Comparative advantage is humane, encourages tolerance, and is a force for peace

Comparative advantage is the idea that if I am better at one task and you are better at another task, we will both be far better off if we trade in what we are each better at.

In this video, Jonathan Sacks explains the deeper, moral benefits of comparative advantage.

A few of his comments and my observations:

He suggests that comparative advantage builds human dignity, peace, and tolerance.

He points out that comparative advantage means each person has something to contribute. This creates value for each person, because each person has some skill that is economically useful. Thus it is humane.

He says the greatest force for peace is trade. People groups can benefit more from trade that from war. Comparative advantage encourages trade.

He suggests trade is the greatest single source for tolerance. He says in the 16th, 17th, and 18th century, the most tolerant countries were trading centers. I think the way this works is that my people and my family will live poorer lives if we focus on things we don’t like about you. If I want my family to have more and nicer food and sufficient clothes, maybe I need to put up with something I don’t particularly like about you or wierd cultural features I’m not comfortable with. Thus, I will be more tolerant.

Rabbi Sachs is the Chief Rabbi for the British Orthodox synagogues. In the post, Chief Rabbi Sacks on Comparative Advantage, Marginal Revolution says:

Few religious leaders understand economics and fewer still are able to draw out the spiritual and humane dimensions.

In my religious tradition, we emphasize the different roles for the realm of the spiritual and the realm of earthly governments (that one sentence covers enough ground that several full-length books would be necessary to explain it). Those realms often don’t overlap and sometimes have different rules.

It is enlightening to me for a Rabbi to point out that classical free market economics are informed by values from the realm controlled by God.

On the other hand, in the last half of the video, he claims that welfare and international debt relief is a manifestation of the Torah system of tithes and particularly the Year of Jubilee. He acknowledges there is an ongoing debate whether those systems should be big or small.

Far too much ground in the video for me to cover in a post, and probably more than I could understand or explain.

Still, it is a superb explanation of the morality of free enterprise and capitalism. Check it out.

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