LGST 101 Lecture Notes - Lecture 2: Comparative Advantage, Selfishness, Absolute Advantage

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Published on 6 Dec 2016
John Locke & Adam Smith
Loke ad “ith: Gloious eolutio at the ed of the 6s. “ith, Wealth of Natios: B
pusuig his o iteest he feuetl pootes that of soiet… B dietig that idust
in such a manner as its produce may be of the greatest value, he intends only his own gain, and
he is in this, as in so many other cases, led by an invisible hand to promote an end that was not
pat of his itetio. A etai popesit i hua atue… to tuk ate ad ehage.
Diisio of lao peits soiet to produce a surplus which can be exchanged for the surplus
of othes Pasio saig is the iediate ause of the iease i apital ad teds
therefore to increase the exchangeable value of the annual produce of the land and labor of the
John Locke:
End of 17th century: context Intellectual origins of capitalism -Enclosure: we would
distribute the Common Lands of each village among the people that had a right to the
-Agriculture + efficient =agricultural output increases/more efficient use of lands. He
expresses WHY there is Private Property. God gave the world to the whole humanity=to the
common. How explain private property?
-Our body is ours, our private property. If we touch/mix it with something that is
common, it becomes our private property. //Is our body ours?
Discussion: Information is important. I can sell a kidney as long as I know/I am conscious of the
effects of not having a kidney.
-God gave us land. But God also gave us labor. Land becomes with the merit of work.
Whe a seat oks fo a aste, h does’t he eoe popieto of his podut? Beause
the servant is an extesio of the aste’s pesoa.
Moe: The do’t hae a itisi alue. Thei alue lies i the oset ad tust of people.
Money allows people to overproduce and keep the extra-products from rotting. John Locke was
the founder of private property. You should only acquire as much as you can make use of:
productivity is the most important. Private property ensures greater productivity for all
mankind Adam Smith
He wants to make society more efficient:
-Division of Labor: innovation of specialized machines/dexterity specialization
podutiit You do’t aste tie sithig task, ou eoe a speialist less likel to ake
mistakes, more likely to innovate)
-International Trade / Free Trade He does not talk about comparative advantage, but
absolute advantage Selfishness: our selfish interests promote the benefit of society as a
The Invisible Hand: by persuading your own interest, you are unintentionally promoting that of
soiet thee is a etai popesit i hua atue to tuk, ate ad tade “eies ae
upodutie eause the do’t add alue to soiet I eliee: Ada “ith sees hat adds
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