Comparative Advantage

DavidRicardo? showed that (all other things being equal), it is always most productive overall for each producer to specialize in what they are best at (their relative advantage), even if some other producer has an absolute advantage in production of that commodity.

Example: You are an absolute God regarding SmallTalk. I'm a beginner. You are also better at writing VisualBasic than I am, but not by much. We say that I have a ComparativeAdvantage over you when writing VisualBasic, because the OpportunityCost of taking you off your SmallTalk work is very high. So, I should specialize in VisualBasic, even though you are better at it. Sigh... :-)

For several longer articles, see EncyclopaediaBritannica, e.g. http://www.britannica.com/bcom/eb/article/5/0,5716,25415+1,00.html [BrokenLink].