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Bonus Quotation of the Day…

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… is from Deirdre McCloskey’s October 2017 paper “A Punter’s Guide to a True but Non-Obvious Proposition in Economics,” a version of which appears in the May 2018 Reason.  (Back in October I linked to the original version [2].) (link below added):

Actually, [the principle of comparative advantage [3] is] dead easy.  No math, no arithmetic.  It is in fact the soul of common sense.  But you have to understand that comparative advantage is the principle of cooperation, as against competition.  The word “advantage” gets us thinking of competition, which is perfectly reasonable in our own individual lives — we do compete with other businesses or other writers or whomever.  But the system as a whole, whatever it is, does well of course by cooperating, in business or science or family life.  It’s not all we do, admittedly.  We also compete.  But within a household or a company or a world economy the job is to produce a result in the best way, cooperatively.  If you are running a household or a sports team or a world economy, you would want to assign roles to the various contributors to the common purpose sensibly.  It turns out to be precisely on grounds of comparative advantage.

DBx: Deirdre’s point is profound and fundamental.  When we specialize along the lines of our respective comparative advantages – or when by first specializing we each thereby come to possess a comparative advantage that each of us did not previously possess (for it doesn’t much matter just how the particular pattern of comparative advantage arises) – we cooperate with each other in producing outputs for each other’s consumption and betterment.  In terms of the above graph, these two producers, if each specializes according to his or her comparative advantage, cooperate with each other in enabling each of these two persons to be part of an economy with a production-possibilities frontier that is further out than is the production-possibilities frontier of any of the two persons acting alone.

And importantly, absolutely nothing of economic significance turns on, or is affected by, any political border that might or might not separate the two people in the above example.

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