The Evolution of Business
Home	Schedule	Syllabus

I. History of Exchange- Moving from Barter to Money to Capital.

A. Barter: c. 9000-6000 BC

B. Money: c. 1200 BC

C. Capital: c. 1156

II. Trade Theory: Why do nations trade?

A. Mercantilism: Government can improve the well-being of the country by encouraging exports and stifling imports.

1. A zero-sum game.

 

2. David Hume: What happens over time?

 

B. Absolute Advantage Theory (Adam Smith): Specialize in the production and export of that good which it produces most efficiently.

 

C. Comparative Advantage Theory (David Ricardo): A country can benefit from engaging in trade even if it has an absolute advantage (or disadvantage) in both products traded.

 

 

 

D. Factor Endowment Theory (Hecksher-Ohlin): Countries will produce and export products that use large amounts of production factors that they have in abundance (capital or highly trained workforce), and they will import products requiring large amounts of production factors that are scarce in their country.

 

 

 

 

E. National Competitive Advantage (Michael Porter): Why does a nation achieve international success in a particular industry?

 

1. National Attributes

 

2. Additional Variables

 

 

3. Theory application: Self-reinforcing diamond