From: Brent Allsop <allsop@fc.hp.com>
>What is "the law of comparative advantage?" or where
>can I find out more about it?
The law of comparative advantage shows why the international division of labour is beneficial to all. It states that every country can improve its welfare by specialising in the most efficient lines of production open to them, those in which they have a comparative advantage. The most efficient lines of production are those in which a country's productivity relative to others is greatest. This is commonly misunderstood to mean those lines of production in which a country is more efficient than all others. If this were true then some countries could conceivably have a comparative advantage in nothing, whereas, in reality every country has a comparative advantage in something, as they must be more efficient in some lines of production than others. For example a very inefficient country in a two-country two-commodity universe may be half as productive as the other country in producing one commodity and only a quarter as productive in the other. Its comparative advantage would lie in producing the commodity in which it had half the productivity of the other country. The law of comparative advantage means that even a country least efficient at producing everything will benefit from free trade. This is because it allows the inefficient country to specialise in what it is relatively poor at producing rather than in what it is *very* poor at producing.
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> - < check: www.libertarian.org/LA/balance.html