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Social Studies skills: Difference between revisions
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=== Comparative Advantage=== | === Comparative Advantage=== | ||
* Definition: A particular economic advantage, resource or ability a country possesses over either its own other economic situations or those of another country. | * Definition: A particular economic advantage, resource or ability a country possesses over either its own other economic situations or those of another country. | ||
* | * the term "comparative advantage" was | ||
* origin of the idea: | |||
** late 1700s Scottish philosopher Adam Smith (1723-1790) | ** late 1700s Scottish philosopher Adam Smith (1723-1790) | ||
click EXPAND for Adam Smith | click EXPAND for Adam Smith quotation on "absolute advantage": | ||
<div class="mw-collapsible mw-collapsed" style="width:50%"> | <div class="mw-collapsible mw-collapsed" style="width:50%"> | ||
<pre> | <pre>''If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it off 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.'' (Book IV, Section ii, 12)</pre> </div> | ||
** early 19th century British economist David Ricardo *1772-1823)>> | ** Comparative advantage means concentrating on what your country is good at making/doing in order to get what other countries are better at making/doing."</pre></div> | ||
** early 19th century British economist David Ricardo *1772-1823): | |||
*** argued for specialization as basis for national wealth and increased trade | |||
*** = laissez-faire, free-trade | |||
*** related comparative advantage to the concept of "opportunity cost" | |||
**** i.e. what is lost by ''not'' engaging in an activity | |||
**** Ricardo argued that it would be more costly to for country A to attempt to produce something that country B can more efficiently create than to focus on what that country A itself does better (its comparative advantage) and simply purchase the other goods from country B | |||
**** and by doing so, both country A and B will benefit from the trade | |||
click EXPAND for David Ricardo's quotation on comparative advantage: | |||
<div class="mw-collapsible mw-collapsed" style="width:50%"> | |||
<pre>it would undoubtedly be advantageous to the capitalists [and consumers] of England… [that] the wine and cloth should both be made in Portugal [and that] the capital and labour of England employed in making cloth should be removed to Portugal for that purpose.</pre></div> | |||
** British colonizer of Australia and economist Robert Torrens independently developed the idea of comparative advantage | |||
click EXPAND for Robert Torrens' quotation on comparative advantage from 1808: | |||
<div class="mw-collapsible mw-collapsed" style="width:50%"> | |||
<pre>''if I wish to know the extent of the advantage, which arises to England, from her giving France a hundred pounds of broadcloth, in exchange for a hundred pounds of lace, I take the quantity of lace which she has acquired by this transaction, and compare it with the quantity which she might, at the same expense of labour and capital, have acquired by manufacturing it at home. The lace that remains, beyond what the labour and capital employed on the cloth, might have fabricated at home, is the amount of the advantage which England derives from the exchange.''</pre></div> | |||
* Examples: | * Examples: | ||
*** Is it advantageous for the U.S. to import oil from Saudi Arabia or to rely only on its own oil production? | *** Is it advantageous for the U.S. to import oil from Saudi Arabia or to rely only on its own oil production? | ||
* see also | |||
** [https://www.cairn.info/revue-cahiers-d-economie-politique-1-2015-2-page-203.htm The discovery of the comparative advantage theory (on James Mill, 1821)] | |||
===Opportunity Cost=== | ===Opportunity Cost=== | ||
* Definition: The value of the next best choice one had when making a decision. | * Definition: The value of the next best choice one had when making a decision. | ||