INR 2002 Chapter 7: INR2002 Chapter 7 Notes
10 Feb 2017
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The puzzle: virtually all economic analysis concludes that trade is economically beneficial. Specialization is the division of labor: central to the argument made by adam smith in the wealth of nations (1776) Argued that self-sufficiency was foolish b/c a greater division of labor made societies wealthier. : an individual pin maker working alone could make 20 pins a day, however, dividing the labor into steps where different workers specialized in each step could produce. 48,000 pins a day: specialization increased productivity, and productivity fueled economic growth. Specialization required access to large markets: restricting market size slowed economic growth, the division of labor depends on the size of the market. Economic for free trade sometimes seen as counterintuitive: e(cid:454)ports are good (cid:271)/(cid:272) the(cid:455) (cid:272)reate jo(cid:271)s, i(cid:373)ports are (cid:271)ad (cid:271)/(cid:272) the(cid:455) take a(cid:449)a(cid:455) jo(cid:271)s; go(cid:448)"t should sti(cid:373)ulate the national economy by restricting imports and encouraging exports (mercantilist) Economic logic insists the imports are the gains from trade while exports are its costs.
