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Comparative advantage

One person (or group) has a comparative advantage over another at producing a certain good if they can do so at a lower opportunity cost.

In a perfectly efficient market for good, the most effective way to improve the world is to work in an area in which you have a comparative advantage. In fact, as the market for good is not perfectly efficient, there may be areas in which an individual has less of a comparative advantage, but are worth working on anyway. Perhaps because these areas are severely neglected.

Comparative advantage can apply to individuals (e.g. what job am I comparatively best at), groups (e.g. what problem are we in a comparatively good position to solve), or countries (e.g. which industries do we have a comparative advantage in). People may have different comparative advantages depending on who they are comparing themselves against. For example, a talented programmer with some management abilities would have a comparative advantage in programming when compared to most of the world, but may have a comparative advantage in management compared to the other programmers who work at her company.

The concept of comparative advantage is particularly useful for deciding where you would have the most impact working. For example, someone with a deep passion for financial modelling may do a lot of good working in finance, and donating to organizations which pursue their social objectives. Comparative advantage can also enable forms of moral trade. Comparative advantage should however be used with caution, as focusing on current skills can encourage a “fixed mindset”.

Comparative advantage is distinct from absolute advantage. A particularly productive person may produce both apples and oranges at a lower time cost than an unproductive person. But the unproductive person will be able to produce either apples or oranges at a lower opportunity cost (in terms of foregone oranges or apples).

Further reading

Todd, Benjamin. 2018. Should you play to your comparative advantage when choosing your career?.
“Do the job that’s your comparative advantage” might sound like obvious advice, but it turns out to be more complicated.

Aceso Under Glass. 2014. My comparative advantage in effective altruism.
A discussion of how it can depend on the group you’re comparing yourself to.

Kuhn, Ben. 2014. Some stories about comparative advantage.
The dangers of adopting a ‘fixed’ mindset.

Todd, Benjamin. 2016. The value of coordination.
As the community grows larger, comparative advantage becomes more important.