Professor: Let's take Tom Schmidt. Now of course he has an absolute advantage in every task- he's better than you at everything. But it would be beneficial to him to trade with you, who are worse at everything than he, because of the principle of Comparative Advantage- you do the task that you're RELATIVELY better at, he does the task he's relatively better at, and you both win.
Student 1: I don't believe you. Tom Schmidt should do all of the tasks.
Professor: No, you see he should focus his resources on the task he's relatively best at and use the wealth he gains from that to trade for goods from other parties.
Student 2: What if we cloned Tom Schmidt?
Professor: You can't clone Tom Schmidt! It's not part of the example!
Student 3: Why isn't Tom Schmidt teaching this class? He'd be better than you at explaining this.
Professor: BECAUSE I HAVE A COMPARATIVE... just, never mind
Tuesday, October 12, 2010
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