What's the Difference Between Specialization and Trade?

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Borders have nothing to do with it. Both sides are better off. What steers people into the different tasks are the wages of different jobs that are constantly adjusting, sending messages and signals as to what is the most productive use of their time. There's no ference to the rest of us. Neither technique, trade or productivity is guaranteed to help every person, every single second, to be better and better off.

Russ Roberts, host of EconTalk, does a monologue this week on the economics of trade and specialization. Economists have focused on David Ricardo's idea of comparative advantage as the source of specialization and wealth creation from trade. Drawing on Adam Smith and the work of James Buchanan, Yong Yoon, and Paul Romer, Roberts argues that we've neglected the role of the size of the market in creating incentives for specialization and wealth creation via trade. Simply put, the more people we trade with, the greater the opportunity to specialize and innovate, even when people are identical. The Ricardian insight masks the power of market size in driving innovation and the transformation of our standard of living over the last few centuries in the developed world.