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This is one of those cases where it's really important to remember the assumptions built into comparative advantage theory, such as "no mobility of labor". If t
by mitthrowaway2 9mo ago
This is one of those cases where it's really important to remember the assumptions built into comparative advantage theory, such as "no mobility of labor". If the Green-country people are more productive at all tasks than the Blue-country people, they can still both profit from trade with each other. But that does not represent the maximum productivity allocation of resources. Output can be increased still further by the Green people replacing the population of the Blue-country with more Green people, in which scenario the optimal resource allocation to sustaining the Blue people is unfortunately zero.
This is why the population of labor animals plummeted in the 20th century. And to put it plainly, it means that there's no guarantee you can always sell labor for enough to keep your home from getting paved over for a data center.