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The realism of comparative advantage simulations

By Tyler Koch
web posted November 21, 2022

It is often difficult for digital simulations to accurately portray real-life scenarios, having to tackle the many factors of change that may affect the outcome of the situation. Simulations commonly lack various small components that may not seem to have a large impact, though brought together can bring a negative blow to the program. Conversely, some simulations, such as the Guns or Butter Game, can gloss over some minor and nitty-gritty details to provide a clean, easy-to-understand model, while still maintaining the integrity of the program. Though the Guns or Butter Game’s simulation of Comparative Advantage was not completely realistic, it was spot-on in its ability to demonstrate the key-takeaways of the concept.

In one sense, the Guns or Butter game was not successful in realistically demonstrating a comparative advantage, as seen in the sacrifices made by telecommunication companies in the U.S. For example, many telecommunications companies in the United States choose to hire customer service representatives from India and the Pacific Islands because it is more cost effective than opening a new call center in America. In doing this, companies are able to apply the savings toward providing cheaper internet and phone services than their competition, which is often more appealing than higher quality to customers. In this scenario, providing a less expensive service outweighs providing a quality service, which gives the company a comparative advantage over other competitors. In the Guns or Butter Game though, there was no factor of “quality or quantity” that had to be taken into account. One simply decided to produce what they had an advantage in, such as food or consumer goods, and import whatever else was required. Had a factor of quality been in the mix, some may have decided to produce different goods or a different amount of certain goods, as opposed to just looking at the comparative advantage in quantity produced per capital.

On the other hand, the simulation did demonstrate a realistic aspect of comparative advantage, in the form of trading for a mutual benefit for a group of countries. For example, Ireland has a comparative advantage in cheese and butter production due to climate and a large amount of land suitable for dairy cows. On the other hand, China has a comparative advantage in electronics because of its abundance of labor. With the opening of trade between Ireland and China, Irish farmers experienced an influx of dairy prices and demand, and therefore likely increased dairy production. Likewise, China saw an increase in electronics sold and demanded, and therefore benefitted from the trade agreements. The beauty of the system is that trade enables both parties to specialize in production of goods that are cheaper to make, and trade for the other necessary goods, resulting in a mutually advantageous system.

Overall, in my opinion, the Guns or Butter Game’s simulation of Comparative Advantage was, for the most part, realistic. As seen in corresponding real-life trade systems that utilize comparative advantage, such as trade between Ireland and China, the Guns or Butter Game was able to accurately portray the key components of comparative advantage trade-agreements in an easy-to-understand way. On the other hand, the simulation lacked a factor of quality, as seen in decisions to sacrifice quality for more quantity in the telecommunication market. As companies are often forced to choose a higher quality, more expensive service or lower quality, cheaper service, they face a tough decision in which would be more cost-effective. In the simulation though, a quality factor is not considered, and is therefore lacking a key component that most firms may struggle with. In total though, the Guns or Butter Game was very accurate in simulating the main concepts of Comparative Advantage and trade, as I believe it was a success. ESR

Tyler Koch is an AP Economics student in high school. (c) Tyler Koch

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