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Individuals, Nations, Whatever

January 12, 2004

Because the law of comparative advantage holds for any trade between two individuals, wherever they may be located geographically or politically, it is ultimately based on the fact that no two individuals are exactly alike. To move the argument to the level of the firm or region or country only complicates the analysis, it doesn't change the principle itself.  Most international trade theorists seem to recognize this and don't confuse the issue by discussing the magnitude of mobility of resources as a qualifying factor. The individual person is the basic "factor of production" that Roberts claims would have to be as mobile as traded goods—meaning, individuals would have to be exactly alike in order to ignore the law of comparative advantage in comparing their relative opportunity costs of production.

 

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