Economics 101

Know Your Comparative Advantage to Make Better Decisions

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Peter Boettke of George Mason University, my graduate school professor and mentor, used to talk about Michael Jordan a lot in his lectures. He said, unabashedly, that Michael Jordan was and is the best basketball player in the history of the sport. There may never be anyone better. I suspect that Michael Jordan knows this about himself.

If Professor Boettke is correct, that means Michael Jordan has an absolute advantage at basketball—he is better than everyone else.

What’s Your Advantage?

Most of us don’t have a Michael-Jordan-situation going on; we are not the best in the world at what we do. If we did, it would be fairly easy to understand exactly how to harness our energy and skills. Regardless, we do bring a set of skills and abilities to the table that may make us relatively better at producing and supplying certain things than others.

There is no arrogance in knowing our strengths. In fact, God calls us to know them and pursue them with excellence. Knowing our skills and gifts is important because of how God has uniquely created each of us.

IFWE’s homeschool curriculum, Understanding God’s Calling, looks at discerning gifts, or strengths, and how they figure into our calling. The module on personal calling looks at three main considerations:

  1. God calls us to discern our gifts—we can do this, in part, by looking at a history of what we do and do not enjoy, and what we do and do not do well.
  2. Other people can help us discern our gifts—sometimes we cannot see ourselves clearly, and it helps to see ourselves through the eyes of a wise friend or relative.
  3. All gifts are God-given—whether they are spiritual or natural.

In Any Work Situation, You Are the Best Person for Your Job

Determining our gifts helps us arrive at a powerful economic concept called comparative advantage. Comparative advantage has everything to do with opportunity cost. That is, the value of what it is we give up associated with producing a good or service.

We should focus on producing things at which we are lower-cost producers than others. We tend to be lower-cost producers when we focus on our specific gifts and talents—like Michael Jordan as a basketball player. Unlike Michael Jordan and basketball, this is usually a relative comparison, so we must understand the gifts of those with whom we work to best harness and unleash our productivity.

At a previous workplace, one of my coworkers was great at putting together events. She loved it and it was part of her work responsibilities. So, when I needed to get a group of people together, I always went to her for help with the planning. Even though I love to entertain at home and could do this type of logistical planning, it made more sense for me to work with her because she was better at the logistics than I was. Just because I can do it, doesn’t mean I should do it at all times.

In another workplace, I may have more experience putting events together, so I would then have the comparative advantage in event planning. I would not have an absolute advantage in event planning (I’m no Martha Stewart) but depending on the situation, there may be a time and a place for me to focus on this type of work. However, it would be a high-cost decision for me to forgo economics and pursue event planning full-time. Being the lower-cost producer depends on time, place, and circumstance.

Your comparative advantage in your home may be different from your comparative advantage at work. At home, I am a lower-cost provider of making meals than my husband, and he is a lower-cost provider of managing our finances. If I paid the bills and he cooked, we would both be less efficient and less fulfilled. But just because those are our relative comparative advantages in the home, does not make them necessarily so outside of the home. I am not a professional chef and he is not a professional financial planner.

Gifts and Stewardship

Knowing your gifts and focusing on them is important for faithful stewardship. It allows us to specialize, especially with regard to things we produce and sell through our labor (our work). This specialization frees us from having to be good at everything and allows us to trade with others.

Whether you’re making decisions impacting your home or work life, I pray that understanding how best to leverage your comparative advantage will lead to greater fulfillment for you, flourishing for those around you, and ultimately, glory to God.

For more about calling, check out this free digital guide, Discover Your Story by Hugh Whelchel in the IFWE bookstore.

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