Comparative Advantage

1. Comparative Advantage Chapter 2 ECON201, Maclachlan, Fall 2005

2. Economic Principle Trade between two parties makes both better off. ECON201, Maclachlan, Fall 2005

3. What’s the alternative to trade? David Thoreau at Walden Pond. ECON201, Maclachlan, Fall 2005

4. On a national level: autarky A policy of national self-sufficiency and nonreliance on imports or economic aid. ECON201, Maclachlan, Fall 2005

5. Mercantilism A country should aim to run trade surpluses and increase its monetary assets. ECON201, Maclachlan, Fall 2005

6. Adam Smith (1723-1790) Critic of mercantilism. Countries should specialize and trade. Specialize where there’s an ABSOLUTE ADVANTAGE ECON201, Maclachlan, Fall 2005

7. ABSOLUTE ADVANTAGE A region has an absolute advantage if it takes fewer resources to produce a good there than elsewhere. Coffee in Columbia. Computer software in Silicon Valley. ECON201, Maclachlan, Fall 2005

8. David Ricardo (1772-1823) Theory of comparative advantage. Even without an absolute advantage a region can trade to the benefit of all parties. ECON201, Maclachlan, Fall 2005

9. Productivity Information ECON201, Maclachlan, Fall 2005

10. Productivity and Opportunity Cost ECON201, Maclachlan, Fall 2005

11. Productivity and Opportunity Cost ECON201, Maclachlan, Fall 2005

12. Productivity and Opportunity Cost ECON201, Maclachlan, Fall 2005

13. Johnnie Cochran Should he prepare his own will? ECON201, Maclachlan, Fall 2005

14. Why some countries have been slow to specialize In the lone houses and very small villages which are scattered about in so desert a country as the Highlands of Scotland, every farmer must be butcher, baker and brewer for his own family. --Adam Smith, 1776 ECON201, Maclachlan, Fall 2005