Essay On Specialization In Production And Internal Trading Of A Single Good In America
The basic international trade economic theory suggests that countries are in a good position to benefit from the production of goods having a comparative advantage. In essence, the world is free for international trade and flow of goods, which makes it economically viable for the United States to specialize in the production of goods with high comparative advantage. The United States is well endowed with technology and highly skilled labor. In this respect, the United States should specialize in the production of goods that require intensive physical and human capital.
Evidently, the division of production of goods among countries in a manner that recognizes the concept of comparative advantage is essential for yielding a higher output. If the United States engages in the production of goods in disregard to the concepts of comparative advantage, it is likely that little gains will accrue from international trade. Because of the expensive labor, for example, the United States would produce labor-intensive products that will also be sold at high prices. In response, the developing nations would produce physical and human capital-intensive products because of the inputs scarcity. Logically, this implies that that in such circumstances, America will lose grip of being a significant competitor in the production of green technologies especially the ones that are less physical and human capital demanding.
Specialization in the production of green technologies in the United States is economically viable and leads to many societal gains. Contrary to self-sufficiency, concentrating on the production of green technologies that the United States has a higher comparative advantage in their production leads to higher outputs. The higher output implies that the society or consumers will have a greater access to goods, and the market size will increase to create more opportunities for economies of scale. Because most people will specialize to produce the same good in the U.S, internal completion will lead to increased supply and lower prices. In addition, specialization leads to division of labor, which is pertinent to the reduction of the cost of production per unit leading to lower product prices for the consumers.
Sometimes, comparative advantage exists at early stages before a technology spreads to other countries. In the United States, for example, products manufactured through the aid of a given technology show a gradual decrease in comparative gains. Essentially, this occurs because production seems to favor countries with less expensive labor once the technologies spread to such countries. In situations where production process is standardized, potential producers of such commodity across the world tend to be the top beneficiaries. Concisely, that happens because the forces of competition drive production to a country whose production costs are the lowest.
Considerably, the United States success in the production of green technology will depend on the legal, economic and regulatory support. Besides the global market forces, all these factors are essential for successful development of green technologies. From the economic perspective, pricing carbon to cater for the greenhouse gasses, marginal damage will be viable in the provision of technology development incentives.
In conclusion, free international trade makes it economically viable for a country to specialize in the production of goods in which it is most efficient. Efficiency in production implies that a country will accrue gains from producing goods whose cost of production is the lowest compared to other countries. Therefore, the readily available skilled labor and sophisticated equipment better explains the essence of production of green technologies in the United States, if specialization is anything to occur.