What's the Difference Between Become a Better Hunter and Having the Opportunity to Buy a Sandwich?

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Specialization and trade makes us all better off, even when we're identical. There are only two ways to improve your standard of living: theft or productivity. You can bang your neighbor over the head and take your stick the neighbor's stuff, or you can figure out ways to make your resources more productive. That is whether i do that by being a better hunter or by having the opportunity to buy a sandwich which means i don't have to spend the time making the sandwich myself.

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.