Friday, September 23, 2005

Trading apples and ideas

I came across this George Bernard Shaw quote in the proceedings of the zemos98 conference (it seems to be a Spanish cultural organization with a "Free Stuff" bent; thanks to Elastico for the link):
"If you have an apple and I have an apple and we exchange these apples then you
and I will still each have one apple. But if you have an idea and I have an idea
and we exchange these ideas, then each of us will have two ideas. "

This jumped out at me since I've been trying to wrap my head around the notion of Comparative Advantage. The quote suggests to me (and I think the Free Stuff community sometimes makes this case) that trade in knowledge goods is intrinsically different from trade in tangible goods.

The goods themselves are obviously different: non-rival vs. rival, for example, and with differences in the cost of marginal production. But the production of both goods consumes rival resources, whether a creator's time or an aquifer's water, and the value placed on the both types of goods will be a function of scarcity. Therefore, while one can expect some differences in trade dynamics based on the properties of information goods, the essentials will remain.

If that's the case, one would expect that different countries would trade in different kinds of information good, since they have comparative advantage in their production. There are signs of such specialization; Norway is, I'm told, the world leader in seismic analysis software as a result of their North Sea oil exploration expertise.

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