hahhaa..look what i found::
Case Study: A Man from Nepal
During a stint as a Peace Corps volunteer in rural Nepal, a young economic naturalist employed a cook named Birkhaman, who came from a remote Himalayan village in neighboring Bhutan. Although Birkhaman had virtually no formal education, he was spectacularly resourceful. His primary duties, to prepare food and maintain the kitchen, he performed extremely well. But he also had other skills. He could thatch a roof, butcher a goat, and repair shoes. An able tinsmith and a good carpenter, he could sew and fix a broken alarm clock, as well as plaster walls. And he was a local authority on home remedies.
Birkhaman's range of skills was broad even in Nepal, where the least-skilled villager could perform a wide range of services that most Americans hire others to perform. Why this difference in skills and employment? One might be tempted to answer that the Nepalese are simply too poor to hire others to perform these services. But as reasonable as this poverty explanation may seem, the reverse is actually the case. The Nepalese do not perform their own services because they are poor; rather, they are poor largely because they perform their own services.
The alternative to a system in which everyone is a jack of all trades is one in which people specialize in particular goods and services, then satisfy their needs by trading among themselves. Economic systems based on specialization and the exchange of goods and services are generally far more productive than those with less specialization. Our task in this subconcept is to investigate why this is so. We will explore why people choose to exchange goods and services in the first place, rather than having each person produce his or her own food, cars, clothing, shelter, and the like.
As this subconcept will show, the reason that specialization is so productive is the existence of what economists call comparative advantage. Roughly, a person has a comparative advantage at producing a particular good or service, say, haircuts, if that person is relatively more efficient at producing haircuts than at producing other goods or services. We will see that we can all have more of every good and service if each of us specializes in the activities at which we have a comparative advantage.
This subconcept also will introduce the production possibilities curve, which is a graphical method of describing the combinations of goods and services that an economy can produce. The development of this tool will allow us to see much more precisely how specialization enhances the productive capacity of even the simplest economy.
