Do You Really Understand Comparative Advantage?

The theory of comparative advantage shows how voluntary exchange benefits both parties and encourages specialization. You don't need to possess an absolute advantage in any particular productive activity to enjoy a comparative advantage. Your comparative advantage is whatever you can do relatively cheaply compared to everything else and everyone else. For instance, Haiti still trades … Continue reading Do You Really Understand Comparative Advantage?

WTO Reaches First-Ever Agreement

Twenty years after its establishment, the World Trade Organization finally reached its first global trade deal last night at the meeting of the world's trade ministers in Bali. The successful agreement foiled expectations that this meeting, like all others of the Doha Round, would end in failure and acrimony. Media outlets have been reporting the … Continue reading WTO Reaches First-Ever Agreement

Does Comparative Advantage Not Work for Buffalo?

Nick Gillespie notes in a recent post: [I]f working on Reason Saves Cleveland taught me one thing, it's that there's no simple solution to urban decline. Some of it is simply historical - the Northeast is not going to dominate American business and culture that way it did 100 years ago and cities such as … Continue reading Does Comparative Advantage Not Work for Buffalo?

Trade and Employment

I teach my undergraduates that trade has no long-run effect on aggregate employment. I teach it because it's right, and very few economists would disagree. Tyler Cowen's recent postings on MR about the negative employment effects of trade have the potential to mislead. To the extent that trade and technology correlate with persistent disemployment in … Continue reading Trade and Employment

Trade Politics in Middle-Earth (Answers & Winner) -updated

Seth Cohn wins Commenter of the Day for getting all three answers to my Middle-Earth quiz right. Here are the answers with brief logic: 1. The Shire will export Longbottom leaf and import mithril armor and iron ore. (Logic: Being abundant in land and scarce in labor and capital, The Shire can make leaf more … Continue reading Trade Politics in Middle-Earth (Answers & Winner) -updated

Trade Politics in Middle-Earth

Seen on an International Political Economy quiz: The world of Middle-Earth has become largely peaceful, and international trade is growing. The Shire, Gondor, and Mordor are three countries in Middle-Earth. The Shire is abundant in land and scarce in labor and capital; Gondor is abundant in labor and capital and scarce in land; Mordor is … Continue reading Trade Politics in Middle-Earth