Comparative Advantage

Comparative Advantage 1

Comparative Advantage Joseph Kulwicki FIN 512: International Finance Walsh College- Summer 2013 September 2, 2013

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Abstract As the United States and the rest of the world come out of the global crisis, international trade becomes even more critical for nations. Countries need to have a better understanding of

what their comparative advantage is in the marketplace in order to prepare for future economic indicators such as job growth and industry specialization. With this knowledge, countries

can better prepare their workforces to meet the needs of the current economy.

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Comparative Advantage In order for the world to grow out of the recent global financial crisis, it is critical that world leaders and economists pay closer to attention to their comparative advantage. A country that focuses on an industry that has a

lower opportunity cost over another will be more fiscally responsible and be more efficient. The concept of comparative

advantage was first introduced in 1776 by Adam Smith, author of An Inquiry into the Nature and Causes of the Wealth of Nations, also known as The Wealth of Nations. Smith describes

comparative advantage as, “What is prudence in the conduct of every private family, can scarce be folly in that of a great kingdom. If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage. The general industry of the country, being always in proportion to the capital which employs it, will not thereby be diminished... but only left to find out the way in which it can be employed with the greatest advantage.” 237 years later, comparative advantage is still Lauren Landsburg, an economist for understanding

discussed by economists.

the Library of Economics and Liberty, shares her

Comparative...