
Grades K-2, 3-5
Don't have an account yet? Sign up for free
Don't have an account yet? Sign up for free
The level of output in an economy can be increased through specialization. Economic specialization occurs when people produce different goods and services than they consume. It requires people to exchange goods and services.
The cover from the December 11, 1999, issue of The Economist displays a photo of a poor child from a third world country. The caption reads: "The real losers from Seattle–Who won the battle of Seattle? It doesn’t much matter. The real concern should be for the losers from that fiasco: the world’s poor." What does this caption mean?
Learn more about the WTO Talks at the Free Trade and Globalization web site. Read the article called "WTO Protests in Seattle, 1999."
Why were people protesting the trade talks? [Some say that the WTO does not do enough to protect workers around the world. Others say that the WTO does not do enough to protect the environment.]
Do officials at WTO agree or disagree with the protesters’ claims? Why? [Disagree. The WTO helps workers around the world by promoting trade.]
The protesters in Seattle want to limit trade by making it harder for certain countries to sell their goods and services to the rest of the world. Environment and worker protection are important issues and deserve attention. However, tying accomplishment of these goals to free trade may not be in everyone’s best interest.
Who would benefit if there were less trade in the world? [Special interest groups, industries that benefit from decreased competition.]
Who would be hurt? [Most of the people in the world, especially the very people the protesters claim to help.]
Why is this? Let’s go back to simpler times and see why…
[Note to the teacher: The level of output in an economy can be increased through specialization. Economic specialization occurs when people produce different goods and services than they consume. It requires people to exchange goods and services, thus increasing interdependence.
Specialization and exchange occur when there is unequal distribution of productive resources and when one party can produce a product at a lower opportunity cost than another party. This latter condition, known as comparative advantage, allows nations (or individuals) to benefit from specialization and trade, even though productive resources are unevenly distributed.]
Activity 1
Pretend the year is 1840. Your family moved one year ago to a sparsely populated area west of the Mississippi River. Only one other family lives within 10 miles of your house, and it is 50 miles to the next town. Each family has 50 acres of land.
Each family has been producing all its own food and clothing for the past year. As the families have come to know each other, Mr. Sanchez notices that each family has some special skills and resources. The Jacobsons seem to have an absolute advantage in growing corn and the Sanchez family an absolute advantage in hunting meat. (A person has an absolute advantage if he or she can produce more of a product with the same amount of resources.) The following chart represents current production.
Food Production Without Specialization: (Units)
Family |
Corn |
Meat |
Sanchez |
8 |
10 |
Jacobson |
35 |
6 |
TOTAL |
43 |
16 |
The families meet to exchange information. Members from both families want to see if they would be better off if each family specialized in what it did best and exchanged the extra goods they produced for other items they need. The following chart represents what they found.
Food Production With Specialization: (Units)
Family |
Corn |
Meat |
Sanchez |
0 |
20 |
Jacobson |
50 |
0 |
TOTAL |
50 |
20 |
Questions:
Activity 2
The Jacobson's have moved, and a new family, the Martins, now live near the Sanchez farm. The two families are interested in trading cloth and meat. The following is the new production schedule:
Food Production Without Specialization: (Units)
Family |
Cloth |
Meat |
Sanchez |
5 |
10 |
Martin |
4 |
6 |
TOTAL |
9 |
16 |
One family has a comparative advantage here if it can produce a product at a lower opportunity cost than the other family. Comparative advantage is a primary basis for specialization and trade. To see if both families will benefit, we must see what each family would give up–the "cost" of one item in terms of the other item. The "cost" of one item in terms of the other is found by calculating the ratio between the two items. The ratio of meat to cloth for Sanchez is 2:1; for Martin 1.5:1. In other words, for the Sanchez family to produce one additional unit of meat, they must give up some cloth.
Questions:
Food Production With Specialization: (Units)
Family |
Cloth |
Meat |
Sanchez |
0 |
20 |
Martin |
9 |
0 |
TOTAL |
9 |
20 |
Write a short magazine article that might follow from the headline in The Economist publication: "The real losers from Seattle–Who won the battle of Seattle? It doesn’t much matter. The real concern should be for the losers from that fiasco: the world’s poor."
For more information refer to the following resources:
"https://www.wto.org/english/news_e/pres99_e/pr160_e.htm."
For anti-WTO information go to "https://globalexchange.org/campaigns/legacy-campaigns/global-econ-101/."
"https://www.wto.org/english/thewto_e/minist_e/min99_e/english/misinf_e/00list_e.htm"
Grades K-2, 3-5
Grades 9-12
Grades K-2, 3-5
Grades 6-8, 9-12