Tran Harry – The Economy Needs A Fix

Comparative Advantage says that while you are exceptional at performing two skilled tasks, it is often wiser to perform the task that will rake in more profit for yourself, and pass off the lesser earning task to someone else. Even though this second person may not be as skilled at performing the task than yourself, traditional economics dictates that this is the best course of action, in essence revolving around the idea of opportunity costs.

Take for example the case of two individuals, suppose Kelly is a great farmer and can harvest crops at an amazingly efficient rate but Kelly also has a talented skill in acting, a profession which if successful can rake in earnings in the upper echelons of society. Should Kelly give up her dreams of acting to continue harvesting her farms, simply because she is really good at it? According to comparative advantage she shouldn’t because she could easily hire a worker to tend to her farms while raking in big money pursuing her acting career. Call in our second individual Joseph, while Joseph is not as good at performing a farming task, he is even lesser skilled at acting so farming is a better gig for Joseph, therefore he will perform the duties and responsibilities of tending to the farm for Kelly at a price in order for Kelly to pursue her acting career.

So how did comparative advantage lead us to our countries downfall? Well for the last few decades we have gone from a production intensive country to a service intensive country. We have the required skills and talent to produce televisions and computers, yet we pass these tasks along to other countries who are willing to perform these tasks such as China, and Japan in order for us to pursue other goals. While China may not be as advanced in development as we our, with blueprints and procedures, our companies have essentially outsourced all manufacturing to these countries and they simply follow our guides to complete the job. In the end while we are off pursuing non-tangible goals as entertainers, managers, and engineers we have outsourced all our production and now we repurchase the goods we have created.

We are stuck in a country with too many glamorous jobs, and paper pushing jobs but not enough production jobs. Jobs which could help us create a budget surplus again someday. Rather than buying everything from our outsourced partners, we need to be able to sell goods to outside countries so that we can regain some set of control of our own financial futures. We have to take on some of the less desirable work, as our country is no longer isolated, and we are open to globalization we must defend our rank as top dog. So we can either start taking back some of these less glamorous jobs or wait until these countries choose to pass on their less glamorous jobs to lesser countries. Hardly an easy task to do when our number one supplier of goods is also our number one creditor as they have absorbed all of the excess funds from trade.