MichaelMatulef on Nostr: More puzzling is the case in which one individual is superior to another in all lines ...

More puzzling is the case in which one individual is superior to another in all lines of production. Suppose, for example, that Crusoe is superior to Jackson both in the production of berries and in the production of game. Are there any possibilities for exchange in this situation? Superficially, it might be answered that there are none, and that both will continue in isolation. Actually, it pays for Crusoe to specialize in that line of production in which he has the greatest relative superiority in production, and to exchange this product for the product in which Jackson specializes. It is clear that the inferior producer benefits by receiving some of the products of the superior one. The latter benefits also, however, by being free to devote himself to that product in which his productive superiority is the greatest. Thus, if Crusoe has a great superiority in berry production and a small one in game production, it will still benefit him to devote his full working time to berry production and then exchange some berries for Jackson’s game products. In an example mentioned by Professor Boulding:

"A doctor who is an excellent gardener may very well prefer to employ a hired man who as a gardener is inferior to himself, because thereby he can devote more time to his medical practice."

This important principle—that exchange may beneficially take place even when one party is superior in both lines of production—is known as the law of association, the law of comparative costs, or the law of comparative advantage.


- Murray Rothbard