One of the simplest concepts to understand in all of human affairs is that we each have different arrays of skills, gifts, and talents. While some are learned and others come naturally, the more we can concentrate on those things we do comparatively well, the better off we tend to be.
■ Maybe Mark Twain could have been a great accountant, but it’s better that he focused on writing instead. Taylor Swift might fold a mean paper crane, but (at least as a professional pursuit) she should probably focus on recording music instead. And a great heart surgeon should probably hire someone else to run the woodchipper.
■ All of this is a matter of comparative advantage, an economic concept so important that Greg Mankiw, the author of the preeminent introductory textbook on economics, listed it as the #1 economic principle he would try to imprint on as many minds as possible.
■ It not only serves to explain why individuals should specialize in what they do best, it also succinctly explains why trade generally makes most participants better off. This isn’t new; David Ricardo explained it in 1817, and we’ve lived in a world brimming with examples ever since.
■ Trade comes with friction, of course, and just because almost everyone ends up better off on net doesn’t mean that some people won’t be set back along the way. But, overwhelmingly, if two entities (generally countries, but sometimes regions, provinces, states, cities, or city-states) have generally comparable foundations of law, then the freest possible movement of goods, money, ideas, and people will tend to make everyone better off, on balance.
■ Legal compatibility matters because a wild structural imbalance can be introduced if one side of a trade allows for slave labor, flagrantly steals intellectual property, or commits acts of war to steal resources. Those circumstances aren’t reflections of authentic comparative advantage.
■ But when generally comparable rules are observed on both sides of a trade, free exchange lets comparative advantages mount, and those results are ultimately measured in wealth. Not only that, they tend also to be reflected in a general goodwill -- the kind of thing Adam Smith identified in 1776. Starting fights where compatibility once prevailed is self-defeating and foolish, and ultimately impoverishes virtually everyone.