What is Comparative Advantage?
You may have heard about comparative advantage. As a concept, it’s a neat and mathematically valid argument. It goes like this, as described in wikipedia:
Say you have two countries, England and Portugal, which both make and use cloth and wine, say at time 1. Their productivity is described in this chart:
Which is to say that in England, it takes more work than in Portugal to produce one unit of either cloth or wine, maybe because of climate differences. In this sense, Portugal has an “absolute advantage” over England in both categories.
However, as I said, both England and Portugal make and use both products. So, if England needs one unit of each, it takes them 220 hours, and if Portugal wishes to consumer one unit of each, it takes them 170 hours to produce it.
Here’s where trade comes in. Starting at time…
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