3. A Collective Enterprise
The law of comparative advantage, and other benefits of cooperation The Layman's Guide to Economics
Value-added trade was the first recorded source of human camaraderie outside of the family unit or survival tribe, with early humans taking a break from savagely brutish warfare to extend their open arms to the foreign trader bringing desired goods they couldn't find anywhere else. The correlation between trading and peace is for good reason - it always makes everyone better off to freely trade with each other. As a result, the more people in the economy, the merrier - more options for consumers, and more customers for producers. The band Incubus thus explains this Evolutionary Economics lesson well, observing, "It's so much better when everyone is in...are you in?"
Adam Smith was perhaps the first to note the economic value of human cooperation, specifically explaining the many benefits of the division of labor and specialization in The Wealth of Nations. By specifically concentrating on what we each do well, Smith argued, we can collectively produce much more of value as a society than we could if we were all working together on the same project. As a result of this specialized cooperation, humans have to trade. This point is so obvious it warrants little explanation. (Explanation for the Dense: If you're going to spend your time inventing a new cell phone, you better find someone to buy it the end of the day, unless you plan on eating your cell phone.)
The benefits of free trade on a global scale are explained by the Law of Comparative Advantage. Comparative Advantage is the idea that a nation benefits from directly producing the most valuable products it can produce by specialization, while trading for those cheaper general products (e.g. agriculture) that other countries can produce. Even if the rich country can produce the more primitive product cheaper domestically, it still benefits from importing it because of the greater amount their society gains from the more valuable production (e.g. curing cancer instead of milking cows). And now you know one reason why global free trade is a good thing.
Economics similarly justifies the open society, simply because everyone benefits from the diversity. No one expected college dropouts (S. Jobs, B. Gates, et al.) to be able to design a computer to radically change the way we live, work and play. Likewise, no one expected a welfare recipient (J.K. Rowling) to produce perhaps the most entertaining children's book in a century. But they did. Thus, Evolutionary Economics explains the necessity of the social safety net. Institutions like state-funded education, health care assistance, unemployment assistance and equality of opportunity all help to ensure that all of us have a chance to discover the next great value-added innovation, in our own ways. (For more on these, see Section 5.)
The new Evolutionary Economics is far different from the infamous Social Darwinism espoused by many irresponsible intellectuals in the past century. Sporadic failure in business is not an indictment of a person's value to society - just ask Abraham Lincoln or Steve Jobs. Sometimes, it's just pure chance - being in the wrong place, or being ahead of your time.
An effective pro-market government policy realizes this and, subject to reasonable reciprocity, "softens the landings" so that all citizens always have the ability to change jobs, start new businesses, and continuously contribute to society's Evolution in their own way. It is thus the sole job of the government to make sure everyone has the ability to contribute to the market-based differentiation, selection and amplification of socially-beneficial innovations -- a process called Creative Destruction.
