Sec. 3. #Choice of the more advantageous occupations#.  Let us consider the cases of two countries somewhat differently situated, such as an old country like England and a newer country such as was the United States in the nineteenth century.  Now the relative advantages of various industries in two such countries are very unlike.  The newer country excels in its broad area, its abundant rich lands, its bountiful natural resources of forests and mines.  These are the superior opportunities which give the economic motives for settlement and for continued immigration from the other lands.  Most of the newcomers find it to their advantage to develop the peculiar opportunities of the new land, rather than to go on producing the same things in the same way as they did in the old country.[6] Thus they get a larger quantity of products per day’s labor, and are able to gain by trading a part of these for the products of the older country.  Thus the characteristic industries of the two countries must differ.  Without any government supervision, therefore, but simply through the choice of enterprises, each seeking the best investment of capital for himself, industries are developed in which each country is either most markedly superior, or least inferior, to its neighbors.  If either laborers or capitalists in the new country were to turn to the less-favored industries they would be forced to accept a smaller reward than they can earn in the more favored.

Sec. 4. #Persistence of difference between nations#.  If both men and wealth interchanged between industries and between countries with perfect readiness and without any outlay whatever for transportation, these differences would soon disappear, and perfect equilibrium of advantage would everywhere result.  In every country, in every occupation, labor and wealth of given quality and amount would receive the same reward.  But the interchange of labor and of products between countries is never without friction.

The laborers, enterprisers, and investors in a naturally rich country are thus in a position of more or less enduring advantage relative to those of older and poorer countries.  Differences of the same nature appear as between different parts of the same country, as between the Northern and the Southern states of the American union, between the Eastern and the Western states, and even between neighboring countries of the same state.  The differences between two countries, however, are likely to be more marked, the circulation of factors being so active within a country that it is allowable to speak broadly of prevailing national rates of wages and of interest.  Altho, as Adam Smith said, “a man is of all sorts of luggage the most difficult to be transported,” the higher wages in a new country attract constantly from the older lands a portion of their laborers.  The higher rate of interest in new countries constantly attracts investments from abroad; yet, despite these forces working toward equalization, the inequality may remain and, through the working of other influences, may even increase in the course of years.