Advantage diminishing - by Duncan McClements

Comparative advantage is the principal in economics that explains why all countries benefit from trade, rather than merely those that are most efficient at producing given goods and services. If Britain can produce 20 cars or 40 computers, and the United States 100 cars or 500 computers, total production could be 60 cars and 270 computers in the absence of exchange but 65 cars and 275 computers with free trade, were Britain to shift to only producing cars. For our purposes, what matters is that the same method can be applied to trade between individuals as well as between countries. Previously this blog has modelled the technological externalities from one additional individual, and found them to be extremely substantial under all reasonable discount rates: in this post, whether comparative advantage externalities are also substantial will be explored. Comparative advantage can be visualised on a production possibility frontier (PPF) such as Figure 1. This represents the ability of soc

Comparative advantage is the principal in economics that explains why all countries benefit from trade, rather than merely those that are most efficient at producing given goods and services. If Britain can produce 20 cars or 40 computers, and the United States 100 cars or 500 computers, total production could be 60 cars and 270 computers in the absence of exchange but 65 cars and 275 computers with free trade, were Britain to shift to only producing cars. For our purposes, what matters is that the same method can be applied to trade between individuals as well as between countries. Previously