Note: This is the latest entry in the Acton blog series, “What Christians Should Know About Economics.” For other entries in the series see this post.
The Term: Comparative advantage
What it Means: The ability of an individual or group of individual (e.g., a business firm) to produce goods or services at a lower opportunity cost than other individuals or groups.
Why it Matters: There is a story of the distinguished British biologist, J.B.S. Haldane, who found himself in the company of a group of theologians. On being asked what one could conclude as to the nature of the Creator from a study of his creation, Haldane is said to have answered, “An inordinate fondness for beetles.”
When we examine creation to uncover what it reveals about the character of God, one of the things we discover time and time again is the Creator’s fondness for diversity. Like Haldane, we can see this by looking at biology (e.g., there are more species of beetle than birds or mammals combined). But we can also find it when we turn to economics.
A primary example of God’s enthusiasm for diversity is the concept of comparative advantage. While the definition of the them makes it sounds dull and wonky, comparative advantage is a beautiful, theologically profound norm of creation.
Fully appreciating the nuances of the ideas requires timely reflection. But understanding it can be achieved when a few minutes. In this brief video, economist Donald J. Boudreaux does a masterful job of explaining how, when combined with trade, comparative advantage improves human communities.