1.7. Development

1.7.1. Reading (skimming, scanning for subject and language study)

1.7.1.1. Read the text “Life and Activities of the Nobel Prize Winner Ohlin Bertil” and say what

main contribution to the study of economic theory Ohlin made.

Life and Activities of the Nobel Prize Winner Ohlin Bertil

Ohlin, Bertil (1899—1979). Bom in Sweden, Professor Ohlin studied at the University of Lund

and the Stockholm School of Economics. He was appointed to the Chair of Economics at Copenhagen

University in 1925. In 1930 Professor Ohlin moved to the Stockholm School of Economics

where he remained until his retirement in 1965. He was a Member of Parliament from 1938 until

1970 and Chairman of the Swedish Liberal Party for many years. He was awarded the Nobel Prize

in Economics in 1977 (jo in tly with Meade). His major contribution, to international trade theory,

was published in Interregional and International Trade (1933). Professor Ohlin refined the theory

of comparative advantage by building upon the work of Eli Heckscher (Heckscher — Ohlin principle).

He also made important contributions to macroeconomic theory, in many ways anticipating

in the 1930s the work of Keynes.

Vocabulary Notes to Text 1.7.1.1

I. ...refined the theory of comparative advantage by building upon the work of... — усовершенствовал

теорию сравнительного преимущества, развивая работы...

1.7.1.2. Read and translate the microtext “Comparative Advantage” into Russian and give

an example of comparative advantage used in practice.

Comparative Advantage

The law of comparative advantage was theoretically reasoned by Ricardo, D. This notion has

become determinative in developing production and trade among countries. By comparative

advantage economists mean the idea that economic agents are most efficiently employed in activities

in which their relative efficiencies are superior to others. The importance of comparative

advantage is that it suggests that, even if someone is very bad at some activity, perhaps even worse

than anyone else at it, it could still be profitably efficient for him or her to pursue it, if he or she

is even more inept at other activities. The idea has been seen as particularly important in explaining

international trade. Countries should specialize in areas in which they have a comparative

advantage.

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Vocabulary Notes to Text 1.7.1.2

1. this notion has become determinative... — это понятие стало определяющим...

2. economic agents — экономические агенты

3. to be bad at some activity — плохо справляться с каким-то видом деятельности

4. inept at other activities — неспособный к другим видам деятельности

1.7.1.3. Translate the microtext “Division of Labour” in written form.

Division of Labour

By division of labour we mean the allocation of labour such that each worker specializes in one

or a few functions in the production process. Adam Smith illustrated the principle in the different

stages of pin-making: drawing the wire, cutting, head-fitting, sharpening. The division improved

labour productivity (a) by the more efficient acquiring of specialist skills and (b) through the saving

of the time because workers did not have to move from one operation to another. Through the

division of labour economies of scale could be achieved. The exchange economy was essential to its

operation. Each worker could so specialize as long as he was assured that he could exchange his

output for others to satisfy his needs. The principle applies to firms and countries also: similar

benefits may be achieved by the specialization in those activities in which the firm or country has

a comparative advantage.