The weather and the theories of absolute and comparative advantage
15th August 2011 by , | 1 Comment
It’s an odd title for a blog, but stick with me. New Zealand is getting a once in 50 years’ weather event right now, a blast from an Antarctic system that is bringing low temperatures and snow to altitudes and cities/towns that have not experienced this within most people’s living memories. Whether the “once in 50 years” moniker remains, given the increasing volatility of world weather patterns, I am not sure.
As it is still late winter rather than early spring, I suspect many farmers are relieved that lambing has yet to get into full swing.
Viewing this from Canada serves to place these two countries’ respective climates in perspective: New Zealand’s capital city, Wellington, had snow yesterday, but the daytime temperature was still above zero celsius. Ottawa, Canada’s capital, rarely ventures above zero from December through to late February, and the average daytime temperature is around minus 10c. None of that is exceptional for most of Canada. One of the implications of our respective climates is that the growing season in most of Canada is intense but much shorter.
I grew up in Taranaki, our dairy heartland, where the weather, like most of New Zealand, is within a fairly mild and narrow band. Most days of the year, winter or summer, it is likely to be somewhere between 10-22 degrees celsius. Combine that with good soil, regular rain and high sunshine hours and it is small wonder that historically we have made our way in the world through growing stuff. We also have an expanding and highly vibrant technological and manufacturing sector, but primary production and tourism remain key drivers.
That fundamental reality is driven by two core tenets of economics: absolute and comparative advantage. Wikepedia gives a pretty good summation of the principles, but it is these two things that underpin world trade. Each country produces what it produces best, you trade with others and everyone is better off. It’s never that simple and is not perfect, but New Zealand as a nation subscribes to that principle and is an ardent free trader. We back ourselves to be very efficient producers of primary products, most notably dairy, but also beef, sheep, timber and fruit. Climate, skilled labour input and technological innovation are ongoing drivers of our advantage in this area.