Yeah, that’s the famous line from Mankiw’s. But I’ve got a question on it.
It is obviously a great deal for Tiger to spend two hours on a Nike ad earning $10,000 rather than spend the time mowing his own lawn, and thereby, save $20 that he’d otherwise have to spend on paying the next-door boy Forest Grump to mow his lawn.
But what makes it a great deal for Forest Grump? Why would Forest Grump mow Tiger’s lawn rather than spend the time on making goods for himself? Can somebody explain it in terms of comparative advantage?
This example of the comparative advantage argument pre-supposes that Grump’s earning capability is maximized at mowing lawns, just as it pre-supposes that Tiger’s earning capability is maximized at Nike commercials. His name isn’t Forest Grump for nothing.
Since it is a hypothetical scenario, I doesn’t make sense to try to flesh things out more than that, IMO.
I am not being unjust towards it. I just want to know why most examples that deal with comparative advantage just explain one side of the story, when any exchange requires that both sides gain.
Perhaps this example is structured this way because it is easy to see why Grump’s best option is to mow grass but not so easy to see why Tiger’s best option is to farm out his mowing jobs.