WEW-007
From Economics
[edit] Microeconomics Question from Walter E. Williams:
Imagine a community of individuals engaging in private production but where the idea of market exchange had not yet been discovered. Explain analytically the nature of the gains available after the discovery of exchange possibilities. Would every member of the community benefit, or might some be harmed as a result of the discovery?
[edit] Answer
No one can be harmed when a community moves from isolation to exchange. Everyone either benefits, or remains unaffected since no one is compelled to trade. Each person can make the decision based on his own interests. Exchange allows individuals to specialize in those products they can produce at a relatively low marginal cost, trading their surplus for other goods whose prices are higher than their own marginal cost. The idea that some might be harmed by a new trading partner generally arises only with respect to someone you are trading with obtains a new trading partner. In such a case, sellers of a good which can be more cheaply produced by the new trading partner could be driven out of business if they cannot reduce production costs, however, society as a whole still benefits from the redirection of scarce resources to their best use (perhaps a general fall in the price level).
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