Comparative Advantage and the Tragedy of Tasmania
When Tasmania was cut off from mainland Australia, it experienced the miracle of growth in reverse, as the reduction in trade and human cooperation led death and extreme poverty for its inhabitants.
What can a small, isolated island economy teach the rest of the world about the nature and causes of the wealth of nations? When Tasmania was cut off from mainland Australia, it experienced the miracle of growth in reverse, as the reduction in trade and human cooperation forced its inhabitants back to the most basic ways of living. In an economy with a greater number of participants trading goods and services, however, there are more ways to find a comparative advantage and earn more by creating the most value for others. Let's join Bob and Ann as they teach us the "Story of Comparative Advantage" like you’ve never seen it before.
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Please consider a mechanism that encouraging challenges to your ideas. Not just the words "we welcome challenges."
When I try to sell free market approach to social problems which intellectuals today use government to solve, I sometimes fail. It would be nice to have the really challenging questions posed here to see how experts handle them. There are a few who challenge Cafe Hayek but they are belligerent and thus their arguments are off-putting. Most of the reason they sound belligerent is that Cafe Hayek supporters attack them. Even when I make it clear that I am loyal supporter and suggest that such and such a point I have trouble making, I am attacked. It is human nature. Please figure out a way to welcome thoughtful challenges.
The only mechanism I can think of --although I don't like it-- You could have staff identify challenges, re-write them without the inflammatory remarks.
What if we follow the logic and imagine that Ann and Bob are countries? How do we know beforehand that the fishermen of Bobland can be retrained (and relocated?) as banana farmers, and how do we know how productive they will be? How much will retraining cost? Will the fishermen be happy or will they revolt? Does imported Annlandic fish taste as good as fresh Boblandic fish? What about the unique Bob Bay scallops that don't exist in Annland? What if salaries are 10 times higher in Bobland?
In the real world, what methods are used to weigh the costs and benefits of such policy decisions? It seems that the calculations would be extremely complex in an international context, especially if considering the realities of currency manipulation, taxes, vast wage discrepancies, unemployment, uneven trade agreements, geopolitical rivalry and so on. Ann and Bob seem like a poor way of illustrating this topic.
You can see the Microeconomics course on this site for the best answer. The short answer is that self-interested actors in a free market converges to the solution that maximizes the total good. However, no one can "do" the calculation; no one can tell you exactly what would have happened if things had been different. But that's life. Still, maybe you can get an estimate by modeling the situation in a simpler way, such as understanding Ann and Bob.
For instance, in this simple model, you are quite right to notice than Annland will be richer if it produces more. But you should also note Bobland will be poorer if it refuses to trade than if it engages in trade.
If the fishermen resort to sabotage, then Annland and Bobland build navies, or throw them in jail, or come up with a better idea. Or they just suffer through it, depending on their estimate of the cost. (Piracy has always been part of trade, its mentioned in commonplace terms in the Iliad, I'm told.) Who knows? No one knows.
Feel free to let us know if you find or invent a better way of introducing these ideas; I think it is pretty good.
Do we know why the inhabitants lost fishing and bone tool technology? Did they adjust to a new diet, fruits and nuts, agrarian, etc? And how does this case study compare to, say, Easter Island, where sustainability appears possible excepting for Western disease, enslavement, etc. Sure, they lost the technology to travel the open ocean, but their culture thrived for several hundred years without contact.