Source: EconLog
by Arnold Kling
“The usual case for free trade is not the best case for free trade. The usual case is based on static efficiency, meaning making better use of a fixed set of resources. Economists use the term comparative advantage to describe how, if humans choose to specialize and trade with one another, each can end up better off than if they produce everything for themselves. But trade has an even more important role to play in what economists have come to call dynamic efficiency, which is the ability of an economy to exploit innovation and increase living standards over time. This dynamic efficiency is a central concern of the economists who shared the 2025 Nobel Prize: Philippe Aghion, Peter Howitt, and Joel Mokyr.” (10/15/25)