Monday, August 4, 2008

Great Video for Teaching Trade

Understanding the benefits of trade between countries is the most important topic in economics. Yet, when teaching comparative advantage students will invariably argue that trade, while providing long-run benefits, also imposes substantial short-run adjustment costs, which make international trade undesirable.

The most effective method of countering this argument is to demonstrate that the adjustment costs due to trade are just like the adjustment costs due to technological progress. And surely, we do not want to impede technologies like the automobile and the dialysis machine. So why hinder the benefits of trade?

My suggestion is to play the video Mexicans and Machines, created by the Reason Foundation and available at here. It is superb, intelligient, and entertaining - a great teaching tool.