Reader BZ posted the following on my introduction to the Practice Problem of the Day series:
My gut tells me that I want to like this so hard…and I do suppose that if anyone was going to have a comparative advantage in anything, it would be Chuck Norris. That said, I’m pretty sure that even Chuck Norris is constrained by the concept of scarcity and therefore can’t escape the principles of comparative advantage. Let’s see why.
(Sidenote: I just looked up Chuck Norris on Wikipedia- the man is 73?!)
Suppose we have two people- Chuck Norris and Jimmy Trivette. (In case you’re curious, Jimmy Trivette is the name of Norris’ sidekick on Walker, Texas Ranger.) These two people perform two tasks in a simple economy- kicking ass and taking names. (Clearly I am having too much fun with this.) Chuck Norris, being Chuck Norris, is obviously “better” at both kicking ass and taking names- in other words, Chuck can both kick more ass and take more names per hour than Jimmy can. In economic terms, this means that Chuck has an absolute advantage in both kicking ass and taking names.
But can Chuck have a comparative advantage in both activities? Let’s say that Chuck can either kick 4 asses or take 4 names in an hour, and Jimmy can either kick 1 ass or take 3 names in an hour. (Like I said, Chuck is “better” at both activities.) But comparative advantage means having a lower opportunity cost of an activity, and, to kick an ass, Chuck has to give up taking one name, but Jimmy has to give up taking 3 names. Therefore, Chuck has the comparative advantage in kicking ass.
So what about comparative advantage in taking names? Chuck has to give up kicking a whole ass in order to take a name, whereas Jimmy just has to forgo 1/3 of an ass kicking (giving, not receiving, of course) in order to take a name. Therefore, Jimmy has a comparative advantage in taking names, and we notice that one can gain a comparative advantage either by being relatively good at something or by being relatively bad at everything else.
Is this always going to be the case? Pretty much- you may have noticed that the opportunity cost of taking a name is the reciprocal of the opportunity cost of kicking an ass. Mathematically, if x is less than y, then 1/x is greater than 1/y, so it must be the case that the comparative advantage flips to the other party for the other good. (That said, it is possible that neither party could have a comparative advantage in anything if both parties face the same opportunity costs.)
There is, of course, one fundamental flaw in this analysis- I assumed that Chuck Norris was in the business of kicking ass *or* taking names, when in reality the model appears to be one of kicking ass *and* taking names. Perhaps I’ll work on an economies of scope post for next time.