There's two ways to get venison. There's the direct way, you go out and you be a hunter. The indirect way is to make sandwiches and swap them for meat. That's the roundabout way to produce stuff trade. If we want stuff, we can either make it for ourselves, or we can make other stuff that people want that's important, or they won't trade with us. And then exchange it.
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.