Conclusiones

The principle of comparative advantage is most often used to explain why free trade makes it possible for people in different countries to pro- duce larger outputs and achieve higher living standards. As we saw in element 4 of part 1, two countries can each gain by trading with one other, even if one country is the best at producing everything and another is the worst at producing everything. The principle of comparative ad- vantage is just as important to the wealth of individuals. Finding the oc- cupational or business activity in which you have a comparative

advantage in and specialising in it will help you earn more money than otherwise, regardless of how good you are in absolute terms.

Like nations, individuals will be able to achieve higher income levels when they specialise, that is, concentrate their efforts on those things that they do best. To pick one extreme, suppose that you are better than everyone else in every productive activity. Would that mean that you should try to spend some time on each activity? Or to go to another extreme, someone could be worse than everyone else in every productive activity. Would that individual be unable to gain from specialisation because he or she would be unable to compete successfully in anything?

The answer to both questions is “no”. No matter how talented you are, you will be relatively more productive in some areas than in others. Sim- ilarly, no matter how poor your ability to produce things is, you will still have a comparative advantage in something; you will be able to compete successfully in some things and can gain by specialising in your com- parative advantage (see part 1, element 4 for additional information on comparative advantage.)

In other words, your comparative advantage is determined by your com- parative abilities, not your absolute abilities. For example, Tiger Woods has the skills not only to be the world’s best golfer but also the best caddy. Who could do a better job than Tiger at giving you advice on your swing, on which club to use, and how to line up your putts? But Tiger Woods has a comparative advantage in playing golf, not caddying. He would be given up far more value by caddying than he gives up by golfing; that means, his opportunity costs for caddying are far greater than his op- portunity costs for playing golf. Similarly, the caddies on the pro tour may not have the caddying potential of Tiger Woods; but since their skills as caddies are far better than their skills as golfer, they sacrifice less value when caddying, and so that is where their comparative advantage lies. For them the opportunity cost of caddying is lower than the one for playing golf.

Obviously, individuals will always be better off if they are really good at something that is highly valued by others. This explains why people like Tiger Woods make a lot of money. But even a person who is not very good at anything will be better off by specialising where his or her dis- advantage is smallest compared to others and by trading with others who have different specialties.

Some people may feel that they are at a disadvantage when they trade with those who make a lot more money than they do. But as we discussed in part 1, element 4: trade benefits both parties. And generally, the more accomplished and wealthy the people you trade with, the better off you are because your services is often worth more to them than to those who are less accomplished and less wealthy. We would rather caddy for Tiger Woods than for any other professional golfer because he will benefit more from caddying services by winning more golf tournaments than other golfers and the additional benefit will tend to be reflected in a higher return to his caddy.

The worst thing you can do is to convince yourself, or be convinced by others, that you are somehow a victim and therefore unable to become wealthy through your own effort an initiative. Some people start out with fewer advantages than others, but, as we will see, even those who are less advantaged, for whatever reason, can do extremely well financially if they make the effort and apply themselves intelligently. You need to take charge of your carrier development and figure out how you can best de- velop your talents and use market cooperation to achieve your goals. No one else cares more about your personal success than you do. Neither does any one else know more about your interests, skills, and goals. Discovery of career opportunities where you have a comparative advan- tage involves more than figuring out those things that you do best. It also involves discovering the productive activities that suit your interest and give you the greatest fulfillment. If you enjoy what you do and believe it is important, you will be happy to do more of it and work to do it better. Real wealth is measured in terms of personal fulfillment. For example,

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the authors of this book (all economists) have found it satisfying to find answers to economic questions and to express what we know in ways that can help others better understand the little corners of the world — and in some cases parts of the big picture, too — that we have examined professionally. Even though the hours are sometimes long, we find most of those hours enjoyable. What we do is not for everyone. But for us, with our interests, the joys of what we do more than make up for the tough patches.

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