GEOG 102 Lecture Notes - Lecture 27: Full Employment, Autarchism, World Trade Organization
Document Summary
Specialization patterns are determined by comparative costs. There is a rational calculation that each country can do to specialize in to get best results. Appropriate relative prices create gains from trade through exchange. Level playing field, flat world: free trade creates this, every country gets to participate and be on the same page as other countries. Free trade good, protection bad: any attempts to restrict free trade are inferior. Based on a series of simplifying assumptions. Trade between two countries with two different commodities rather than the whole world of trading is what the theory says. Full employment in each country; all money is productively invested in economy, nothing being wasted. Comparing equilibria (no transition costs): economy is in equilibrium. Transport costs: (don"t think about it at all or if do its limited and fixed) of moving commodities around: fossil fuels. Countries: approximately equal size and power: no one country gets to dominate global market.
