This video made me happy…and a little nostalgic. I would have to guess that these are the sorts of things that people say behind my back…
Very cute. But you didn’t really think that you were going to get away without some sort of edumacation, right? So the professor mentions comparative advantage (not to be confused with competitive advantage) as the rationale for labor specialization. You can learn more about comparative advantage and the gains from trade here:
Another choice excerpt from the video is the quote “What the heck is marginal utiltity anyway?” Well…marginal utility is the additional happiness you get from consuming one more of something. Let’s take an example from the Superbowl party I was at last night. I had had three slices of pizza, and the marginal utility of the fourth slice of pizza was the additional happiness that the fourth slice gave me above and beyond what the first three had provided. (In my case, I would argue that the fourth slice had negative marginal utility, since it just made me feel too full rather than any happier.)
The second half of the video gets into a bit of a grey area with the globalization bit…now, it is true from an economic standpoint that, under certain assumptions, free trade is efficient (where “efficient” means “creating the biggest economic pie”), but it’s not necessarily an equitable outcome for everyone, since less competitive domestic producers lose while consumers win (when free trade leads to foreign imports) or vice versa (when free trade leads to domestic exports). Economists make the argument that, because the winners in this scenario win more than the losers lose, it’s possible for the winners to somehow compensate the losers and make everyone better off. Unfortunately, I have yet to see that part be accomplished in practice. So when the girl in the zebra tank top argues that it’s unfair that jobs are outsourced, she’s not necessarily wrong, she’s just arguing a different point than the one that economists typically make.
In case you were curious, you can find the Economic Freedom of the World report here, and yes, the Smoot-Hawley tariff was kind of a debacle, largely because it caused other countries to put retaliatory tariffs in place. Who would’ve thought that other countries wouldn’t just be okay with us taxing their goods and them not taxing ours? Hmph.
By the end, the video drifts off into a bit of unsubstantiated libertarianism territory- for the record, there are benefits to licensing that may outweigh the costs, and you can ponder this next time your upstairs neighbor hires an unlicensed plumber. There is also mixed evidence on the effect of a minimum wage, which I find to be particularly surprising. (The most well-known counterintuitive evidence is from a study by David Card and Alan Krueger- you can find a summary here.) The takeaways at the end are a bit of a bastardization of what economists actually have to say about the role of government, since very few economists would argue that less government is ALWAYS better. (If you don’t believe me, see public goods, externalities, etc.) That said, I don’t see economists heading up the Progressive Club any time soon, either.