Oct 15 2007
Comparative advantage as the basis for trade – oh, what a beautiful concept!
Published by Jason Welker at 10:38 pm under Comparative advantage,Trade
This week in comparative advantage | Free exchange | Economist.com
The writers at Free Exchange find the concept of comparative advantage to contain almost enchanting beauty and hope for a better world. Perhaps they romanticize it a bit much, but this is an interesting little piece, nonetheless:
The principle of comparative advantage is one of those ideas that can completely transform the way you see the world, once you really internalise it. That everyone, even those who are best at nothing, can benefit themselves and others through co-operation is a beautiful idea that points to the possibility of a benevolent world.
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About the author: Jason Welker teaches International Baccalaureate and Advanced Placement Economics at Zurich International School in Switzerland. In addition to publishing various online resources for economics students and teachers, Jason developed the online version of the Economics course for the IB and is has authored two Economics textbooks: Pearson Baccalaureate’s Economics for the IB Diploma and REA’s AP Macroeconomics Crash Course.
Jason is a native of the Pacific Northwest of the United States, and is a passionate adventurer, who considers himself a skier / mountain biker who teaches Economics in his free time. He and his wife keep a ski chalet in the mountains of Northern Idaho, which now that they live in the Swiss Alps gets far too little use. Read more posts by this authorRelated posts:
- Comparative advantage, plain and simple
- SAS Economists Podcast #10: Perfect competition and comparative advantage in… the World of Warcraft!
- Dominican Republic struggles to find its “comparative advantage” as it faces new competition from Asia
- Does free trade really mean lower prices? A debate between two economists much smarter than me
- Fair trade vs. free trade: the problem with “dumping”
"That everyone, even those who are best at nothing, can benefit themselves and others through co-operation is a beautiful idea that points to the possibility of a benevolent world." Aww what a sweet way to employ economics philosophically. Maybe we should spread this article around the school to help out all the depressed Asian kids who find that there's always SOMEONE better than them. "Well mom, IT'S OKAY that my GPA is not the highest.. because according to this article on the economist.com site, i still have comparative advantage that enables me to make the world a better place! HA!"
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The hard part is finding out what our own comparative advantage is in! It took me years of self-discovery to find that my comparative advantage was actually in making Kraft macaroni and cheese perfectly, I mean PERFECTLY, without even looking at the box… I'll tell you, if only there were a DEMAND for people with such an impressive skill, I wouldn't be stuck in this dead end job!
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Haha, kudos to Mr. Welker and his Kraft macaroni and cheese perfection. =P I still need to hone my skills in that aspect.
I agree with Alice on how this economic concept can be applied philosophically. I mean, it makes sense. For example, is person A is just faster at doing both his math and English homework than B, if one of them does math once and just copies it again and the other does the homework for the other class and copies it. Then they trade, they'd save a lot of time. Hmmm…. That's something to think about for us students… Just kidding, it would look a little weird having two distinctive types of hand writing for two different classes.
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All of us, as distinct individuals, have our special assets as well as downfalls. So, it is highly desirable for people to help one another. Thus, even though this philanthropic outlook may seem exaggerated and romanticized, I believe that creating peace is just one step away; if only we could rid ourselves of never-ending greed and help others, this world would be a truly harmonic place.
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Wow Dana, wouldn't that be ideal? Similar to Alice, i also like how this article points out that everyone can contribute, and everyone has a desired skill that could be combined with others to make a more efficient system. As for making macaroni and cheese, i challenge you Mr.Welker.
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The guys at Free Exchange are a little bit lost in their fantasy of the great Comparative Advantage, the answer to the world's problems. I can’t quite understand how they figure people who are the best at nothing can benefit from comparative advantage! A nation that has no advantage over other countries for the production of ANYTHING cannot profit by free, un-regulated comparative advantage! Or at least this is what I believe. If the nation were to use protectionist methods on their economy to help them gain that comparative advantage they’re lacking, well it wouldn’t be real comparative advantage because the government is interfering in the natural “flow” of this so called “beautiful concept”. Shouldn’t this make sense?
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