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Comparative advantage and when to blow up your island

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Re: Comparative advantage and when to blow up your island

#101

Post by chii »

s1artibartfast wrote: post #39
mabbo wrote: post #9

What bothers me in today's world is that we ignore how some countries achieve their comparative advantage. Why did Hershey's chocolate close the factory not too far from where I grew up, and move the manufacturing to Mexico? Well, labor is cheap there because there are no unions, few health and safety regulations, few workers' rights groups. That makes it much cheaper to operate. Why can China manufacture clothing ch…

I think you are conflating comparative advantage and absolute advantage. As the article explains, comparative advantage is what a country is good at doing, not how good it is compared to other countries. The latter is absolute advantage. You can be worse than every country on earth at making X, but still have a comparative advantage in making it. >And while I don't disagree that for some countries that are trying to…

> Once better jobs exist for workers, sweatshops should be disallowed

why do they need to be disallowed, if workers are given the freedom to pick their best option?

Re: Comparative advantage and when to blow up your island

#102

Post by WalterBright »

chii wrote: post #98
eloff wrote: post #96

Earlier quoted context omitted.

I'm not sure I believe that. War doesn't usually end until one side surrenders in a way the other side is willing to accept. If all you have left to fight with is improvised weapons, then it continues with that. I would argue that very expensive, complex machines are the Tiger tank mistake all over again. Mechanically unreliable because of the complexity, but when it worked it was completely unmatched. One Tiger tank…

> If all you have left to fight with is improvised weapons, then it continues with that. and see how well (or poorly) that work. Look at afganistan. Look at iraq. Insurgents continue to fight, and the usa just cannot completely win. A war is won on ideology, not weapons.

> Insurgents continue to fight, and the usa just cannot completely win.

The US cannot win those because it is unwilling to do what is necessary (indiscriminate killing) to win.

> A war is won on ideology, not weapons.

I don't see much evidence for that in the history of warfare. For example, during WW1, the fortunes of the armies ebbed and flowed with the ebb and flow of who had the technical advantage in the air war.

Re: Comparative advantage and when to blow up your island

#103

Post by jbay808 »

NovemberWhiskey wrote: post #85
hyperpallium2 wrote: post #70

Earlier quoted context omitted.

Though China's trajectory is to not need the USA.

Given that China invests gigantic sums of money in the US and has vast segments of industry dedicated to selling goods to the US, it is not very clear to me how you've concluded that.

> vast segments of industry dedicated to selling goods to the US

If they don't want anything from their trading partners, the output of those industries can just as easily be directed to their own population.

Re: Comparative advantage and when to blow up your island

#104

Post by jbay808 »

mjw1007 wrote: post #66
soVeryTired wrote: post #62

Earlier quoted context omitted.

Arrow's impossibility theorem has always seemed a little fishy to me: I think the axioms are too strong (if you pressed me on this, I'd wonder if the 'independence of irrelevant alternatives' axiom is problematic). The fact that it holds when there are three or more options but not for two options just doesn't sit right with me.

It turns out that there is very little scope to relax the axioms: for almost any voting scheme, there are circumstances where you do better by not voting your true preferences. See the Gibbard-Satterthwaite theorem. Pretty much the only scheme that avoids this is "choose a voter at random and elect the candidate they like best".

> Pretty much the only scheme that avoids this is "choose a voter at random and elect the candidate they like best".

And at this point we learn how many people's true preference is to vote themselves as president!

Re: Comparative advantage and when to blow up your island

#105

Post by kevin_thibedeau »

NovemberWhiskey wrote: post #85
hyperpallium2 wrote: post #70

Earlier quoted context omitted.

Though China's trajectory is to not need the USA.

Given that China invests gigantic sums of money in the US and has vast segments of industry dedicated to selling goods to the US, it is not very clear to me how you've concluded that.

The US is a convenient parasite. Uplift their domestic population, throw in India and all of Africa and China can bear to lose 370 million consumers.

Re: Comparative advantage and when to blow up your island

#106

Post by avmich »

chii wrote: post #99
avmich wrote: post #94

Earlier quoted context omitted.

Sigh. If only. Do you know what happened with Crimea in 2014 - and what was going on in Debaltsevo, Donetsk region, Ukraine, in February 2015?

but those are wars that are isolated to a region, not a region-wide war like the WW.

So what? Those are still invalidating the idea of "80 years since a conflict between continental European nations".

Re: Comparative advantage and when to blow up your island

#107

Post by mandelbrotwurst »

chii wrote: post #100
fragmede wrote: post #67

Earlier quoted context omitted.

The metal (steel, aluminum, etc) used in new cars didn't exist 10 years ago. From first principles, making steel is easy. Making stainless steel, figuring out when to add additives and what those additives should be, is harder. Doing it at scale, in quantity, cheaply, and safely, taking all aspects into consideration is dramatically harder, and if you dump the expertise now, and then have to restart from first princi…

> dump the expertise now you'd imagine they, upon acquiring said expertise, would write it down so that it is permanently available to others. What happens to the expertise if the person with it dies in an accident or old age?

You do write it down for exactly that reason, but it doesn't make it permanently available in the way that you describe - much of generational knowledge transfer happens by living and working side by side, not just reading books that the elders wrote.

Re: Comparative advantage and when to blow up your island

#108

Post by greycol »

chii wrote: post #100
fragmede wrote: post #67

Earlier quoted context omitted.

The metal (steel, aluminum, etc) used in new cars didn't exist 10 years ago. From first principles, making steel is easy. Making stainless steel, figuring out when to add additives and what those additives should be, is harder. Doing it at scale, in quantity, cheaply, and safely, taking all aspects into consideration is dramatically harder, and if you dump the expertise now, and then have to restart from first princi…

> dump the expertise now you'd imagine they, upon acquiring said expertise, would write it down so that it is permanently available to others. What happens to the expertise if the person with it dies in an accident or old age?

Some institutional knowledge is just knowing where it was written down.

Some of it is trade secrets and so when the company is wound down it's sold as IP to another place.

Some expertise is contextual to the actual build of the equipment. Having a manual that said replace this O-ring every week in a blower or you'll suffer failures may not actually be expert knowledge anymore, It could be all that is stopping you from losing a million dollar piece of equipment or it could be what's causing you to lose productivity for an hour every week in a pagan ritual to the sacred maintenance document.

Being an expert and being able to chronicle that expertise are not just separate skills they're separate tasks. They might not know what is worth highlighting or they might prefer to read a book than to take on the extra task of writing it down.

Re: Comparative advantage and when to blow up your island

#109

Post by tuatoru »

merpnderp wrote: post #47
defen wrote: post #18

These simple models of free trade work fine when discussing commodities or raw materials, but one thing I never see addressed (I'm far from an expert, just an interested layman) is that modern manufacturing involves far more than the raw inputs - there's complicated logistics and an entire holistic knowledge base of the company or companies which produce a thing. A society can forget how to make things, especially if…

I'm starting to see a consensus that one of the biggest drawbacks to free trade is the loss of skills. It is great to get cheap steel from China and great for China to sell steel at a profit, but it sucks losing the engineering jobs. But what truly is awful is now there is hardly anyone who knows how to run a steel mill anymore in the US. The US might not always be friends with China, but the US will always need stee…

> one of the biggest drawbacks to free trade is the loss of skills.

The Economics jargon is "real option value". When you have engineers making widgets of type A, it's easy to get them to make types B, C, and D should the need arise. This potential to do other things has real value even if in fact you never do them.

Real option value should always be evaluated when choosing a course of action, but since it's about non-existent things, it's usually skipped. (Edit: calling it "real" must be economist humor.)

Ricardo didn't know about, or chose to ignore, real option value. In the classic England = cloth, Portugal = wine trade, Portugal would be better off making cloth because of real option value.

Re: Comparative advantage and when to blow up your island

#110

Post by [deleted] »

jgeada wrote: post #46
bluGill wrote: post #40

Earlier quoted context omitted.

The US can produce large numbers of N95 masks. What we cannot do is produce large numbers tomorrow. If you are willing to bankroll me I'll setup a factory and in 2 years I'll produce any arbitrary number of N95 masks you care. There are two obvious problems above. First, 2 years, will we even need N95 masks in two years? Second, I said I'd make them, but I cannot promise I can make them cheaper than China can.

You are severely underestimating the necessary level of manufacturing "culture", logistics and processes that were lost when we outsourced manufacturing. For many things, including probably making N95 masks, we can no longer just decide to make them now without reconstructing that entire logistical tail, all the myriad of small manufacturers, and train people with specialized know-how and the years of experience that…

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