Trade

When economists talk of the benefits of trade, they speak of division of labor and comparative advantage. Anyone can try to live self-sufficiently, producing everything he or she needs entirely independently. But there are productive advantages to focusing one’s efforts on one or a [Page 3399]few tasks and then trading the results with others who have focused their efforts on different tasks. For example, if one person specializes in raising chickens and harvesting eggs and another focuses on growing wheat and apples, then if they trade they are both likely to end up with more and better quality chickens, eggs, wheat, and apples than if they each tried to produce all of those items separately.

Adam Smith used the example of a pin factory to show ...