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Comparative Advantage drives me insane. It's so widely misunderstood, or just unknown, and yet its crucial to understanding so many political decisions. I don'

Comparative Advantage drives me insane. It's so widely misunderstood, or just unknown, and yet its crucial to understanding so many political decisions. I don't have a position on TTIP, but many of my friends do. Having a view on TTIP without understanding comparative advantage is like having a position on Israel without knowing that Palestine exists. It's not that you could be better informed - everyone could always be better informed - it's that you missed the crucial motivating factor that explains everyone's behaviour. Yet, comparative advantage is hard to explain and seems like some rhetoric thought up by evil, exploitative international capitalists. To me, the simplest explanation is that trade is always beneficial, because parties only agree to it when they both see advantage. I've thought about how I'd run a workshop to explain this. I'd divide up the group up into teams and issue a different selection of chocolates to each team. Then I'd ask everyone to swap, and ask each team to say if they were happier after the swapping. Unless the workshop is full of pathologically irrational people, everyone will be happier or at least as happy as before.

explanibrag 10y ago
"To me, the simplest explanation is that trade is always beneficial, because parties only agree to it when they both see advantage." That's true in an efficient-economic-agent sort of way, but do you really think it's true in the real world? Do you think actors (nations, companies, individuals) don't make errors of judgement?
- jimmytidey 10y ago
  Yes, I think people make errors of judgement. I also think the 'path dependency' mentioned in another comment exists. I also think, as another poster mentioned, there are strategic reasons to ensure a balance of industries in your economy. I think the comparative advantage model remains a compelling starting point despite all this. But it doesn't matter what I think, the key thing is that many people who actually do make decisions use the comparative advantage model.

explanibrag 10y ago

"To me, the simplest explanation is that trade is always beneficial, because parties only agree to it when they both see advantage." That's true in an efficient-economic-agent sort of way, but do you really think it's true in the real world? Do you think actors (nations, companies, individuals) don't make errors of judgement?

jimmytidey 10y ago
Yes, I think people make errors of judgement. I also think the 'path dependency' mentioned in another comment exists. I also think, as another poster mentioned, there are strategic reasons to ensure a balance of industries in your economy. I think the comparative advantage model remains a compelling starting point despite all this. But it doesn't matter what I think, the key thing is that many people who actually do make decisions use the comparative advantage model.