Simple trade makes people better off when preferences differ, but the true power of trade occurs when trade leads to specialization. Specialization creates enormous increases in productivity. Without trade, the knowledge used by an entire economy is approximately equal to the knowledge used by one brain. With specialization and trade, the total sum of knowledge used in an economy increases tremendously and far exceeds that of any one brain.

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International trade is trade across political borders. The theory of comparative advantage explains how a country, just like a person, can increase its standard of living by specializing in what it can make at low (opportunity) cost and trading for what it can make only at high cost. When we apply the logic of opportunity cost to trade, we discover that everyone has a comparative advantage in something, so everyone can benefit from inclusion in the world market.