholesale-Motor Vehicle Supplies & New Parts
5020 Wholesale-Furniture & Home Furnishings
5030 Wholesale-Lumber & Other Construction Materials
5031 Wholesale-Lumber, Plywood, millwork & Wood Panels
5040 Wholesale-Professional & Commercial Equipment & Supplies
5045 Wholesale-Computers & Peripheral Equipment & Software
5047 Wholesale-Medical, Dental & Hospital Equipment & Supplies
5050 Wholesale-Metals & Minerals (No Petroleum)
5051 Wholesale-Metals Service Centers & Offices
5063 Wholesale-Electrical Apparatus & Equipment, Wiring Supplies
5064 Wholesale-Electrical Appliances, TV & Radio Sets
5065 Wholesale-Electronic Parts & Equipment, NEC
5070 Wholesale-Hardware & Plumbing & Heating Equipment & Supplies
5072 Wholesale-Hardware
5080 Wholesale-Machinery, Equipment & Supplies
5082 Wholesale-Construction & Mining (No Petro) Machinery & Equip
5084 Wholesale-Industrial Machinery & Equipment
5090 Wholesale-Misc Durable Goods
5094 Wholesale-Jewelry, Watches, Precious Stones & Metals
5099 Wholesale-Durable Goods, NEC
5110 Wholesale-Paper & Paper Products
5122 Wholesale-Drugs, Proprietaries & Druggists' Sundries
5130 Wholesale-Apparel, Piece Goods & Notions
5140 Wholesale-Groceries & Related Products
5141 Wholesale-Groceries, General Line (merchandise)
5150 Wholesale-Farm Product Raw Materials
5160 Wholesale-Chemicals & Allied Products
5171 Wholesale-Petroleum Bulk Stations & Terminals
5172 Wholesale-Petroleum & Petroleum Products (No Bulk Stations)
5180 Wholesale-Beer, Wine & Distilled Alcoholic Beverages
5190 Wholesale-Miscellaneous Non-durable Goods
5200 Retail-Building Materials, Hardware, Garden Supply
5211 Retail-Lumber & Other Building Materials Dealers
5271 Retail-Mobile Home Dealers
5311 Retail-Department Stores
5331 Retail-Variety Stores
5399 Retail-Misc General Merchandise Stores
5400 Retail-Food Stores
5411 Retail-Grocery Stores
5412 Retail-Convenience Stores
5500 Retail-Auto Dealers & Gasoline Stations
5531 Retail-Auto & Home Supply Stores
5551 Boat Dealers
5600 Retail-Apparel & Accessory Stores
5621 Retail-Women's Clothing Stores
5651 Retail-Family Clothing Stores
5661 Retail-Shoe Stores
5700 Retail-Home Furniture, Furnishings & Equipment Stores
5712 Retail-Furniture Stores
5731 Retail-Radio, TV & Consumer Electronics Stores
5734 Retail-Computer & Computer Software Stores
5735 Retail-Record & Prerecorded Tape Stores
5810 Retail-Eating & Drinking Places
5812 Retail-Eating Places
5900 Retail-Miscellaneous Retail
5912 Retail-Drug Stores and Proprietary Stores
5940 Retail-Miscellaneous Shopping Goods Stores
5944 Retail-Jewelry Stores
5945 Retail-Hobby, Toy & Game Shops
5960 Retail-Nonstore Retailers
5961 Retail-Catalog & Mail-Order Houses
5990 Retail-Retail Stores, NEC
6012 Pay Day Lenders
6021 National Commercial Banks
6022 State Commercial Banks
6029 Commercial Banks, NEC
6035 Savings Institution, Federally Chartered
6036 Savings Institutions, Not Federally Chartered
6099 Functions Related To Depository Banking, NEC
6111 Federal & Federally Sponsored Credit Agencies
6141 Personal Credit Institutions
6153 Short-Term Business Credit Institutions
6159 Miscellaneous Business Credit Institution
6162 Mortgage Bankers & Loan Correspondents
6163 Loan Brokers
6172 Finance Lessors
6189 Asset-Backed Securities
6199 Finance Services
6200 Security & Commodity Brokers, Dealers, Exchanges & Services
6211 Security Brokers, Dealers & Flotation Companies
6221 Commodity Contracts Brokers & Dealers
6282 Investment Advice
6311 Life Insurance
6321 Accident & Health Insurance
6324 Hospital & Medical Service Plans
6331 Fire, Marine & Casualty Insurance
6351 Surety Insurance
6361 Title Insurance
6399 Insurance Carriers, NEC
6411 Insurance Agents, Brokers & Service
6500 Real Estate
6510 Real Estate Operators (No Developers) & Lessors
6512 Operators of Nonresidential Buildings
6513 Operators of Apartment Buildings
6519 Lessors of Real Property, NEC
6531 Real Estate Agents & Managers (For Others)
6532 Real Estate Dealers (For Their Own Account)
6552 Land Subdividers & Developers (No Cemeteries)
6770 Blank Checks
6792 Oil Royalty Traders
6794 Patent Owners & Lessors
6795 Mineral Royalty Traders
6798 Real Estate Investment Trusts
6799 Investors, NEC
7000 Hotels, Rooming Houses, Camps & Other Lodging Places
7011 Hotels & Motels
7200 Services-Personal Services
7310 Services-Advertising
7311 Services-Advertising Agencies
7320 Services-Consumer Credit Reporting, Collection Agencies
7330 Services-Mailing, Reproduction, Commercial Art & Photography
7331 Services-Direct Mail Advertising Services
7334 Services-Photocopying and Duplicating Services
7340 Services-To Dwellings & Other Buildings
7350 Services-Miscellaneous Equipment Rental & Leasing
7359 Services-Equipment Rental & Leasing, NEC
7361 Services-Employment Agencies
7363 Services-Help Supply Services
7370 Services-Computer Programming, Data Processing, Etc.
7371 Services-Computer Programming Services
7372 Services-Prepackaged Software
7373 Services-Computer Integrated Systems Design
7374 Services-Computer Processing & Data Preparation
7377 Services-Computer Rental & Leasing
7380 Services-Miscellaneous Business Services
7381 Services-Detective, Guard & Armored Car Services
7384 Services-Photofinishing Laboratories
7385 Services-Telephone Interconnect Systems
7389 Services-Business Services, NEC
7500 Services-Automotive Repair, Services & Parking
7510 Services-Auto Rental & Leasing (No Drivers)
7600 Services-Miscellaneous Repair Services
7812 Services-Motion Picture & Video Tape Production
7819 Services-Allied To Motion Picture Production
7822 Services-Motion Picture & Video Tape Distribution
7829 Services-Allied To Motion Picture Distribution
7830 Services-Motion Picture Theaters
7841 Services-Video Tape Rental
7900 Services-Amusement & Recreation Services
7948 Services-Racing, Including Track Operation
7990 Services-Miscellaneous Amusement & Recreation
7994 Services-Video Game Arcades
7995 Services-Gambling Transactions
7996 Services-Amusement Parks
7997 Services-Membership Sports & Recreation Clubs
8000 Services-Health Services
8011 Services-Offices & Clinics of Doctors of Medicine
8050 Services-Nursing & Personal Care Facilities
8051 Services-Skilled Nursing Care Facilities
8060 Services-Hospitals
8062 Services-General Medical & Surgical Hospitals, NEC
8071 Services-Medical Laboratories
8082 Services-Home Health Care Services
8090 Services-Misc Health & Allied Services, NEC
8093 Services-Specialty Outpatient Facilities, NEC
8111 Services-Legal Services
8200 Services-Educational Services
8300 Services-Social Services
8351 Services-Child Day Care Services
8600 Services-Membership organizations
8700 Services-Engineering, Accounting, Research, Management
8711 Services-Engineering Services
8731 Services-Commercial Physical & Biological Research
8734 Services-Testing Laboratories
8741 Services-Management Services
8742 Services-Management Consulting Services
8744 Services-Facilities Support Management Services
8748 Business Consulting Services, Not Elsewhere Classified
8880 American Depositary Receipts
8888 Foreign Governments
8900 Services-Services, NEC
9721 International Affairs
9995 Non-Operating Establishments

Industry

From Wikipedia, the free encyclopedia

Cement factories are part of the manufacturing industry. This factory is in Malmö, Sweden.

An industry is a sector that produces goods or related services within an economy. The major source of revenue of a group or company is an indicator of what industry it should be classified in. When a large corporate group has multiple sources of revenue generation, it is considered to be working in different industries. The manufacturing industry became a key sector of production and labour in European and North American countries during the Industrial Revolution, upsetting previous mercantile and feudal economies. This came through many successive rapid advances in technology, such as the development of steam power and the production of steel and coal.

Following the Industrial Revolution, possibly a third of the economic output came from manufacturing industries. Many developed countries and many developing/semi-developed countries (China, India etc.) depend significantly on manufacturing industry.

History

Slavery

Slavery, the practice of utilizing forced labor to produce goods and services, has occurred since antiquity throughout the world as a means of low-cost production. It typically produces goods for which profit depends on economies of scale, especially those for which labor was simple and easy to supervise. International law has declared slavery illegal.

Guilds

Guilds, associations of artisans and merchants, oversee the production and distribution of a particular good. Guilds have their roots in the Roman Empire as collegia (singular: collegium) Membership in these early guilds was voluntary. The Roman collegia did not survive the fall of Rome. In the early middle ages, guilds once again began to emerge in Europe, reaching a degree of maturity by the beginning of the 14th century. While few guilds remain today, some modern labor structures resemble those of traditional guilds. Other guilds, such as the SAG-AFTRA act as trade unions rather than as classical guilds. Professor Sheilagh Ogilvie claims that guilds negatively affected quality, skills, and innovation in areas where they were present.

Industrial Revolution

The industrial revolution (from the mid-18th century to the mid-19th century) saw the development and popularization of mechanized means of production as a replacement for hand production. The industrial revolution played a role in the abolition of slavery in Europe and in North America.

Since the Industrial Revolution

In a process dubbed tertiarization, the economic preponderance of primary and secondary industries has declined in recent centuries relative to the rising importance of tertiary industry, resulting in the post-industrial economy. Specialization in industry and in the classification of industry has also occurred. Thus (for example) a record producer might claim to speak on behalf of the Japanese rock industry, the recording industry, the music industry or the entertainment industry - and any formulation will sound grandiose and weighty.

Industrial development

Optimized logistics have enabled the rapid development of industry. Here is a thermal oxidizer during the industrial shipping process.
 
A factory, a traditional symbol of the industrial development (a cement factory in Kunda, Estonia)
 
The Industrial Revolution led to the development of factories for large-scale production with consequent changes in society. Originally the factories were steam-powered, but later transitioned to electricity once an electrical grid was developed. The mechanized assembly line was introduced to assemble parts in a repeatable fashion, with individual workers performing specific steps during the process. This led to significant increases in efficiency, lowering the cost of the end process. Later automation was increasingly used to replace human operators. This process has accelerated with the development of the computer and the robot.

Deindustrialisation

Colin Clark's sector model of an economy undergoing technological change. In later stages, the Quaternary sector of the economy grows.

Historically certain manufacturing industries have gone into a decline due to various economic factors, including the development of replacement technology or the loss of competitive advantage. An example of the former is the decline in carriage manufacturing when the automobile was mass-produced.

A recent trend has been the migration of prosperous, industrialized nations towards a post-industrial society. This is manifested by an increase in the service sector at the expense of manufacturing, and the development of an information-based economy, the so-called informational revolution. In a post-industrial society, manufacturers relocate to more profitable locations through a process of off-shoring

Measurements of manufacturing industries outputs and economic effect are not historically stable. Traditionally, success has been measured in the number of jobs created. The reduced number of employees in the manufacturing sector has been assumed to result from a decline in the competitiveness of the sector, or the introduction of the lean manufacturing process.

Related to this change is the upgrading of the quality of the product being manufactured. While it is possible to produce a low-technology product with low-skill labour, the ability to manufacture high-technology products well is dependent on a highly skilled staff.

Society

An industrial society is a society driven by the use of technology to enable mass production, supporting a large population with a high capacity for division of labour. Today, industry is an important part of most societies and nations. A government must have some kind of industrial policy, regulating industrial placement, industrial pollution, financing and industrial labour.

Industrial labour

An industrial worker amidst heavy steel components (KINEX BEARINGS, Bytča, Slovakia, c. 1995–2000)

In an industrial society, industry employs a major part of the population. This occurs typically in the manufacturing sector. A labour union is an organization of workers who have banded together to achieve common goals in key areas such as wages, hours, and other working conditions. The trade union, through its leadership, bargains with the employer on behalf of union members (rank and file members) and negotiates labour contracts with employers. This movement first rose among industrial workers.

War

The assembly plant of the Bell Aircraft Corporation (Wheatfield, New York, United States, 1944) producing P-39 Airacobra fighters

The Industrial Revolution changed warfare, with mass-produced weaponry and supplies, machine-powered transportation, mobilization, the total war concept and weapons of mass destruction. Early instances of industrial warfare were the Crimean War and the American Civil War, but its full potential showed during the world wars. See also military-industrial complex, arms industries, military industry and modern warfare.

Economic equilibrium

From Wikipedia, the free encyclopedia
 
Economic equilibrium
A solution concept in game theory
Relationship
Subset ofEquilibrium, Free market
Superset ofCompetitive equilibrium, Nash equilibrium, Intertemporal equilibrium, Recursive competitive equilibrium
Significance
Used formostly Perfect competition, but also some Imperfect competition

In economics, economic equilibrium is a situation in which economic forces such as supply and demand are balanced and in the absence of external influences the (equilibrium) values of economic variables will not change. For example, in the standard text perfect competition, equilibrium occurs at the point at which quantity demanded and quantity supplied are equal. Market equilibrium in this case is a condition where a market price is established through competition such that the amount of goods or services sought by buyers is equal to the amount of goods or services produced by sellers. This price is often called the competitive price or market clearing price and will tend not to change unless demand or supply changes, and quantity is called the "competitive quantity" or market clearing quantity. But the concept of equilibrium in economics also applies to imperfectly competitive markets, where it takes the form of a Nash equilibrium.

Properties of equilibrium

Three basic properties of equilibrium in general have been proposed by Huw Dixon. These are:

Equilibrium property P1: The behavior of agents is consistent. 

Equilibrium property P2: No agent has an incentive to change its behavior. 

Equilibrium property P3: Equilibrium is the outcome of some dynamic process (stability).

Example: competitive equilibrium

Competitive Equilibrium: Price equates supply and demand.
  • P – price
  • Q – quantity demanded and supplied
  • S – supply curve
  • D – demand curve
  • P0 – equilibrium price
  • A – excess demand – when P
    0
  • B – excess supply – when P>P0
  • In a competitive equilibrium, supply equals demand. Property P1 is satisfied, because at the equilibrium price the amount supplied is equal to the amount demanded. Property P2 is also satisfied. Demand is chosen to maximize utility given the market price: no one on the demand side has any incentive to demand more or less at the prevailing price. Likewise supply is determined by firms maximizing their profits at the market price: no firm will want to supply any more or less at the equilibrium price. Hence, agents on neither the demand side nor the supply side will have any incentive to alter their actions.

    To see whether Property P3 is satisfied, consider what happens when the price is above the equilibrium. In this case there is an excess supply, with the quantity supplied exceeding that demanded. This will tend to put downward pressure on the price to make it return to equilibrium. Likewise where the price is below the equilibrium point there is a shortage in supply leading to an increase in prices back to equilibrium. Not all equilibria are "stable" in the sense of equilibrium property P3. It is possible to have competitive equilibria that are unstable. However, if an equilibrium is unstable, it raises the question of reaching it. Even if it satisfies properties P1 and P2, the absence of P3 means that the market can only be in the unstable equilibrium if it starts off there.

    In most simple microeconomic stories of supply and demand a static equilibrium is observed in a market; however, economic equilibrium can be also dynamic. Equilibrium may also be economy-wide or general, as opposed to the partial equilibrium of a single market. Equilibrium can change if there is a change in demand or supply conditions. For example, an increase in supply will disrupt the equilibrium, leading to lower prices. Eventually, a new equilibrium will be attained in most markets. Then, there will be no change in price or the amount of output bought and sold — until there is an exogenous shift in supply or demand (such as changes in technology or tastes). That is, there are no endogenous forces leading to the price or the quantity.

    Example: Nash equilibrium

    Equilibrium quantities as a solution to two reaction functions in Cournot duopoly. Firm 1's reaction function q1=R1(q2) gives its optimal output q1 to a given output q2 of firm 2. Likewise, firm 2's reaction function q2=R2(q1). The Cournot-Nash equilibrium occurs where the two reaction functions intersect and both firms are choosing the optimal output given the output of the other firm.
     
    The Nash equilibrium is widely used in economics as the main alternative to competitive equilibrium. It is used whenever there is a strategic element to the behavior of agents and the "price taking" assumption of competitive equilibrium is inappropriate. The first use of the Nash equilibrium was in the Cournot duopoly as developed by Antoine Augustin Cournot in his 1838 book. Both firms produce a homogenous product: given the total amount supplied by the two firms, the (single) industry price is determined using the demand curve. This determines the revenues of each firm (the industry price times the quantity supplied by the firm). The profit of each firm is then this revenue minus the cost of producing the output. Clearly, there is a strategic interdependence between the two firms. If one firm varies its output, this will in turn affect the market price and so the revenue and profits of the other firm. We can define the payoff function which gives the profit of each firm as a function of the two outputs chosen by the firms. Cournot assumed that each firm chooses its own output to maximize its profits given the output of the other firm. The Nash equilibrium occurs when both firms are producing the outputs which maximize their own profit given the output of the other firm.

    In terms of the equilibrium properties, we can see that P2 is satisfied: in a Nash equilibrium, neither firm has an incentive to deviate from the Nash equilibrium given the output of the other firm. P1 is satisfied since the payoff function ensures that the market price is consistent with the outputs supplied and that each firms profits equal revenue minus cost at this output. 

    Is the equilibrium stable as required by P3? Cournot himself argued that it was stable using the stability concept implied by best response dynamics. The reaction function for each firm gives the output which maximizes profits (best response) in terms of output for a firm in terms of a given output of the other firm. In the standard Cournot model this is downward sloping: if the other firm produces a higher output, the best response involves producing less. Best response dynamics involves firms starting from some arbitrary position and then adjusting output to their best-response to the previous output of the other firm. So long as the reaction functions have a slope of less than -1, this will converge to the Nash equilibrium. However, this stability story is open to much criticism. As Dixon argues: "The crucial weakness is that, at each step, the firms behave myopically: they choose their output to maximize their current profits given the output of the other firm, but ignore the fact that the process specifies that the other firm will adjust its output...". There are other concepts of stability that have been put forward for the Nash equilibrium, evolutionary stability for example.

    Normative evaluation

    Most economists, for example Paul Samuelson, caution against attaching a normative meaning (value judgement) to the equilibrium price. For example, food markets may be in equilibrium at the same time that people are starving (because they cannot afford to pay the high equilibrium price). Indeed, this occurred during the Great Famine in Ireland in 1845–52, where food was exported though people were starving, due to the greater profits in selling to the English – the equilibrium price of the Irish-British market for potatoes was above the price that Irish farmers could afford, and thus (among other reasons) they starved.

    Interpretations

    In most interpretations, classical economists such as Adam Smith maintained that the free market would tend towards economic equilibrium through the price mechanism. That is, any excess supply (market surplus or glut) would lead to price cuts, which decrease the quantity supplied (by reducing the incentive to produce and sell the product) and increase the quantity demanded (by offering consumers bargains), automatically abolishing the glut. Similarly, in an unfettered market, any excess demand (or shortage) would lead to price increases, reducing the quantity demanded (as customers are priced out of the market) and increasing in the quantity supplied (as the incentive to produce and sell a product rises). As before, the disequilibrium (here, the shortage) disappears. This automatic abolition of non-market-clearing situations distinguishes markets from central planning schemes, which often have a difficult time getting prices right and suffer from persistent shortages of goods and services.

    This view came under attack from at least two viewpoints. Modern mainstream economics points to cases where equilibrium does not correspond to market clearing (but instead to unemployment), as with the efficiency wage hypothesis in labor economics. In some ways parallel is the phenomenon of credit rationing, in which banks hold interest rates low to create an excess demand for loans, so they can pick and choose whom to lend to. Further, economic equilibrium can correspond with monopoly, where the monopolistic firm maintains an artificial shortage to prop up prices and to maximize profits. Finally, Keynesian macroeconomics points to underemployment equilibrium, where a surplus of labor (i.e., cyclical unemployment) co-exists for a long time with a shortage of aggregate demand.

    Solving for the competitive equilibrium price

    To find the equilibrium price, one must either plot the supply and demand curves, or solve for the expressions for supply and demand being equal.
    An example may be:
    Simple supply and demand.svg
    In the diagram, depicting simple set of supply and demand curves, the quantity demanded and supplied at price P are equal.

    At any price above P supply exceeds demand, while at a price below P the quantity demanded exceeds that supplied. In other words, prices where demand and supply are out of balance are termed points of disequilibrium, creating shortages and oversupply. Changes in the conditions of demand or supply will shift the demand or supply curves. This will cause changes in the equilibrium price and quantity in the market. 

    Consider the following demand and supply schedule:

    Price ($) Demand Supply
    8.00 6,000 18,000
    7.00 8,000 16,000
    6.00 10,000 14,000
    5.00 12,000 12,000
    4.00 14,000 10,000
    3.00 16,000 8,000
    2.00 18,000 6,000
    1.00 20,000 4,000
    • The equilibrium price in the market is $5.00 where demand and supply are equal at 12,000 units
    • If the current market price was $3.00 – there would be excess demand for 8,000 units, creating a shortage.
    • If the current market price was $8.00 – there would be excess supply of 12,000 units.
    When there is a shortage in the market we see that, to correct this disequilibrium, the price of the good will be increased back to a price of $5.00, thus lessening the quantity demanded and increasing the quantity supplied thus that the market is in balance.

    When there is an oversupply of a good, such as when price is above $6.00, then we see that producers will decrease the price to increase the quantity demanded for the good, thus eliminating the excess and taking the market back to equilibrium.

    Influences changing price

    A change in equilibrium price may occur through a change in either the supply or demand schedules. For instance, starting from the above supply-demand configuration, an increased level of disposable income may produce a new demand schedule, such as the following:

    Price ($) Demand Supply
    8.00 10,000 18,000
    7.00 12,000 16,000
    6.00 14,000 14,000
    5.00 16,000 12,000
    4.00 18,000 10,000
    3.00 20,000 8,000
    2.00 22,000 6,000
    1.00 24,000 4,000

    Here we see that an increase in disposable income would increase the quantity demanded of the good by 2,000 units at each price. This increase in demand would have the effect of shifting the demand curve rightward. The result is a change in the price at which quantity supplied equals quantity demanded. In this case we see that the two now equal each other at an increased price of $6.00. Note that a decrease in disposable income would have the exact opposite effect on the market equilibrium.

    We will also see similar behaviour in price when there is a change in the supply schedule, occurring through technological changes, or through changes in business costs. An increase in technological usage or know-how or a decrease in costs would have the effect of increasing the quantity supplied at each price, thus reducing the equilibrium price. On the other hand, a decrease in technology or increase in business costs will decrease the quantity supplied at each price, thus increasing equilibrium price. 

    The process of comparing two static equilibria to each other, as in the above example, is known as comparative statics. For example, since a rise in consumers' income leads to a higher price (and a decline in consumers' income leads to a fall in the price — in each case the two things change in the same direction), we say that the comparative static effect of consumer income on the price is positive. This is another way of saying that the total derivative of price with respect to consumer income is greater than zero.

    Dynamic equilibrium

    Whereas in a static equilibrium all quantities have unchanging values, in a dynamic equilibrium various quantities may all be growing at the same rate, leaving their ratios unchanging. For example, in the neoclassical growth model, the working population is growing at a rate which is exogenous (determined outside the model, by non-economic forces). In dynamic equilibrium, output and the physical capital stock also grow at that same rate, with output per worker and the capital stock per worker unchanging. Similarly, in models of inflation a dynamic equilibrium would involve the price level, the nominal money supply, nominal wage rates, and all other nominal values growing at a single common rate, while all real values are unchanging, as is the inflation rate.

    The process of comparing two dynamic equilibria to each other is known as comparative dynamics. For example, in the neoclassical growth model, starting from one dynamic equilibrium based in part on one particular saving rate, a permanent increase in the saving rate leads to a new dynamic equilibrium in which there are permanently higher capital per worker and productivity per worker, but an unchanged growth rate of output; so it is said that in this model the comparative dynamic effect of the saving rate on capital per worker is positive but the comparative dynamic effect of the saving rate on the output growth rate is zero.

    Disequilibrium

    Disequilibrium characterizes a market that is not in equilibrium. Disequilibrium can occur extremely briefly or over an extended period of time. Typically in financial markets it either never occurs or only momentarily occurs, because trading takes place continuously and the prices of financial assets can adjust instantaneously with each trade to equilibrate supply and demand. At the other extreme, many economists view labor markets as being in a state of disequilibrium—specifically one of excess supply—over extended periods of time. Goods markets are somewhere in between: prices of some goods, while sluggish in adjusting due to menu costs, long-term contracts, and other impediments, do not stay at disequilibrium levels indefinitely, and many goods markets such as commodity markets are highly organised and liquid and have essentially instantaneous adjustment of their prices to equilibrium levels.

    Economies of scope

    From Wikipedia, the free encyclopedia
     
    Economies of scope are "efficiencies formed by variety, not volume" (the latter concept is "economies of scale"). In economics, "economies" is synonymous with cost savings and "scope" is synonymous with broadening production/services through diversified products. For example, a gas station that sells gasoline can sell soda, milk, baked goods, etc. through their customer service representatives and thus gasoline companies achieve economies of scope.

    Economics

    The term and the concept's development are attributed to economists John C. Panzar and Robert D. Willig (1977, 1981).

    Whereas economies of scale for a firm involve reductions in the average cost (cost per unit) arising from increasing the scale of production for a single product type, economies of scope involve lowering average cost by producing more types of products.

    Economies of scope make product diversification, as part of the Ansoff Matrix, efficient if they are based on the common and recurrent use of proprietary know-how or on an indivisible physical asset. For example, as the number of products promoted is increased, more people can be reached per unit of money spent. At some point, however, additional advertising expenditure on new products may become less effective (an example of diseconomies of scope). Related examples include distribution of different types of products, product bundling, product lining, and family branding.

    Unlike economies of scale, "which can be reasonably be expected to plateau into an efficient state that will then deliver high-margin revenues for a period", economies of scope may never reach that plateau at all. As Venkatesh Rao of Ribbonfarm explains it, "You may never get to a point where you can claim you have right-sized and right-shaped the business, but you have to keep trying. In fact, managing the ongoing scope-learning process is the essential activity in business strategy. If you ever think you’ve right-sized/right-shaped for the steady state, that’s when you are most vulnerable to attacks."

    Natural monopolies

    While in the single-output case, economies of scale are a sufficient condition for the verification of a natural monopoly, in the multi-output case, they are not sufficient. Economies of scope are, however, a necessary condition. As a matter of simplification, it is generally accepted that markets may have monopoly features if both economies of scale and economies of scope apply, as well as sunk costs or other barriers to entry.

    Advantages

    Economies of scope have the following advantages for businesses:
    • Extreme flexibility in product design and product mix
    • Rapid responses to changes in market demand, product design and mix, output rates, and equipment scheduling
    • Greater control, accuracy, and repeatability of processes
    • Reduced costs from less waste and lower training and changeover costs
    • More predictability (e.g., maintenance costs)
    • Faster throughput thanks to better machine use, less in-process inventory, or fewer stoppages for missing or broken parts. (Higher speeds are now made possible and economically feasible by the sensory and control capabilities of the “smart” machines and the information management abilities of computer-aided manufacturing (CAM) software.)
    • Distributed processing capability made possible and economical by the encoding of process information in easily replicable software
    • Less risk: A company that sells many product lines, sells in many countries, or both will benefit from reduced risk (e.g., if a product line falls out of fashion or if one country has an economic slowdown, the company will likely be able to continue trading)
    However, not all economists agree on the importance of economies of scope; some argue that the concept applies only to certain industries, and then only rarely.

    Examples

    Economies of scope arise when businesses share centralized functions (such as finance or marketing) or when they form interrelationships at other points in the business process (e.g., cross-selling one product alongside another, using the outputs of one business as the inputs of another).

    Economies of scope served as the impetus behind the formation of large international conglomerates in the 1970s and 1980s, such as BTR and Hanson in the UK and ITT in the United States. These companies sought to apply their financial skills across a more diverse range of industries through economies of scope. In the 1990s, several conglomerates that "relied on cross-selling, thus reaping economies of scope by using the same people and systems to market many different products"—i.e., "selling the financial products of the one by using the sales teams of the other"—which was the logic behind the 1998 merger of Travelers Group and Citicorp.

    3D printing is one area that would be able to take advantage of economies of scope, as it is an example of same equipment producing "multiple products more cheaply in combination than separately".

    If a sales team sells several products, it can often do so more efficiently than if it is selling only one product because the cost of travel would be distributed over a greater revenue base, thus improving cost efficiency. There can also be synergies between products such that offering a range of products gives the consumer a more desirable product offering than would a single product. Economies of scope can also operate through distribution efficiencies—i.e. it can be more efficient to ship to any given location a range of products than a single type of product.

    Further economies of scope occur when there are cost savings arising from byproducts in the production process, such as when the benefits of heating from energy production has a positive effect on agricultural yields.

    Friday, July 10, 2020

    Forgetting curve

    From Wikipedia, the free encyclopedia
     
    Typical Representation of the Forgetting Curve.
     
    The forgetting curve hypothesizes the decline of memory retention in time. This curve shows how information is lost over time when there is no attempt to retain it. A related concept is the strength of memory that refers to the durability that memory traces in the brain. The stronger the memory, the longer period of time that a person is able to recall it. A typical graph of the forgetting curve purports to show that humans tend to halve their memory of newly learned knowledge in a matter of days or weeks unless they consciously review the learned material.

    The forgetting curve supports one of the seven kinds of memory failures: transience, which is the process of forgetting that occurs with the passage of time.

    History

    From 1880 to 1885, Hermann Ebbinghaus ran a limited, incomplete study on himself and published his hypothesis in 1885 as Über das Gedächtnis (later translated into English as Memory: A Contribution to Experimental Psychology). Ebbinghaus studied the memorisation of nonsense syllables, such as "WID" and "ZOF" (CVCs or Consonant–Vowel–Consonant) by repeatedly testing himself after various time periods and recording the results. He plotted these results on a graph creating what is now known as the "forgetting curve". Ebbinghaus investigated the rate of forgetting, but not the effect of spaced repetition on the increase in retrievability of memories.

    Ebbinghaus's publication also included an equation to approximate his forgetting curve:

     
    Here, represents 'Savings' expressed as a percentage, and represents time in minutes. Savings is defined as the relative amount of time saved on the second learning trial as a result of having had the first. A savings of 100% would indicate that all items were still known from the first trial. A 75% savings would mean that relearning missed items required 25% as long as the original learning session (to learn all items). 'Savings' is thus, analogous to retention rate.
     
    In 2015, an attempt to replicate the forgetting curve with one study subject has shown the experimental results similar to Ebbinghaus' original data.

    Hermann's experiment contributed a lot to experimental psychology. He was the first to carry out a series of well-designed experiments on the subject of forgetting, and he was one of the first to choose artificial stimuli in the research of experimental psychology. Since his introduction of nonsense syllables, a large number of experiments in experimental psychology has been based on highly controlled artificial stimuli. 

    Increasing rate of learning

    Hermann Ebbinghaus hypothesized that the speed of forgetting depends on a number of factors such as the difficulty of the learned material (e.g. how meaningful it is), its representation and other physiological factors such as stress and sleep. He further hypothesized that the basal forgetting rate differs little between individuals. He concluded that the difference in performance can be explained by mnemonic representation skills.

    He went on to hypothesize that basic training in mnemonic techniques can help overcome those differences in part. He asserted that the best methods for increasing the strength of memory are:
    1. better memory representation (e.g. with mnemonic techniques)
    2. repetition based on active recall (especially spaced repetition).
    Forgetting Curve with Spaced Repetition

    His premise was that each repetition in learning increases the optimum interval before the next repetition is needed (for near-perfect retention, initial repetitions may need to be made within days, but later they can be made after years). He discovered that information is easier to recall when it’s built upon things you already know, and the forgetting curve was flattened by every repetition. It appeared that by applying frequent training in learning, the information was solidified by repeated recalling.

    Later research also suggested that, other than the two factors Ebbinghaus proposed, higher original learning would also produce slower forgetting. The more information was originally learned, the slower the forgetting rate would be.

    Spending time each day to remember information will greatly decrease the effects of the forgetting curve. Some learning consultants claim reviewing material in the first 24 hours after learning information is the optimum time to re-read notes and reduce the amount of knowledge forgotten. Evidence suggests waiting 10–20% of the time towards when the information will be needed is the optimum time for a single review.

    However, some memories remain free from the detrimental effects of interference and do not necessarily follow the typical forgetting curve as various noise and outside factors influence what information would be remembered. There is debate among supporters of the hypothesis about the shape of the curve for events and facts that are more significant to the subject. Some supporters, for example, suggest that memories of shocking events such as the Kennedy Assassination or 9/11 are vividly imprinted in memory (flashbulb memory). Others have compared contemporaneous written recollections with recollections recorded years later, and found considerable variations as the subject's memory incorporates after-acquired information. There is considerable research in this area as it relates to eyewitness identification testimony, and eyewitness accounts are found demonstrably unreliable.

    Equations

    Many equations have since been proposed to approximate forgetting, perhaps the simplest being an exponential curve described by the equation:


    where is retrievability (a measure of how easy it is to retrieve a piece of information from memory), is stability of memory (determines how fast falls over time in the absence of training, testing or other recall), and is time.

    Simple equations such as this one were found by Rubin, Hinton, and Wenzel (1999) to provide a good fit to the available data.

    Introduction to entropy

    From Wikipedia, the free encyclopedia https://en.wikipedia.org/wiki/Introduct...