MEPX
Chapter 8 of 10All chapters

Chapter 8 of 10

Trade

Why countries exchange at all.

Comparative advantage

Specialising where your opportunity cost is lowest, then trading, can leave both sides better off even when one produces everything more efficiently.

  • The aggregate gains are real and so are the concentrated losses.
  • Displaced workers bear costs that the average figure hides entirely.

Barriers

Tariffs and quotas protect specific industries at a cost spread across all consumers. That asymmetry, concentrated benefit and diffuse cost, explains much of trade politics.