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The Dub/Chud Example

The Dub/Chud Example

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The Dub/Chud Example

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  1. The Dub/Chud Example

  2. The neighbors: Dub & Chud Chud’s mower Dub’s mower Chud’s weeding tool Dub’s weeding tool garden garden Dub’s work: Mowing: 7 hours Weeding: 5 hours Chud’s Work: Mowing: 3 hours Weeding: 4 hours 12 hours total 7 hours total

  3. The Comparative Advantage Opportunity costs of mowing and weeding: DubChud Mowing= 7hrs Mowing= 3hrs Weeding= 5hrs Weeding= 4hrs O.C. of mowing:O.C. of mowing: 7/5 of a weeded garden 3/4 of a weeded garden O.C. of weeding:O.C. of weeding: 5/7 of a mowed lawn 4/3 of a mowed lawn

  4. The next step: specialization & the destruction of boundaries Chud’s mower Dub’s mower Chud’s mower Chud’s weeding tool Dub’s weeding tool Dub’s weeding tool garden garden • The neighbors strike a deal: • Dub weeds both gardens with his weeding tool, taking 10 hours instead of the 12 he used to spend • Chud mows both lawns with his mower, taking 6 hours instead of the 7 he used to spend

  5. The new system comes with a price for Dub’s mower… Dub’s mower, now useless Chud’s mower, mowing Dub’s lawn garden • The once-productive lawn mower that belongs to Dub now sits collecting dust in a shed, unable to find work because its old job is now being done by Chud’s mower with a comparative advantage. • Dub’s mower is angry at the injustice and protests, throwing grass and rocks at Chud’s mower when it comes to mow the lawn.

  6. Not just mowers and weeding tools… Dub’s unemployed mower: China’ s high tech industry .. e.g., software engineers Chud’s employed mower: US’s high tech industry, e.g., software engineers. Dub’s employed weeding tool: China’s blue collar jobs, perhaps textiles. Chud’s unemployed weeding tool. US’s blue collar jobs, perhaps textiles.

  7. Let’s see what happens when China’s software engineers (Dub’s mower) catch up to the US so output per hour is the same (i.e., let Dub mow in 3 hours just like chud). Re-calculate the opportunity costs of production for Dub. Who has the comparative advantage now?

  8. So Dub mows now and Chud weeds. Discuss the proposition now.

  9. Discuss the welfare implications (from the very beginning (closed economy) until now) and draw some welfare pies.

  10. What to do???