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I am taking the liberty of posting here Bryan Caplan’s latest EconLog entry [2] in full, for the point it makes is important and profound:
A Solipsist’s Guide to Comparative Advantage [2]
Bryan Caplan According to extreme solipsism [3], you’re the only person who really exists. Suppose this strange position were true. What would it imply for the Law of Comparative Advantage [4]?
Consider a standard textbook problem with two agents: you and me. By hypothesis, I’m a mere illusion, but I’m still a useful resource. Suppose that an hour of time yields the following output.
Wheat Steel You 10 1 Me 1 5 Now suppose that the wheat:steel price ratio is 1:1. Ordinarily, we’d say that you could just trade with me, making us both better off. But on the solipsistic assumption, you can correctly regard me as a mere tool for converting one unit of wheat into one unit of steel. For all practical purposes, then, you can forget about my existence, and simply recalculate your own productivity:
Wheat Steel You 10 10 Now suppose I’m the solipsist, and you’re illusory – a mere tool for me to convert one unit of steel into one unit of wheat. Then I can forget about your existence, and simply recalculate my own productivity:
Wheat Steel Me 5 5 Of course, solipsism is false [5]. But we two solipsists can still teach the world a lesson. Namely: in a deep sense, trade increases productivity:
Without Trade With Trade Wheat Steel Wheat Steel You 10 1 10 10 Me 1 5 5 5 You might object, “We already know that trade increases productivity via shared knowledge, increasing returns, etc.” But these are all empirical claims. My point is stronger: Trade tautologically increase productivity. And if a solipsist can see this, so should everyone.