Tuesday, October 13, 2009

Tripped by Simplicity.

The notion of comparative advantage and trade is simple. I am relatively better at producing x, you are relatively better at producing y, we both want both, so we set some sort of price and trade, making both of us better off. Or, I have something you want (but I don't) and you have something I want (but you don't) so lets trade and then we both get what we want. Children are notorious for doing this at lunch time- "I'll trade my bologna sandwich for your cookies." Anyone who's been in Sherri's Econ 100 course has played the trade and exchange game. It's simple, it's fun, children could do it, and it does an excellent job of demonstrating how trade creates more of this notion we call wealth. By the end of the game, hopefully, each persons hands are full of things they value more than what they gave away. In my case, I grew up in a house with a small balcony over a wooden floor and a father as a dentist. Candy wasn't valued, but bouncy balls provided hours of chandelier almost-shattering fun. I traded all my candy for bouncy balls. I gained wealth that day (bouncy balls are more highly valued in my world) and so did the person who wanted more candy.
I think the world trips over the simplicity of the whole notion.

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