Trade benefits arise when actors specialize in what they do best.
Ricardo's 1817 argument, and the counterintuitive part is that trade benefits both parties even when one is worse at everything. The gain comes from relative rather than absolute cost.
In practice
- A hospital where the consultant is better than the registrar at both diagnosis and paperwork still gains from the registrar doing the paperwork.
- A two-person business where one partner is better at everything still divides tasks by relative advantage, and the output rises.
- Further reading
- Wikipedia
- Subject
- Economics & Incentives
- Essay
- The regularities money obeys