POLI 12 Chapter Notes - Chapter 293-331: World Politics, International Political Economy, Factor Endowment
Document Summary
Had for a country to be able to produce everything efficiently. Modern societies are based on specialization with people focusing on one aspect and the others on other aspects. Division of labor permits diverse segments of society to focus on different economic activities in ways that benefit society as a whole. Argued that self-sufficiency was foolish because a greater division of labor made societies wealthier. Increases productivity and productivity fueled economic growth. Division of labor allow gains from international trade. Comparative advantage: ability of a country or firm to produce a particular good or service more efficiently than other goods or services such that its resources are most efficiently employed in this activity. The comparison is to the efficiency of other economic activities the acot might undertake, not to the efficiency of other countries or firms. Comparative refers to a comparison among the things a country can do, not between the countries themselves.
