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Competitive advantage is how every small community works. One person runs the coffee shop, someone is the mechanic, there’s the town contractor, plumber, grocer
by justonceokay 1y ago
Competitive advantage is how every small community works. One person runs the coffee shop, someone is the mechanic, there’s the town contractor, plumber, grocer, sheriff, etc. the more each person is able to specialize the more services are available to the whole town.
I understand international politics are completely different, but it is hard for me to understand how comparative advantage would not be useful at that level as well.
- js8 1y agoComparative advantage somewhat works on international level, but with very specialized stuff. There is no reason every country needs its own space program, its own EUV tooling or its own global positioning system. But for commonly used goods that every person needs, every country would benefit from producing these on their own, thanks to various synergies. Specialization has also transaction cost. If you're skilled it might be better to plumb some things yourself than call a professional and risk him being a hack. So I don't think it's one system being better than other. Rather, specialization is like paralelism - there is a transaction cost due to nonlocality, but also better scaling. So, like with paralelism, the rule should be - try as much as you can to produce locally, and specialize only where the scale advantage becomes really strong (usually that happens with high-tech products that are needed in very low quantities - by centralizing production, knowhow is easier to apply and capital costs are easier to justify).