Comments on: Capitalist Roommate System

By: gopi

gopi — Sun, 19 Apr 2009 08:36:07 +0000

i’m sorry.. there’s a mistake in my last post. The last sentence shud be ” then A shud cook and B shud clean because A is thrice as productive as B in cooking, but only twice as productive as B in cleaning. Though A has absolute advantage in both, B has comparitive adv in cleaning.

By: renegade_division

renegade_division — Tue, 31 Mar 2009 17:55:20 +0000

I am not sure what are we talking about here, you are merely describing David Ricardo's theory of comparative advantage(something trashing which Paul Krugman won a Nobel Prize).

If an individual is able to bid lowest for ALL the tasks in the house(and it is possible) then he has a comparative advantage in everything.

On the other hand in International Trade it rarely can happen that one country is able to produce EVERYTHING cheaply. Among roommates minimum price IS all the comparative advantage demonstrated.

By: gopi

gopi — Tue, 31 Mar 2009 17:11:25 +0000

oh, comparitive advantage is widely used.. in all international trade.in fact, this theory is the reason why trade exist between countries. and the one who bids the lowest has an absolute advantage.. not necessarily a comparative advantage. if A takes 2 hrs to clean and B takes 4 hrs to clean; A takes 3 hrs to cook and B takes 9 hrs, then A shud clean and B shud cook because B is thrice as productive in cooking, but only twice as productive in cleaning. Though B has absolute advantage in both, A has comparitive adv in cleaning.

By: renegade_division

renegade_division — Tue, 31 Mar 2009 16:54:14 +0000

Well my goal was to build a simple system which people can actually USE, so I didn’t bother with all that stuff.

Secondly in a long term deal(like husband and wife). Comparative advantage is still used where the Husband usually goes out to hunt(or earn bread) and the wife collects forages and cooks and manages the house.
Another thing is Comparative advantage comes up through prices, nobody manually assigns the priorities to the people. In a joint task like cooking(where its more efficient to cook for all people rather than to cook for everyone individually) the comparative advantage is with the guy who has bid the lowest. For a task like doing laundry every individual can give his task to the person he thinks does it best(though not many people would choose to hand out laundry task to people). And then proper comparative advantage will emerge.

By: gopi

gopi — Tue, 31 Mar 2009 09:36:28 +0000

auctioning is the best way to determine the price of a product/service.but i believe that who does what should b determined by ricardo’s theory of comparitive advantage. take for eg there’s a house rented by 2 ppl and the only 2 chores involved are cooking and cleaning toilets. if person A is relatively better in cooking than at cleaning as compared to his roommate B, he shud do the cooking and B shud clean and they shud trade their services as per the rates fixed by auctioning. so, my point is : even though A agrees to do both at lower prices,he shud do only that thing in which he has a comparitive advantage – this way, both gains.