The Advantages of Comparative Advantage

Comparative advantage is a concept that is difficult to grasp. However, the following article clearly explains its mechanism. The supporting idea lies in opportunity cost which is a topic that does not come to mind instantly.

The article provides a very good example with Winston Churchill. Churchill was amazing in both writing and building. But, because his opportunity cost of building (i.e. not enough good writing about politics) was much higher than the opportunity cost of writing (i.e. a moderately built wall), it was better if he invested his time in writing. In the very example, there is also another advantage which is to the bricklayer that is hired to build Churchill’s walls. The brick layer is employed and thus receives economic benefits. Similarly, the consumers are receiving high quality writing content because of Churchill’s focus on writing.

We could conclude that comparative advantage is beneficial to both parties who participate in it because it takes the opportunity cost (which is taken for granted most of the times) and applies it to the most efficient way of producing something.

Similarly, the article uses other examples like Hong Kong, Singapore, Britain, NAFTA and explains how comparative advantage have benefitted or will benefit them or the parties involved.

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