Russ Roberts on Smith, Ricardo, and Trade

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4.7 • 4.3K Ratings

🗓️ 8 February 2010

⏱️ 62 minutes

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Summary

Russ Roberts, host of EconTalk, does a monologue this week on the economics of trade and specialization. Economists have focused on David Ricardo's idea of comparative advantage as the source of specialization and wealth creation from trade. Drawing on Adam Smith and the work of James Buchanan, Yong Yoon, and Paul Romer, Roberts argues that we've neglected the role of the size of the market in creating incentives for specialization and wealth creation via trade. Simply put, the more people we trade with, the greater the opportunity to specialize and innovate, even when people are identical. The Ricardian insight masks the power of market size in driving innovation and the transformation of our standard of living over the last few centuries in the developed world.

Transcript

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0:00.0	Welcome to Econ Talk, part of the Library of Economics and Liberty. I'm your host Russ Roberts
0:13.9	of George Mason University and Stanford University's Hoover Institution. Our website is econtalk.org
0:21.2	where you can subscribe, find other episodes, comment on this podcast, and find links to
0:26.5	another information related to today's conversation. Our email address is mailadicontalk.org. We'd
0:33.6	love to hear from you. Today's February 4, 2010, and today's podcast is a bit unusual. There's
0:44.0	no guest, just me. I want to share with you some of my thoughts on trade that I've been thinking
0:48.9	about for a while. And in the meanwhile, I want to thank everyone who's been responding to
0:53.3	my request for feedback on the Experimental Mike Munger podcast. My volume of mail has increased
1:00.3	lately and my ability to respond sadly has not been very high, but I assure you I read every one
1:06.5	of your emails and they're very gratifying to me and informative and please keep them coming. And I
1:13.2	also appreciate your suggestions for guests. So keep those coming too. Finally, I want to mention
1:18.9	before I get started that we are on Twitter at econtalker, e-c-o-n-t-a-l-k-e-r. And I use that
1:27.6	Twitter account to mention upcoming podcasts, solicit questions for guests, and add some
1:33.9	occasional thoughts on other things as well. So please follow us there if you're interested.
1:38.2	On to today's topic. About 15 years ago, I wrote a book, The Choice, A Fable of Free Trade
1:45.5	and Protectionism. And in the book, David Ricardo comes back to life as a ghost to try to convince
1:50.6	an American television manufacturer in 1960. The trade is good for America, good for the next
1:56.1	generation of Americans, even though it will destroy his company and hurt his hometown. At the
2:02.1	center of that book is Ricardo's central contribution to economics, the idea of comparative
2:07.6	advantage. So I've been thinking about comparative advantage for a long time. And a few years ago,
2:12.2	I wrote a couple of essays for the Library of Economics and Liberty that I'll link to exploring
2:17.3	some of what I've learned and been thinking about. But in the last couple of years, my thinking
	...

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