One of the most venerable and I think most powerful wealth-creating ideas in economics is the package of comparative advantage, gains from specialization, and gains from trade. As we all know, different countries just do different things well: the Swiss give us chocolates, the Germans give us beer, the French give us wine, and the British give us…um…they give us … um…um… Oh wait, the British were the ones who gave us the ideas of comparative advantage & gains from specialization & trade in the first place!
These thoughts were prompted by a Greg Mankiw blog that advised potential Econ Ph.D. students where to go to school based on rankings of economics departments. One of the rankings was global, which allowed you to see where in the world are the best economics departments. I knew of course that the US does well in Economics Graduate Programs (we are only good at two things, the other being Hollywood movies, so please don’t begrudge us this). The UK itself is a bit shrunken from its former Economics self but still does well, but I was struck particularly how well Canada and Australia do (see picture). Hence, almost 90 percent of the best economics departments in the world are in just four places, all of which were settled by the British if they are not actually British.
Adam Smith’s descendants cast a long shadow….