Summary in haiku form
Comparative advantage.
Just let people trade!
Summary in one paragraph
Moving from a world with just a single individual to a world with multiple individuals allows us to study the benefits of trade. The example of comparative advantage—called the only surprising example in economics—shows that trade between two people can provide mutual benefits even when one person is better than the other at everything. This shows that it can sometimes be difficult to see potential benefits from trade, but the Coase Theorem says that optimizing individuals have an incentive to keep trading until they exhaust all possible gains from trade. This suggests that a world full of optimizing individuals will be orderly rather than chaotic, and in fact we see this order in phenomena like the law of one price, which predicts that goods that are easy to trade will be sold at approximately the same price all over the world.
Notes on specific pages
Page 60: Ronald Coase and the Coase Theorem
Ronald Coase won the 1991 Nobel Prize “for his discovery and clarification of the significance of transaction costs and property rights for the institutional structure and functioning of the economy.”
Paul Krugman won the 2008 Nobel Prize “for his analysis of trade patterns and location of economic activity.”
Efficient market hypothesis
Need to add links to Links to Ricardo, BB King.
