Framing Practicum: Comparative Advantage

When thinking about comparative advantage, I find it helpful to frame it in terms of the lowest opportunity cost. I think this points attention in the most useful way to explain the concept.

If Xenia can produce 1 unit of apples or 0.5 units of bananas, this is just saying that the amount grown of one fruit is the opportunity costs of growing the other fruit. Xenia has a lower opportunity cost of growing apples than Yuma.

Also, it would be nice to do one of these for market size as well.

General system components:

• Two or more producers
• Two or more products with differing costs for each producer
• Consumption
• A coordinating mechanism

Scientific hierarchy and specialization. When a new graduate student does wet lab work for a PI in a large and well-funded lab, they're generally foregoing only an opportunity to do wet lab work somewhere else. They don't have the resources, scientific knowledge base, or position to pursue their own high-level research strategy, even if they had one. If a well-funded PI were to do wet lab work, they'd be giving up time they could be devoting to high-impact strategy work. Hence, even though the PI might be better at the bench than any of their graduate students, they nevertheless don't actually do any wet lab work themselves. On occasion, though, they might step in to perform a critical procedure in a crunch if the assigned grad student isn't able to do it.

Furthermore, successful labs probably specialize not only to advance the state of the art in their field, but also in order to be able to provide services to other labs. If lab A is run by a highly competent PI who has a large but limited supply of labor and capital, they could develop competency in any of a wide range of advanced skills and techniques. But if lab B, even if run by a modestly competent PI, can specialize in a component of work relevant to lab A, then they might have a comparative advantage in that area. Lab A will let them have it, so that they can produce more of the things lab B is not able to do.

Hibernation vs. winter foraging. Ground squirrels hibernate; hares do not. One speculative explanation is that, in energy-sparse environments, species specialize not only in different particular food sources, but in different seasons. Hares specialize in exploiting winter food sources; ground squirrels specialize in maximally exploiting summer resources through more complex patterns of behavior. In a sense, they're finding different comparative advantages. They may evolve with these patterns in a way that reflects a sort of "evolutionary trade." Hares focusing on a pattern of energy consumption and expenditure that can run at a uniform moderate level, sustainable in summer against competition from lots of hungry squirrels, and also in winter when food sources are scarce. Squirrels focus on a pattern that maximally exploits abundant summer resources, and then shuts down during the winter, "leaving the rest" for the hares. This isn't symbiosis, and it's not just "specialization" in the narrow sense of, say, growing a beak adapted to a particular flower shape. Beak specialization is equivalent to a firm producing better tools for its workers to do the job it's focused on; hibernation vs. winter foraging lifestyles are equivalent to the process by which firms choose which jobs to focus on in the first place.

Can we apply other economic principles to understand evolution and predict or explain patterns in our observations? We might use "market size" to understand the evolution of multicellular organisms. The more cells we have in the body, the more they're able to specialize. This predicts that we'd find increased cellular diversity in larger organisms, even within analogous organs.

Cellular differentiation. Pluripotency and mature function are two different cell "products." Stem cells can offer cheap pluripotency, but it's expensive for them to differentiate all the way to maturity. Partially differentiated cells can reach maturity in a narrower set of endpoints cheaply, but cannot naturally revert to pluripotency (as far as I know). The body uses these cells, and coordinates their reproduction, differentiation, and maturation.

This makes me curious about the extent to which cellular proliferation and differentiation is controlled vs. incentivized. The body is certainly heavily controlled by intercellular signaling, which controls the behavior of cells. This is analogous to a command economy. When, if ever, is the body regulated (in a healthy way, i.e. not cancer) by creating "rewards" of energy or oxygen to select for cells maximally able to exploit that reward?

Example One: Good Cop / Bad Cop

The classic interrogation trope involves a suspect who is being interrogated by two police officers - one who is friendly and tries to offer to help the suspect, and one who is aggressive and threatens them with the consequences of not cooperating. We can think of the two cops as components of the Police Agent, and they are pursuing two goals: Trust and Fear. Both Trust and Fear are sub-goals for the ultimate goal which is likely a confession, plea deal or something of that nature, but the officers have uncertainty about how much Trust or Fear might motivate the suspect towards this ultimate goal, so they want to maximize both. Here, Trust is built by the "Good Cop" while Fear is built by the "Bad Cop". Imagine both cops start out pretty evenly split between pursuing Trust and Fear, but the the first cop is naturally a bit more aggressive (this is the "Bad Cop") and so he is following a slightly aggressive strategy (i.e. geared towards Fear). Vice versa for the second cop ("Good Cop"). Now because the suspect is already afraid of the Bad Cop, the Bad Cop gets more Fear from increasing their aggression than the Good Cop would, as it's taken more seriously. Similarly, because the suspect is already slightly friendly towards the Good Cop, the Good Cop gets more Trust from increasing their friendliness than the Bad Cop would, because they've built rapport and it's seen as more genuine. Thus, in order to maximize the total amount of Trust and Fear, the Good Cop should completely specialize in friendliness and the Bad Cop should completely specialize in aggression, due to their comparative advantages.

Example Two: Multi-Party Systems

In a multi-party system, you might have three political parties that are all broadly on the same side of the spectrum, with little doubt they'd form a governing coalition if they could. Let's say there are n groups that these three parties can possible draw votes from, with each group representing a certain policy goal that all three parties would be happy or indifferent towards implementing (example for the left: unions, immigrants, students, renters). So we have three subsystems (each party) and n goals they are try to maximize. Now note that rhetoric / messaging is generally tied to what goals you focus on, and that a given voter may find different rhetoric more or less persuasive for a given political goal. If all three parties attempt to solve all n goals equally, they will likely have very similar rhetoric / messaging due to similar goal focus and composition of their political coalition. This means any given voter will likely be hearing only one version of a message, but hearing it from three different sources, which minimizes the chance of the message landing and maximizes confusion & conflict. If instead, each of the three parties focuses on a different subset of groups and policy goals (based on whatever they are randomly currently inclined towards) , any given voter will hear three distinct messages on similar goals and so will be likelier to be persuaded by one of them - furthermore the messaging is likelier to be more direct and less confused. So to maximize the likelihood of achieving any of the n goals - by maximizing the likelihood of these three parties winning a majority of seats - these parties should specialize in different types of rhetoric. The key aspect of comparative advantage here is that there's a negative interaction term between all the different groups/goals (representing confusion of rhetoric and wasted messaging) so parties can achieve Pareto-optimal gains by focusing on a specific group/goal and leaving another to a different party. This may seem like a poor explanation for party specialization given the historical ways in which parties have formed, but parties are a revolving door of new members and a system where each party pulls in members from a subset of the n groups and those members then push that party towards advocating for that subset of n groups is stable and maximizes any one group's chances of success. Friendly party leaders can also talk to each other to achieve some version of this coordination - I've seen this in practice in my own country. Note: this idea is not novel to me but the framing of it as comparative advantage is.

Example Three: Student Debt

Here the two sub-systems are you and future you. The multiple goals are money and time. As a student you might be able to get a $15/hr part-time job whereas in the future you could get a job where you expect to be paid twice that. Clearly to maximize money and time in a pareto-optimal way, you'll refrain from working while being a student, and instead work slightly more when you're older. This would generally entail taking on a lot of student debt. In this example there are costs since money is not fungible through time and taking on debt incurs interest, but if the comparative advantage is big enough, those can be overcome.