Comments on: How Comparative Advantage Affects Your Job http://www.bargaineering.com/articles/how-comparative-advantage-affects-your-job.html personal finance blog with anecdotes, advice and commentary. Sun, 12 Feb 2012 23:30:41 +0000 hourly 1 By: dong http://www.bargaineering.com/articles/how-comparative-advantage-affects-your-job.html/comment-page-1#comment-262828 dong Tue, 08 Jul 2008 02:24:47 +0000 http://www.bargaineering.com/articles/?p=2664#comment-262828 The example is actually one of absolute advantage since Jim is better at catching fish, and John is better at gathering berries ABSOLUTELY. Strictly economically speaking the better example of comparative advantage example would be: Jim catches 5 fish a hour and gather 5 lbs of berries. John catches 1 fish a hour and gather 3 lbs of berries. In that example Jim is better at fishing and gathering berries. The real beauty of comparative advantage is that trading partners don't actually need to be better but rather just better at something else. In the case above, John has a comparative advantage in gathering berries. John is better off just concentrating on gathering berries even though Jim is better at in absolute terms. Jim can spend 3 hours and get 15 fish, and john can get 9 lbs of berries in that 3 hour span. Jim can then trade 5 fish to John for 6 lbs of berries, and end up with 10 fish and 6 lbs of berries which is still better than he could have done on his own. John ends up with 5 fish and 3lbs of berries which is way better than he could've done. The real nugget of comparative advantage is that it's effective regardless of the overall productivity levels. We have Ricardo to thank for figuring this one out. The example is actually one of absolute advantage since Jim is better at catching fish, and John is better at gathering berries ABSOLUTELY. Strictly economically speaking the better example of comparative advantage example would be:

Jim catches 5 fish a hour and gather 5 lbs of berries.
John catches 1 fish a hour and gather 3 lbs of berries.

In that example Jim is better at fishing and gathering berries. The real beauty of comparative advantage is that trading partners don’t actually need to be better but rather just better at something else. In the case above, John has a comparative advantage in gathering berries. John is better off just concentrating on gathering berries even though Jim is better at in absolute terms.

Jim can spend 3 hours and get 15 fish, and john can get 9 lbs of berries in that 3 hour span. Jim can then trade 5 fish to John for 6 lbs of berries, and end up with 10 fish and 6 lbs of berries which is still better than he could have done on his own. John ends up with 5 fish and 3lbs of berries which is way better than he could’ve done.

The real nugget of comparative advantage is that it’s effective regardless of the overall productivity levels. We have Ricardo to thank for figuring this one out.

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