The Road to Poverty - The Cook of Robert Frank

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In a modern society that has more people to trade with, it doesn't make sense to learn how to do those things. The number of people you can exchange with is an enormously important factor for both smithy and ricardian reasons. And we all can get richer through the growth of innovation and technology. That's really paromer point about the power of ideas and knowledge.

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.