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Trade and Preferences
Specialization, Productivity, and the Division of Knowledge
Comparative Advantage
Trade and Globalization
Takeaway
Chaos, conflict, and war may dominate the news, but it’s heartening to know that there is also an astounding amount of world cooperation. The next time you are in your local supermarket, stop and consider how many people cooperated to bring the fruits of the world to your table: kiwis from New Zealand, dried apricots from Turkey, dates from Egypt, mangoes from Mexico, bananas from Guatemala. How is it that farmers in New Zealand wake up at 5 AM to work hard tending their fields so that you, on the other side of the world, may enjoy a kiwi with your fruit salad?
This chapter is about a central feature of our world, trade. It’s about how you eat reasonably well every day yet have little knowledge of farming, it’s about how you cooperate with people whom you will never meet, and it’s about how civilization is made possible.
We will focus on three of the benefits of trade:
Trade makes people better off when preferences differ.
Trade increases productivity through specialization and the division of knowledge.
Trade increases productivity through comparative advantage.