Our weekly explainer on economics using lessons from popular culture. In Installment 35, Black Panther ignores Comparative Advantage.
Among the many Marvel characters, few have caught on in the popular imagination as Black Panther has. Our prince is quite a package. He is a fearsome warrior, with a legitimate claim to the throne obtained by winning the most legitimate fist fight ever. Prince T’Challa also happens to be wrestling with the sins of his father and the expectations of his fellow tribesmen. However, while training to be a fine fighter and a finer world leader, he skipped a vital Econ 101 lesson that David Ricardo taught the world: the law of Comparative Advantage.
Wakanda seems to have grown by leaps and bounds over the past millennia in isolation from the world. The country refuses to give or take any sort of aid from the international community and is still, secretly, the most prosperous country in the world. (The rest of this piece contains spoilers.) This fallacy is not just embedded in the premise of the film, but also appears in the after-credit scene. In his address to the United Nations, when asked what Wakanda has to offer to the rest of the world, the Black Panther unleashes a wide pearly-white smirk, that familiar smile of a political leader revealing his arrogance.
David Ricardo would have much to teach him.
Ricardo, in 1817, explained the vital difference between absolute advantage and comparative advantage. A country/tribe may have an absolute advantage over the production of every commodity in the market, yet it may not have the comparative advantage in producing all those goods.
In other words, the big guy gains even if he trades with the little guy. the little guy have as much to offer as big guy do.
To illustrate our point, let us say Wakanda and K’un Lun can produce only two goods in this universe: missile blasters and pretty yellow baskets. Wakanda can produce either 20 missile blasters with its scarce resources or 10,000 yellow baskets at any given point. While K’un-Lun, with its scarce resources, can produce only 1 missile blaster or 3000 yellow baskets. Wakanda has an absolute advantage in producing both missile blasters and yellow baskets. But it does not have a comparative advantage in producing yellow baskets. K’un-Lun does.
If Wakanda trades 1 missile blaster for 2000 yellow baskets it still gains as it can now produce 4 additional blasters while having 2000 yellow baskets to use. At the same time, K’un-Lun can focus on producing 3000 additional baskets to trade and gain 1.5 missile blasters. Wakanda gains, K’un-Lun gains. Wakanda needs K’un-Lun to be prosperous to make efficiency gains in the production of commodities out of the scarcest input available in this universe – vibranium. In other words, they would be better off with trade.
The trade between missile blasters and yellow baskets is just one of the many permutations of trade possible for the kingdom of Wakanda.
This was a simplistic illustration with a two-goods economy but the theory extends well to a multi-goods economy as well.
This even applies to your personal life. Consider this: say you are a lawyer. You have hired a driver for your commute. You may be better at driving than your driver. However, you continue to pay the driver for his services. The driver has a comparative advantage in driving over you. You have chosen to devote your resources (your time) to a skill that pays you the highest. If you are a lawyer, it makes more sense for you to practise law than to drive. With this trade, both you and your driver are better off.
There is also a wide assumption that nations trade with each other, while the truth is that nations do not trade. Trade is a “voluntary agreement” between two individuals or groups of people represented by agents.
Wakandans, alas, are not the only ones to have made this fallacy. The USA wants protectionist policies to supposedly protect its domestic industries; Donald Trump threatened to slap a 45% tariff on Chinese imports; within Africa, an African firm selling goods within the continent faces an average tariff rate of 8.7%, compared with 2.5% overseas.
What these countries and Wakandans have failed to realize that trade is a positive-sum game. The case of India’s GDP growing post-1991 is well-known – we keep telling it to ourselves and yet fail to take the lesson from it.
In a positive-sum game, both parties to the trade benefit. A zero-sum game on the other hand, requires one party to the exchange to be worse off in order to make the other party better off.
So Prince T’Challa, the world has much more to offer to the kingdom of Wakanda than you can think of. Also, we totally empathise with your disappointment in the ignorance of your former leaders. Isolationism never helped anybody. The greatest superpower any nation can have is the power of trade.
