![]() |
David Ricardo (Wikipedia) |
David Ricardo, economist extraordinaire, taught the theory of comparative advantage. This theory predicts that countries should focus on making what they are good at making and import everything else. If my country has the right climate to grow bananas, but not apples, and your country has the right climate to grow apples but not bananas, then I grow bananas and you grow apples. I sell you my extra bananas, and you sell me your extra apples. Together we both have the highest possible number, and largest variety, of fruit.
![]() |
Bananas (Wikimedia Commons) |
Now suppose I want to compete in the market for apples, and you want to compete in bananas. I destroy my banana groves and then build giant indoor apple groves that don’t get excessive water or sunlight. I set up air conditioning to compensate for my tropical climate. You destroy your apple groves, and replace them with giant greenhouses. You dig irrigation ditches. It should be pretty obvious that these massive shovel-ready public works projects, no matter now many jobs they might create, will actually reduce the overall abundance of fruit.
![]() |
Apples (Wikimedia Commons) |
This is also my favorite career advice for students. Some students are natural accountants. Some are not. When a discouraged accounting student with low grades comes to me for advice, I ask them, “do you like accounting?” If they say yes, I try to encourage them to try harder. If they like to do accounting, and they’re good at it, and they work really hard, then they will be successful. On the other hand, some students will sheepishly admit that they hate accounting. They’re pursuing it because they want to find a good job, or because of family pressure. These students have a tremendous challenge before them, an unnecessary challenge: the challenge of growing bananas in an apple orchard.
No comments yet... Be the first to leave a reply!