Advantages Of Trade And Specialization

Agency Problem: “The difficulties that arise when a principal hires an agent and cannot fully monitor the agent’s actions.” (Cornett, Adair, & Nofsinger, 2016, p. 15).

1. Long-distance commerce acted as a motor of change in pre-modern world history by altering consumption and daily life. Essential food and useful tools such as salt were traded from the Sahara desert all the way to West Africa and salt was used as a food preserver. Some incenses essential to religious ceremonies were traded across the world because there was a huge demand for them. Trade diminished economic self-sufficiency by creating a reliance on traded goods and encouraged people to specialize and trade a particular skill. Trade motivated the creation of a state due to the wealth accumulated from controlling and taxing trade. Trade posed the problem of if the government or private

The advantages of free trade- The law of comparative advantage comes into play when a country engages in free trade. This means that a country will be selling goods and services that it can produce at a relatively low cost and buying those that would be costly to produce. It also is in an advantageous position as it can get a wide variety of goods at the cheapest price possible. International trade also promotes competition in domestic markets and allows the consumers to purchase a wider variety of goods at lower prices. Too much regulatory policies that reduce trade also retard economic progress. This includes limiting entry of new firms in various businesses. Regulations that give priority to political authority over the rule of law and freedom of contract always undermine gains from trade. This creates the problem of corruption, red tape, and inefficiency. When they set the price above the market price, consumers are discouraged to purchase them. Allocation of capital into wealth creating projects is a sign of vibrant capital market. It is essential to have mechanisms capable of efficiently using the available resources for a country to realize its potential. Investment in capital needs to be consumption-oriented. The value of the additional output derived from the investment needs to exceed the cost of investment. The country needs to invest its resources in productive endeavors. In the modern economy, the capital market plays an important role (p. 51-89).

insights which have been neglected by the later literature of new growth theory and new trade

The Industrial Revolution caused a major development in social history with major changes in manufacturing, transportation, and agriculture that had an intense effect on socioeconomic and cultural conditions in Europe that then spread to North America and eventually around the world, influencing almost every aspect of everyday life and society. Looking through sources from the time period, it is easy to see how lives were changed due to the advancements in technology that improved manufacturing, agriculture, and transportation. After intently studying these phenomena, many Historians agree that all of these major changes were the main effect of the Industrial Revolution, but they may disagree on the causes of this event.

Why do countries trade? Why do we have allies? Why don’t we just become self-sufficient? It's because if we were to become self-sufficient we would not be able to cycle money and we wouldn’t have as many resources and amenities to get by with our entitled selves and only our spoiled selves, we would collapse into our own reality and eventually the word apocalypse would be innocent compared to what we would do to ourselves. So yeah self-sufficiency is not an option, we must trade.

Joel Mokyr, author of A Culture of Growth, explains the beginning of modern economy where growth was considered ordinary from a cultural aspect. He focuses on the period from around 1500 to mid18th century in Europe, the first development of modern economic growth. The Enlightenment and the growth of useful knowledge become central concepts. Modern economic grown lead to the Great Divergence among countries who were rich versus poor.

The Industrial Revolution could possibly be the most important event in the history of our world. Before it, people worked mostly on farms or sold things through the market that were hand crafted. This revolution brought about great change in the ways that we produce goods and the economies of the world. While some might argue that Industrialization had primarily negative consequences for society because of the rough working and living conditions, it was actually a positive thing for society. Industrialization’s positive effects were an increased standard of living, better means of travel, and more developed countries with better economies.

More recent incarnations of growth theory, following Romer (1986) and Lucas (1988), endogenize steady-state growth and technical progress, but their explanation for income differences is similar to that of the older theories. For instance, in the model of Romer (1990), a country may be more prosperous than another if it allocates more resources to innovation, but what determines this is essentially preferences and properties of the technology for creating ‘ideas’.1 Though this theoretical tradition is still vibrant in economics and has provided many insights about the mechanics of economic growth, it has for a long time seemed unable to provide a fundamental explanation for economic growth. As North and Thomas (1973, p. 2) put it: “the factors we have listed (innovation, economies of scale, education, capital accumulation etc.) are not causes of growth; they are growth” (italics in original). Factor accumulation and innovation are only proximate causes of growth. In North and Thomas’s view, the fundamental explanation of comparative growth is differences in institutions. What are institutions exactly? North (1990, p. 3) offers the following definition: “Institutions are the rules of the game in a society or, more formally, are the humanly devised constraints that shape human interaction.” He goes on to emphasize the key implications of institutions since, “In consequence they structure incentives in human exchange, whether political, social, or economic.” Of

The Industrial Revolution in Britain’s history is marked as the period of great development that led to the modern era of growth, improved living standards and technology. Moreover, this revolution was not just limited to Britain; it affected the rest of Europe and America in the same positive manner. Due to the Industrial Revolution’s success in many countries, it is now commonly cited as the surest way for a country to develop. In economics, goals of a developed country are high production of goods, high Gross Domestic Product (GDP), low unemployment and sustained growth; during an Industrial Revolution all these are achieved. However, despite the main goal of IR to improve living standards for the population, the actual success when

Trade is generally known as the buying and selling of goods from one person to another, “international trade would involve at minimum two countries and can go up to however many want to participate in the trade”1 and have something to offer that the there corresponding countries are willing to accept. Trade involves a lot of protection backed by the governments of the countries trading; hence, there are a number of common arguments in favor of protection. These may help certain groups within a country, or even may help a nation achieve some overall goal entirely. When it comes to trade there are numerous arguments put forward, some of which I will be discussing in this paper such as government

Across human history, societies adopted different political and societal systems. The same applies in term of trade, in which the system evolved from basic barter, common sharing, up to the invention of gold coins, trade and commerce system. Today’s world is dominated by western cultures. The different political, economic, and societal systems in the world are strongly influenced by the western civilization values.

Trading has been a part of human history from the ancient years and it will continue to be .It has played a significant role in the development of our civilization as it was a way of exchanging ideas and culture and human interaction. Although trading was mostly being made directly from the producer to the customer there was also the indirect way of trading operated by merchants, persons who trade goods produced by others in order to earn profit. Nowadays we have developed a system which is called global market and is

Conflict of interest is defined in Walton and Henderson (2005) as circumstances in which some interest of a person has an inclination to be at odds with the consistent exercise of his discernment in another’s interest. The idea of conflict of interest in that perception touches on positions of decision-making with a practical importance such as a company management’s discussion and acceptance of a decision and determinations of a board of directors of a business establishment. Hence, the conflict is a psychological one resulting from within a human or organization that is authorized to make decisions (p.4-7).

Principal-Agent relationships occur in many forms in business. Understanding these relationships is crucial for investors in order to make better investment decisions.