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Brandis (1967) argues that "absolute advantage does not exist" and "that it is a logical impossibility". (See also comment, comment, reply.)

My question here is very narrow and specific. I do not understand why the highlighted sentence below (from p. 172) is true.

Brandis seems to be claiming that the last 5 units of Product Y cannot possibly cost 5 units of capital and 15 units of labor. But I do not understand why this is not possible.

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  • $\begingroup$ Divide out the costs of the capital and labour of A on a per unit basis. I think it's not correct to say it's not possible, but I can see that it is inconsistent (there is something in the model missing to explain the inefficiency of the last 5 units of Y produced by B). I can see if labour quality is the same, and capital quality is the same and all other external factors are the same, how can the production curves be different? $\endgroup$ – serakfalcon Nov 5 '17 at 4:35
  • $\begingroup$ @serakfalcon: But I can easily come up with any single production function that fits the data (for both A and B). Unless of course you impose the assumption that there are constant returns to scale, but I don't think that any such assumption is imposed here. $\endgroup$ – Kenny LJ Nov 5 '17 at 5:17
  • $\begingroup$ I agree with you that his argument isn't fully solid however if the production function is the same for A and B then it's fair to say that A doesn't have an absolute advantage. $\endgroup$ – serakfalcon Nov 5 '17 at 6:16

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