How Neoliberal Globalization Directs Higher Education

Relative Advantage For Labor Division

Calculated by opportunity costs, the principle of relative advantage (or comparative advantage) is used for dividing labor not only between individuals but also between economies. One of common understandings in economics is therefore that when two individuals or nations have different opportunity costs in performing a particular task, they can improve the total values of the produced goods and services by specialization and trade in those goods and services. Let us take the case of France, the United Kingdom, South Korea, and Vietnam as an example (Table 1). An assumption herein is that the goods are similar in value, and their values do not change over time. (Reality is different, however.) Given this assumption, if each of the economies choose to produce a particular good to their relative advantage, the total output they produce within 60 minutes comes to 16 (six airplanes, four cars, four laptops, and two shirts). Otherwise, they can only produce a maximum number of 14 products within the time allotted.