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The EU elite are ignorant of the true meaning and importance of “comparative advantage”

The EU elite are ignorant of the true meaning and importance of “comparative advantage”
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From Open Europe news summary of 14 March 2018 (my highlight):

Commenting on Prime Minister Theresa May’s Mansion House speech earlier this month, the EU’s chief Brexit negotiator Michel Barnier called it a “surprising idea” that the UK would be allowed to benefit from convergence with EU rules in some areas while “open[ing] up the possibility of divergence when there is the comparative advantage for it.” He stressed the importance of social and environmental standards to the EU’s regulatory framework, asking, “Does the UK also want to distance itself from this model which they have constructed gradually with us and engage in dumping against us?”

To answer Barnier’s question–emphatically YES! The UK should seek to benefit where it has acomparative advantage. In fact every person on earth should seek to so benefit. A comparative advantage means that people engage in the division of labor/specialization, and allow others to do the same, in order to produce more goods and services for the market. Note that no one needs to possess anabsolute advantage, meaning that he can produce a good or service better or more cheaply than all others in the market. For example, a brilliant lawyer may be able to perform secretarial services better than anyone on the planet; nevertheless, it is to his and everyone else’s advantage for him to hire these services in order than he may perform his more highly rewarding legal services. Therefore, everyone is able to participate and succeed in the market economy. In short, Michel Barnier, and I’m sure others in the EU elite, are completely ignorant of economic science.

 

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Patrick Barron is a consultant to the banking industry. He teaches Austrian school economics at the University of Iowa and Bank Managemant Simulation for the Graduate School of Banking, University of Wisconsin. Visit his blog. Send him mail.

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