The Duck of Minerva

Classroom Activity: Comparative Advantage

21 February 2014

Editor’s note: this post previously appeared on my personal blog.

This fourth activity comes after students are to have listened (slides) to a lecture on how states are currently leaving a lot of money lying on the ground by failing to cooperate more fully. The examples I used all concern economic cooperation—specifically, how there’d be a whole lot more stuff to go around if states changed their trade, exchange rate, and immigration policies—though I discuss other areas where states fail to reap all the available benefits of cooperation in other lectures. Look below the fold for details.

First, I tried to illustrate that even when it is possible to be self-sufficient in the sense of meeting one’s essential needs, there’s still more to be gained from specialization and trade.

Allowing for convex combinations, it is clearly possible for each clan to meet their minimum needs on their own. For H to do so, they must spend 20% of their time hunting and 25% of their time brewing, which leaves them with a fair amount of time either for leisure or catching more deer. However, B must devote 50% of their time to hunting and 25% of their time brewing, meaning they don’t have a lot of free time left to increase their consumption or spend on leisure. More importantly, there is no way for either clan to achieve their ideal outcome on their own. By the time B catches enough deer, they’ll have no time left to brew. H can catch 4 deer and still have time to brew 3 kegs of beer, but it won’t be good beer, and any outcome that involves drinking bad beer is clearly a travesty. The only way for both sides to reach the outcomes they consider ideal is if H spends 40% of their time hunting and B spends 75% of their time brewing, and then H gives 4 deer to B in exchange for 3 kegs of good beer. Then and only then will everyone be as happy as they can be.

Second, I attempted to convince them that the economic implications of trade and immigration are very similar. As I acknowledged in the lecture, there are cultural, political, and sociological implications to immigration that are less of a concern with trade, and there are important distributional concerns to both that we’ll explore later—I really tried to make sure they knew I wasn’t telling them what they should value or who they should vote for—but insofar as I’ve told them from the outset that one of the big questions facing students of international politics is why states leave money lying on the ground, it’s incumbent upon me to demonstrate that we’re not talking about a trivial amount of money. Which I don’t think we are.

Again, it is impossible for either clan to achieve their ideal outcome on their own. Yes, there are costs to allowing B into village 1, but If H refuses to do so, then the world will be deprived of good beer. The only way for both sides to achieve the outcomes they consider ideal is for H to let B in and spend 40% of their time hunting, for B to spend 87.5% of their time brewing (no longer 75%, since they need another keg to compensate H for letting them into the village), and for H to trade 4 deer to 4 kegs of good beer.

Most of the students did well on this activity. Some did not, of course, but they did better overall on this one than the previous two activities. That was by design. The previous two activities were meant in part to help them understand the material better but also to incentivize listening to the lectures. This time around, I was less concerned with separating good students from bad than persuading everyone that barriers to trade and migration deprive the world of prosperity, and thus explaining the persistence of such barriers is an important task for students of international politics.