We learned in this chapter that when an individual, firm, or country has the comparative advantage in producing a good or service, they can gain from trading that good or service with others. The American economy is based on this idea. Most people have 1 job which they can do at a lower opportunity cost than other people, which is why other people pay them to do it. For example, cooking is not very difficult, but it takes years of education and experience to do it at a high level. You could prepare a gourmet meal, but a professional chef can do it at a much lower opportunity cost, which is one reason you might pay a professional to cook for you –you give up less resources (time) earning money to pay for a meal than you would learning how to cook well, and then actually making a meal. The chef then takes the money they earned cooking, and uses it to pay other people to do services for them… for example, the chef could work on their own car, but the mechanic has a comparative advantage in automotive work, so it makes sense for the chef to pay the mechanic… and the mechanic takes the money and the cycle continues.
Most of my students are in college because they think they will be able to make more money with a college degree. But at the same time, we know that some college degrees really don’t help graduates make more money (art history, for example). The problem with degrees like this is that they don’t provide students with skills that give them a comparative advantage in doing something that pays well. An art history degree will allow graduates to compare and contrast historical art, but there is basically no market for these skills, which is why they make no money with this degree.
With all of this in mind, please respond to the following prompts:
- What skills are you hoping to get in college that you will sell to employers later? What will you have a comparative advantage in?
- If you don’t finish your degree, what will you have a comparative advantage in and what type of job will you do?
- If you do finish your degree, but you do the minimum possible to get by and don’t really get the skills you need, how will this affect your ability to make money later in life?
If you don’t know what you want to do or what skills you want, then you can do this assignment from the perspective of someone you know. Imagine you are them, and answer accordingly.
Here is my personal example:
- I went to college to learn economics, which is the study of resource allocation. I learned how to make optimal decisions using marginal analysis in many different settings. This gave me the ability to analyze business activities and to offer consulting services to businesses that need to make changes to maximize their profits. (I later went to graduate school to develop a comparative advantage in teaching college-level economics courses.)
- If I didn’t finish my degree, I would probably be a manager at a pizza restaurant. I know the industry well, have experience, and there are many job openings for people with these skills.
- If I was a lazy student, just doing the minimum to get by, I would not have actually learned what I needed to. I could probably still graduate -“C’s get degrees”- but the important thing is to get skills. The degree on my wall is just a receipt in a nice frame. If I had been a lazy student, I would not have a comparative advantage in anything, I would just be in debt due to student loans and would have been better off not going to college at all.