A TRUE BUT N0N0BVI0US PROPOSITION? Trade is about cooperation, not competition.

Author:McCloskey, Deirdre Nansen
Position:IDEAS
 
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THE GREAT MATHEMATICIAN Stanislaw Ulam challenged the great economist Paul Samuelson to name a principle in the social sciences that was both true and nonobvious. Samuelson thought for a bit, then replied, "Ricardo's theory of comparative advantage."

"That this idea is logically true," he said, "need not be argued before a mathematician; that it is not trivial is attested by the thousands of important and intelligent men who have never been able to grasp the doctrine for themselves or to believe it after it was explained to them."

You can make the argument for comparative advantage seem highly non-trivial and devilishly hard to believe after it is explained to you by following the great English economist David Ricardo into arithmetic and clotted prose. Ricardo wrote in 1817 that "England exported cloth [to Portugal] in exchange for wine because, by so doing, her industry was rendered more productive to her; she had more cloth and wine than if she had manufactured both for herself; and... the industry of Portugal could be more beneficially employed for both countries in producing wine." If you can instantly grasp that logic (and go on believing it for practical purposes such as opposing Donald Trump's view of foreign trade) you are either already an economist or have an astonishing natural ability for the subject.

The economist Paul Krugman wrote a column a long time ago claiming that comparative advantage is in fact difficult to comprehend, requiring various tricky assumptions only an economist could love. But it is "difficult" only in the world of Princeton University economists in which market "imperfections" abound and mathematical proof reigns.

Actually, it's dead easy. No math, no arithmetic. It is, in fact, the soul of common sense. Comparative advantage is merely the principle of cooperation. The word advantage gets us thinking of competition, perfectly reasonable in our own individual lives--we do compete with other businesses or other writers or whomever. But we also massively cooperate with family and colleagues. The world as a whole, furthermore, does well by cooperating, in business or science or cultural life. It's not all we do, admittedly. I said: We also compete. But within a household or a company or a world economy, the job is to produce a result in the best way, cooperatively. If you were running a sports team, say, you would want to assign roles to the various contributors to the common purpose sensibly. It turns out to...

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