≡ Menu

Comparative Advantage is Not an Engineering Project

Here’s a follow-up letter to Daniel Schwartz:

Mr. Schwartz:

Thanks for your response.

In my earlier note I should have made the following point stronger and more distinctly: even if government officials are not motivated by their own narrow interests, and even if these officials are singularly prescient about what are ‘the industries of the future,’ they cannot possibly engineer an economy to have a ‘better’ comparative advantage without overriding many of the freely made choices of legions of ordinary men and women.

A simple example will reveal my meaning. Suppose that you, as an adult, wish to earn your living writing poetry despite your parents’ wish that you become a neurosurgeon. You’re aware that poets earn less monetary income than do neurosurgeons, but your desire to work as a poet is so strong that you’re willing to forego a great deal of income in order to enjoy the satisfaction of writing poetry full-time.

How would you react if your parents secured a court order that permits them to force you to train and then to work as a neurosurgeon? Would you find this use of force acceptable? Would your answer change if your parents show you data that ‘prove’ that having a comparative advantage as a neurosurgeon is ‘better’ than having a comparative advantage at writing poetry?

In one objective, if shallow, sense your parents would be correct about the relative economic merits of neurosurgery versus poetry, for the market value of your services as a neurosurgeon would almost certainly be far higher than the market value of your services as a poet. But should this ‘objective’ fact dominate?

(If your parents instead persuade you, by subsidizing you with money stolen from their neighbors, to pursue a career as a neurosurgeon, the problem remains. The only difference is that now your parents forcibly reduce, not your options, but those of their neighbors.)

Not only does comparative advantage exist only at the level of the individual producing unit (the worker or the firm) rather than at the level of the nation – and not only, therefore, does each nation contain within it countless different (and always in flux) comparative advantages. In addition, each producing-unit’s comparative advantage is determined by a large number of variables, many of which are the subjective preferences of individual workers and owners. For these and a host of other reasons it would be foolish to entrust government officials with the power to engineer changes in comparative advantages.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030


Next post:

Previous post: