Intuition Pumps for Comparative Advantage

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I sometimes forget how uninformed the average human being is. Economists certainly don’t forget this, so they make sure to hang onto simplistic explanations of important concepts. I think we need better ones for comparative advantage.

While waiting around for my dinner to arrive Saturday night, the subject of politics came up, and I complained a bit about the politics of Gen Z men. It seems that the neighboring guests, two young men, heard what I was saying, since I soon overheard them talking about Trump’s trade policy. One of them said something to the effect of “Trump’s tariffs are important. We’re too dependent on China, and we’re gonna be making things in America again.”

I often imagine that this sort of person has heard of comparative advantage before and has had it explained to them, but has somehow become convinced that protectionism is still a good idea. Here is a more likely explanation: most people don’t think about this sort of thing often. They might encounter an idea like comparative advantage once or twice in their life, but they will almost certainly forget it.

Every idea more complicated than a statement like “We’re too dependent on China” is an anti-meme for normal people, an idea that stops itself from spreading. Some of the most powerful anti-memes for normal people are contained in textbooks, and economics textbooks are especially packed with anti-memes that resist being believed and remembered. Comparative advantage is one such anti-meme.

Economists sometimes try to improve on the anti-meme status of comparative advantage through intuition pumps. The concept of an intuition pump comes from philosopher Daniel Dennett, who described them as follows:

A popular strategy in philosophy is to construct a certain sort of thought experiment I call an intuition pump. ... Intuition pumps are cunningly designed to focus the reader's attention on “the important” features, and to deflect the reader from bogging down in hard-to-follow details.

The usual intuition pump for comparative advantage sounds like this:

“You have lots of stuff in your life that you don’t make. You didn’t make your shirt, and you probably didn’t make your food (or at least the ingredients). If you did, you’d be really poor! You’d spend all day farming, and you probably wouldn’t ever finish building your first laptop. So why should your country be any different? It’s good to specialize and trade for other things you want.”

My own microeconomics professor, Daniel Lin, applied this intuition pump when he gave the example of the 100-mile suit. The creators attempted to make a suit using only materials available within 100 miles of their location. It’s not very good, and they had to sometimes use materials not available within 100 miles:

Self-sufficiency isn’t very dapper.

This idea that we often rely on others to make things we can’t make is a pretty good intuition pump, since it gets people thinking about the benefits of specialization and trade. This man in his terrible suit provides an image of how difficult it can be to make a good product using only local materials.

But I think this intuition pump could be greatly improved. To a skeptical layman, the United States appears obviously different from a single person or team. There’s plenty of land and hundreds of millions of people, making the country a world of its own.¹ We’re also a lot smarter and wealthier than people in foreign countries, so clearly, we should be able to make everything here. (Indeed, nothing is physically stopping us from, say, making bananas and coffee in the few areas we could make them.)

A superior intuition pump is called for. Something needs to be used to focus the listener’s attention on what really matters, what comparative advantage is really about: opportunity cost. To do one thing, you must not do something else. Here’s what that looks like as an intuition pump:

“Think about how much you depend on other people to do things you can do yourself. You depend on others to work as farm laborers, for example. Why not farm your own food? Because you have better things to do with your time. Farm your own food, and you won’t have time to do your job, which a farm laborer probably doesn’t know how to do.

The entire country is like this. The United States could make everything for itself, but then it would have to give up on some of the things it makes right now, like advanced financial services, software, and medical technology. The people and materials have to come from somewhere.”

This isn’t foolproof. With a lack of experience and an active imagination, the audience might suspect that somehow, we can get a free lunch. Our government is pretty tough, and we’ve been holding back all these years against the cheating foreigners—don’t you feel that way?—so why can’t more Americans work in manufacturing and make $60k a year?

If you’re especially lucky, they might then flash some fun buzzwords like “currency manipulation” or “floating exchange rate system” that have intellectual force among people whose primary experience with economics is through fast-talking pseudoexperts on Instagram. I once witnessed a woman who had come across the concept of an externality, and, not seeming to understand what it meant, applied it to international trade, claiming that imports from other countries produce negative externalities that we should tax. No, she didn’t mean products that require carbon emissions to produce. She was merely convinced that importing produced “negative externalities”, perhaps because the concept was tied to the convenient conclusion that they should be taxed. Someone with a double-digit IQ and a bone to pick is quite dangerous once they’ve found the magical expert words.

Listeners sometimes need to be encouraged to think about the real world rather than the world of accounting. You have your exchange rate magic in hand; alright then. You imagine that Americans can be paid $60k a year to work in manufacturing. What does $60k a year mean when the money can’t be used to buy flights to Cabo, the newest Grand Theft Auto, or a life-saving appendectomy? To gather workers into a sector like manufacturing, you must lose them in other sectors, and much of the output they would otherwise create. Indeed, skilled pilots, game developers, and doctors are some of the things the US is great at producing compared to its top trading partners, Mexico, Canada, and China. Something would have to give.

Unfortunately, every paragraph I’ve written here lacks the force of the punchy statements that can be made about trade. “We shouldn’t be so dependent on China” will usually be easier to follow and more convincing. So at times, it may be better to flashbang the audience with even simpler, harsher statements: “Should we really start making the simpler products made in China and Mexico, and give up on our highly developed industries?” Or, to be even punchier: “We shouldn’t make dumb products like China. My opponent wants to raise import taxes. Boo! Taxes!”

The mathematical argument can be abstract and hard to follow for most people, as difficult as that might be for an economist to imagine. (What??? Isn’t it just basic algebra?) It helps to explain it as clearly as possible with tables and graphs, but that won’t get you very far. Alternatively, we can make people think about this common fact of life—that we rely on others to do things we could do ourselves, but lack the time to do—and that might be the best way to help them understand comparative advantage.

1. Though it should be noted that like the concept of comparative advantage, I often forget that most people don’t know the population of the United States off the top of their head like I do. (It’s about 340 million. That’s almost as many people as there were on Earth in 1400!)