The number of tasks that's appropriate for us to specialize in emerges from our inner actions, and it emerges from our innovations at emerges from our ontrapenurial insights. So smith by this silly assumption that people are all the same, we can see right away, not right away, but we can see that even in the wore we're all identical, there's potential for trade. And i say it's important because when we teach comparative advantage in trade, we often get stuck in this two by two matrix. We don't know how many tasks there are,. The end is unknown. There's no book that says what the end tasks are. They have to be figured out by
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.