Is Comparative Advantage Essential to Economic Prosperity?

Imagine a space colony planted on Vega III, an isolated human-compatible planet with a uniform surface climate and topology. All of the colonists are asexual, non-aging humanoid clones made from a single genetic pattern in a robotic laboratory in the grounded starship. Casualties due to accidents, etc., can be replaced.

All of the clones have identical abilities and preferences, and thus no comparative advantages of any kind. Is trade and economic prosperity still possible? If so, how and why?

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They may all have identical

They may all have identical abilities and preferences, but you did not mention if they all have identical motivation and inclinations. Assuming they do not, then some of them will plausibly be more inclined then others to create that which satisfies theirs and the others preferences.They will likely request compensation in return for what they create so that they may be able to make up for the time and effort of creating that which will satisfy the others preferences. Even if they did all have the same inclinations as well, then there would still be a form of trade because they would have to satisfy their preferences and necessity would force various members of this society into specializing their labour for this purpose.
Furthermore, some of them have to do something, otherwise how could the colony survive? Like I mentioned above, necessity would drive them to engage in work and production, thus forcing them to specialise and trade at least to an extent.

Either way, what the bloody hell does this have to do with the real world and how it operates.


there are lots of ways. Even

there are lots of ways.

Even with identical abilities and preferences, they can garner different experiences and specializations. This will happen naturally. If several people have already started learning to be doctors, it will benefit another person more to learn to be the only plumber than one of many doctors. Once different specialties are learned, you have comparative advantages.

Trade can also take place with identical skill sets. One person may go find water, another may go find metal ore. They can now trade because both items have diminishing marginal utility, even if preferences are equal.

Insurance, or risk pooling, is another form of trade which does not require any differences in preferences.

Besides the division of

Besides the division of labor, as the above two comments mentioned, there is also the issue of relative factor abundance. Even if surface climate and topology are uniform, different areas may still have different relative concentrations of people and different distributions of natural resources.

If so, the Heckscher-Ohlin theorem kicks in, and badda-bing, badda-boom, you got some trade.

Is Comparative Advantage

Is Comparative Advantage Essential to Economic Prosperity?
Is trade and economic prosperity still possible? If so, how and why?

The title and the body ask two different questions. Possible yes, essential no. We could imagine that these are robinson crusoes who have a strong preference for self-reliance. Would comparative advantage arise anyway?
Either way, what the bloody hell does this have to do with the real world and how it operates.
The question is more intersting than the answer - comparative advantage is often explained in terms of different settings or different traits -
how far you are to the ocean impacts whether to be a farmer or a fisherperson or a fishmonger. Being able to swim would also impact that choice. So the question shows that, take all that stuff away, and comparative advantage is still vital. This blog tends to be libertarian in a nonlibertarian world, so there's some focus on the sweeping power of comparative advantage, and the way that non-coercive interactions foster that better than coercive ones.
This relates somehow to the issue of, should you choose work based on what you like to do, or on what others value? America more than asia has opted for "what others value" resulting in riches, longer life, but no net gain in daily happiness. Many people are in the situation where they do well at the thing they love the most, but others face tough choices and either take jobs they hate or make less than they could elsewhere, or find a balance of a job they can stand and earn a living at.

The connection to the real

The connection to the real world and how it operates is that the only economic things that are not scarce are invalid economic theories enforced by political power.

Voluntary, mutually beneficial trade or exchange can only be logically imagined if the exchanged goods are value ranked in the reverse order for the exchange participants.

This requires the Subjective Theory of Value and the Law of Diminishing Subjective Marginal Utility.

As long as the division of labor can be employed to increase overall productivity, then an individual will be able to specialize in the production of a single product, resulting in a quantity in excess of what he can or wishes to consume himself.

The only reason to produce this surplus is to trade the last units produced whose exchange-value is greater than their use-value to the producer. An individual will often find it beneficial to exchange a surplus, exchange-valued good for a use-valued good produced in surplus by someone else. The trading partner will also benefit as the specific goods traded, for him, have interchanged their exchange-value and use-value character.

When considering the Subjective Theory of Value, it is easy to fall into the trap of believing that the subject begins and ends with differences in whims and preferences between individuals. The above is intended to show that there is also a physical contextual content enforced by the Law Of Diminishing Marginal Utility. This allows mutually beneficial trade and exchange even if all of the individuals involved are identical and interchangeable in all respects.

Regards, Don

Zing! Awesome, Don. :smile:

Zing! Awesome, Don. :smile:

Note also that even with

Note also that even with identical abilities and inclinations, problems of divisibility still obtain. There are plenty of jobs for which one person doing a whole day's work in the job is much more productive than forty people each doing 1/40 of a day's work in the same job, even if the forty people are all exactly as able as the one. And once the forty folks realize this, you get division of labor right away, even if they have to flip coins to decide who gets which job because all of them are perfectly indifferent to the choices.

As long as there is property

As long as there is property ownership and scarcity, there will be trade. I think Mises (or someone) pointed out that as long as you occupy space, then you create scarcity, since no one else can stand there. Hence, maybe all these people trade for is the best view. Of course, once perfect equilibrium is disturbed, it never returns. Hence the stupidity of the perfect competition model.

I don't think even in the

I don't think even in the abstract you can create a model that someone won't find an existing comparative advantage in -something you overlooked in the setup. For example since there is only one starship there could be a comparative advantage based on relative distance to the starship. And since on different sides of the planet there would be different times of day, and different views of the night sky there could be comparative advantages in sleep times, and information gathering to name a few. The more you correct for this the more you move towards complete impossibility in your model at which point the question is no longer meaningful. Ex: Given a scenario that could only exist by defying the laws of physics, or by changing the nature of space and time do you think it is possible for trade to exist in this setting? Thus: is X possible in the non-possible setting of y? Yes... no... maybe??? :dizzy:

I think that both goes

I think that both goes beyond Don's point and supports it- the point is to understand that there is always an advantage to a division of labor, whether there is an inherent homogeneity in the population or not. But since there is no real way short of fundamentally altering the universe to avoid some sort of comparative advantage, trade will always happen, period.

I see Don going at the problem ala Mises with full-blown socialism- assuming perfect intentions among the planners and *still* showing that it wouldn't work; its a case of showing that division of labor is good and not contingent upon inherent advantages among people (though differences/advantages among people in terms of time, space, and talent do indeed drive the natural division of labor).

Whether or not some

Whether or not some comparative advantages either exist or come to exist doesn't change the fact that they are NOT essential to the existence of mutually beneficial trade and exchange. Nor are variations in the abilities or preferences of individuals required even operating under the Subjective Theory of Value.

Regards, Don

Don't forget comparitive age

Don't forget comparitive age and the need for saving for old age.