Comparative Advantage in Practice

Working through numbers shows why comparative advantage is powerful. Suppose Country A can produce either 10 tons of rice or 5 computers per worker, and Country B either 6 tons of rice or 1 computer. A is better at both, but each computer costs A 2 tons of rice, while it costs B 6 tons. Each ton of rice costs B only one-sixth of a computer, compared with half a computer in A.

So A should specialize in computers and B in rice, and any exchange rate between 2 and 6 tons of rice per computer leaves both better off. Real-world patterns echo this logic: Bangladesh's garment exports and Switzerland's precision instruments reflect relative strengths, not absolute ones. Comparative advantage can also change over time, as education, investment and technology alter what a country does relatively well, which is how South Korea moved from wigs and textiles to ships, cars and semiconductors.