Timmy elsewhere

At the ASI.

Proof perfect that people instinctively understand Ricardo\’s comparative advantage.

11 thoughts on “Timmy elsewhere”

  1. What’s stunning about Einstein is that he found his perfect niche in Mathematical Physics. He was not remotely a good enough mathematician to flourish at that; there’s no reason to suppose that he’d have made much of an experimental physicist or engineer. But he pursued the very thing that suited him: to become the second best ever mathematical physicist implies, I suppose, pretty fantastic self-knowledge.

  2. On second thoughts, I wonder whether I should have said “theoretical physicist” rather than “mathematical physicist”. Dunno.

  3. I’m familiar with all the two-countries examples but how do they apply today? Globalisation seems to remove a lot of the constraints the original concept rests upon such that all the factors of production simply migrate to where they are most productive.

    Also the idea doesn’t seem to consider the price of the goods being produced and traded. Since any society is capable of greater production than its needs for consumption, would comparative advantage really kick in before all needs were met? Only to the extent this gives you more stuff lower down the hierarchy of needs, whether that be Portuguese wine or more time off work. Country A could decide to meet their needs then down tools and enjoy extra leisure time, and tell country B to get lost with their bloody overpriced cloth.

  4. “At that sort of level, the 1 in 10,000, pretty much any career choice is going to lead to worldly success. ”

    I don’t have it too hand, but Malcom Gladwells book “Outliers” has something in it about research on those at some level of giftedness (can’t remember what level, possibly higher than 1 in 10,000) which showed that those folk were actually less succesful than peopleat a lower level of giftedness. So I’m not at all sure about your line that i’ve quoted.

    Of course, I’m pretty sure that this changes nothing about your analysis. To do so, it would require that going into a non-comparative advantage field, for that level of giftedness, would provide better returns than the comparative advantage field does; but, if people above a certain level of giftedness do fare worse than those below that level it seems likely to be something internal, not field related…. But, hey, I know you appreciate pedantry for pedantries sake.

  5. Hmm, I must be an awkward sod (not that I’m in the top 1 in 10,000, but you said you thought this applies to everyone).

    Definitely best at maths at school. Not bad at humanities, but had to work at it whereas maths was largely intuitive.

    Did maths & physics A-level (obeying the theory so far), but only because I knew I could stroll through with straight As, which would get me into a decent university to read law.

    Why did I do that? Not because I thought there was more money in law than maths (careers advice wasn’t that sophisticated), but because it looked more interesting.

    Which brings in another factor. What we want to look at is not income but something more like profit – income minus the work/ hassle/ hours/ unpleasantness factors.

    So most people would not become prize-fighters or work in the oil industry for a little bit more money, because even if that was where the comparative advantage was, the extra money would not compensate for the unpleasantness of the job. But they would for a lot more money.

    Tim adds:

    “Which brings in another factor. What we want to look at is not income but something more like profit – income minus the work/ hassle/ hours/ unpleasantness factors.”

    Yes, this is “utility”.

  6. Mat (#4), isn’t that about measuring “giftedness” in an earnings context?

    Someone could be very gifted in one technical subject but lack the other skills needed to make an employment or commercial success.

    In which case is he part of the top 1 in 10,000?

    Depends which top 1 in 10,000 you’re looking at. Gladwell may be looking at a different group to Tim.

  7. Being unusually gifted is strongly correlated with mental illness, which is one reason it doesn’t automatically mean success.

  8. I agree people instinctively understand they should play to their strengths, what they don’t always grasp, in my experience, is that rewards follow supply/demand, not skill.

    This came up only a few days ago for me while chatting to an acquaintance in the building trade. He had found that while people supposed the greatest rewards went to bricklayers and the skilled craftsmen, the most money was actually to be made from site preparation, i.e. scraping it flat with a bulldozer. All he had to do was organise the bloke with the bulldozer and count the money.

  9. @Roue:

    I agree; whether it’s Occupiers thinking their hand-woven baskets and a bit of bike servicing should sell for enough to give them a middle-class lifestyle, or the MPAA thinking that because they’ve spent US$300M on making a movie, it should make at least double that in ticket and DVD/Blu-ray sales. Even if both the basket and the movie are ugly, shoddy and thoroughly undesirable.

  10. Roue/Alex: Certainly that is true, though, as Richard and Tim note, there can be non-monetary personal benefits, like the satisfaction of a job well done. If you have developed a skill, then putting it to good use can be utility-maximising even when it is not revenue-maximising. Of course, you should still be doing a good job (i.e., taking pleasure in a shoddy piece of work is just perverse).

    Adam Smith, I recall, makes a very similar point in Wealth of Nations when he talks (in effect) about wages for undesirable and hazardous jobs, and contrasts with the (ceteris paribus) lower wages for more desirable jobs.

  11. @Philip Certainly, there are non-revenue paths to utility maximisation for the individual. But some (especially creatives and artisans) tend to believe in a Labour Theory of Value and think “I’ve put my heart, soul and all my considerable skill into this widget for the last year, but no one will pay what it’s ‘worth’ to buy it from me” and be frustrated with the perceived injustice of the world. Chances are, either a) their skill isn’t as considerable as they perceive it to be (cf. Dunning-Kruger effect) or b) they’ve made something that no-one actually wants very much.

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