- Cafe Hayek - http://cafehayek.com -  The Division of Labor
Tweet [1]  Both Smith and Ricardo were deeply interested in
specialization. In Smith, the division of labor comes from an
expanding market. For Ricardo, specialization comes from
differences that make trade possible. Ricardo’s insight was that
even if you are inferior in everything, you can have a
comparative advantage in something making specialization and
trade worthwhile.  A year or so ago, I heard my colleague James
Buchanan talk about this, partially drawing on this paper [2] of
his with Yoon.  Here’s the example he gave that helped me
understand the difference between Smith and Ricardo. Suppose you
have a 100 hunters going out into the field. Suppose they’re all
identical. All equally good at everything, including hunting.
When the number of hunters gets large enough, reaching say, 100,
it can now become profitable for one hunter to stop hunting and
specialize in starting a business providing take-out breakfasts
and lunches for hunters on the