Perspectives on Trade

A fundamental aspect of economy is trade. Many like to attribute trade to systems such as Mercantilism or Capitalism. Truth is, trading evolved with human beings since ancient times.It involves recognizing different abilities people have and taking advantage of this to obtain more than you could on your own. In Economic talk, we say people have comparative advantages on producing some things or executing some tasks, in plain English this just means everybody has a limited amount of resources (time, money, employees,…), and in order to produce something over something else, you are giving up the possibility of producing it. This giving up is what in Economic talk we refer to as Opportunity Cost. If your opportunity cost is smaller than somebody else`s, you have comparative advantage, than you can specialize on producing it and trade for the other good you would also like to consume, but you don`t have comparative advantage on.

People have been trading since before the creation of money (as a matter of fact, money is itself a good we exchange, but I won`t get into this matter). Exchanging wheat for cow, weapons for pottery, food for protection, those are all trades where people just naturally exchanged one thing for another.

Trading is however a controversial topic, and many people would argue that a world of trade isn`t as pretty as Economists like to portrait. And most of them are right, the real world doesn’t work as nicely as our models do, but they help us break reality into pieces and understand them separately in order to try to comprehend the whole.

Here is a nice video on trading for you, I hope you get the idea. I would be happy to answer any questions you might have about the topic.