So where does that concept get us, without peaceful trade?
Suppose we have a simple, two-factor model of the Hundred Years’ War. The English have a comparative advantage in archers; the French have a comparative advantage in armored knights. Without peaceful trade, what non-obvious conclusion does comparative advantage lead us toward?
It was obvious, even before the concept of comparative advantage was developed, that English strategy should favor archers and French strategy should favor knights. It was obvious that both sides should attempt wherever possible to fight when circumstances favor their preferred mode of fighting and to avoid battle when circumstances are against them.
What I’m trying to say is that you can look at pretty much anything through pretty much any analytical lens; you could probably attempt to apply the lens of Biblical prophecy to the unification of Japan. Most of those views do not give meaningful insights (I admit that some promote success in humanities graduate programs, which strains the definition of meaningfulness). What insight do you see that can be gained through applying the lens of comparative advantage to a new subject?
It sounds like you’re still thinking about the “comparative” part of “comparative advantage” as comparing between two people/groups of people, which isn’t really the point. Lemme try another example to see if that helps.
Let’s say that Robert has a total budget of $100,000,000 and is faced with a long list of options such as these:
$100,000 for a new dialysis machine, which will save 3 lives
$1,000,000 for a liver for Johnny, which will save 1 life
$10,000 to train the nurses on proper hygiene when inserting central lines, which will save an expected 100 lives
...
Now suppose—this is a supposition we’ll need for our theorem—that Robert does not care at all about money, not even a tiny bit. Robert only cares about maximizing the total number of lives saved. Furthermore, we suppose for now that Robert cares about every human life equally.
If Robert does save as many lives as possible, given his bounded money, then Robert must behave like somebody assigning some consistent dollar value to saving a human life.
We should be able to look down the long list of options that Robert took and didn’t take, and say, e.g., “Oh, Robert took all the options that saved more than 1 life per $500,000 and rejected all options that saved less than 1 life per $500,000; so Robert’s behavior is consistent with his spending $500,000 per life.”
Alternatively, if we can’t view Robert’s behavior as being coherent in this sense—if we cannot make up any dollar value of a human life, such that Robert’s choices are consistent with that dollar value—then it must be possible to move around the same amount of money, in a way that saves more lives.
This is an example of comparative advantage at work.
In this case, each of the options entails different trade-offs between saving lives and saving money. Comparing e.g. the two options “$100,000 for a new dialysis machine, which will save 3 lives” vs “$1,000,000 for a liver for Johnny, which will save 1 life”, the dialysis machine has a relative advantage in saving lives, while the new liver has a relative advantage in saving money. When Robert achieves pareto optimality (i.e. saves the most lives subject to some budget constraint), there will be some “price”—some trade-off between marginal dollars and lives saved. All the options with a relative-advantage-in-saving-lives better than that price will specialize in saving lives (i.e. he’ll spend money on those things, thereby saving lives), and all the options with a relative-advantage-in-saving-dollars better than the price will specialize in saving dollars (i.e. he’ll “spend lives” by not buying those things, thereby saving money).
I see what you’re saying. I would have called that “weighing my options”, but if you prefer to call it “comparative advantage” I have no problem.
I’ll note that there might not be a coherent price for the optimum decision for various reasons. For example, there might be a very cost-effective idea that requires more than Robert’s total budget (so he can’t choose it). Alternatively, there might be ideas where the outcome is uncertain and the probability of success is not reasonably estimable, so no marginal price can be computed*.
*He could always assign a probability by the method of rectal extraction, but the computation would not be reliable.
So where does that concept get us, without peaceful trade?
Suppose we have a simple, two-factor model of the Hundred Years’ War. The English have a comparative advantage in archers; the French have a comparative advantage in armored knights. Without peaceful trade, what non-obvious conclusion does comparative advantage lead us toward?
It was obvious, even before the concept of comparative advantage was developed, that English strategy should favor archers and French strategy should favor knights. It was obvious that both sides should attempt wherever possible to fight when circumstances favor their preferred mode of fighting and to avoid battle when circumstances are against them.
What I’m trying to say is that you can look at pretty much anything through pretty much any analytical lens; you could probably attempt to apply the lens of Biblical prophecy to the unification of Japan. Most of those views do not give meaningful insights (I admit that some promote success in humanities graduate programs, which strains the definition of meaningfulness). What insight do you see that can be gained through applying the lens of comparative advantage to a new subject?
P.S. France won.
It sounds like you’re still thinking about the “comparative” part of “comparative advantage” as comparing between two people/groups of people, which isn’t really the point. Lemme try another example to see if that helps.
In Coherent Decisions Imply Consistent Utilities, Eliezer uses the example of a hospital administrator (named Robert) who is budgeting the hospital’s big purchases.
This is an example of comparative advantage at work.
In this case, each of the options entails different trade-offs between saving lives and saving money. Comparing e.g. the two options “$100,000 for a new dialysis machine, which will save 3 lives” vs “$1,000,000 for a liver for Johnny, which will save 1 life”, the dialysis machine has a relative advantage in saving lives, while the new liver has a relative advantage in saving money. When Robert achieves pareto optimality (i.e. saves the most lives subject to some budget constraint), there will be some “price”—some trade-off between marginal dollars and lives saved. All the options with a relative-advantage-in-saving-lives better than that price will specialize in saving lives (i.e. he’ll spend money on those things, thereby saving lives), and all the options with a relative-advantage-in-saving-dollars better than the price will specialize in saving dollars (i.e. he’ll “spend lives” by not buying those things, thereby saving money).
Does that much make sense, at least?
I see what you’re saying. I would have called that “weighing my options”, but if you prefer to call it “comparative advantage” I have no problem.
I’ll note that there might not be a coherent price for the optimum decision for various reasons. For example, there might be a very cost-effective idea that requires more than Robert’s total budget (so he can’t choose it). Alternatively, there might be ideas where the outcome is uncertain and the probability of success is not reasonably estimable, so no marginal price can be computed*.
*He could always assign a probability by the method of rectal extraction, but the computation would not be reliable.