The Voluntary Life: 225 Comparative Advantage Is Mind-blowing

26 October 2015

225 Comparative Advantage Is Mind-blowing


This is a short episode to explain a key idea from economics. Comparative advantage is a simple idea, but its implications are mind-blowing when you really get it. It is a process that most people don't understand, but it is at the root of everything that we create. Comparative advantage is intimately linked to what it means to be human.

Show Notes:
Listen to Episode 225


3 comments:

  1. Jake, thanks for making this podcast. Most people find the idea of comparative advantage quite unintuitive, and difficult to understand. So the more explanations of it that are out there, the better.

    Comparative Advantage has many ramifications.

    Whenever a government taxes trade (by means of sales tax, import duties, etc), some of the potential trades no longer take place, because it is not profitable for the parties to trade with the tax in place. Without the trade, people have to work in jobs at which they are (comparatively) inefficient. Not only do the individuals suffer, but everyone in society suffers because the total production of goods and services is reduced.

    Whenever affirmative action is mandated, it results in some people working in jobs at which they are (comparatively) inefficient. Again the total production of goods and services is reduced, to the disadvantage of everyone in society.

    War, of course, also impoverishes each person by preventing people from trading to exploit their comparative advantage.

    I wrote about this in a 2012 article titled "Should the world’s best brain surgeon and fastest typist hire a secretary?"
    http://quezi.com/15421
    but I'm not able to convince most readers.

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  2. Great episode Jake.

    It truly is mind blowing. When coupled with the concept of the division of labor, I don't know how I get through every day without having a nervous breakdown contemplating the spectacular nature of spontaneous order.

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  3. I love the superman story. How can econ professors make such a simple idea so difficult to understand?

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