James K. Galbraith has stated that "free trade has attained the status of a god" and that " ... none of the world's most successful trading regions, including Japan, Korea, Taiwan, and now mainland China, reached their current status by adopting neoliberal trading rules." [..] These comments have been heavily criticized by mainstream academics like Paul Krugman, who noted the lack of mathematical modeling or simulati…
Comparative advantage and when to blow up your island
31–40 of 117 posts
Re: Comparative advantage and when to blow up your island
#32"Comparative advantage" has always embodied, to me, the difficulty with electoral politics. It's a fairly easy concept, taught fairly widely, yet almost no one really understands it and views the world through that lens. Most voters are operating without an understanding of comparative advantage. Now apply that to dozens of other concepts in other fields. Same situation. It's depressing.
Should I be in favor of cronyism?
I actually take the other side despite getting paid by them. These companies/Management made terrible decisions and continue to make terrible decisions. Instead of selling and replacing managers we are burdened with zombie companies.
Re: Comparative advantage and when to blow up your island
#33If I understand correctly, one reason there seem to be so many results for zero-sum games is that they have defined solutions, whereas in other situations, a mathematically valid strategy is to be a jerk ("blow up the island") and attempt to take the lion's share[1] of the surplus for oneself. One of the early game theory papers considers two people with radios, parachuted onto a grid, who must rendezvous. It derives…
Re: Comparative advantage and when to blow up your island
#34What 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…
Re: Comparative advantage and when to blow up your island
#35What 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…
China's comparative advantage in clothing comes from long before there were any re-education camps in Xinjiang. The first phase of industrialization in China was based on clothing production. Compare China's exports in 1995 [1], which were heavily skewed towards clothing, to their exports in 2018 [2], which were much more heavily skewed towards electronics. Xinjiang makes up only a tiny part of the Chinese economy, a…
Re: Comparative advantage and when to blow up your island
#36James K. Galbraith has stated that "free trade has attained the status of a god" and that " ... none of the world's most successful trading regions, including Japan, Korea, Taiwan, and now mainland China, reached their current status by adopting neoliberal trading rules." [..] These comments have been heavily criticized by mainstream academics like Paul Krugman, who noted the lack of mathematical modeling or simulati…
So empirical evidence vs simulation is somewhat Hobson's choice.
Re: Comparative advantage and when to blow up your island
#37"Comparative advantage" has always embodied, to me, the difficulty with electoral politics. It's a fairly easy concept, taught fairly widely, yet almost no one really understands it and views the world through that lens. Most voters are operating without an understanding of comparative advantage. Now apply that to dozens of other concepts in other fields. Same situation. It's depressing.
(Off the top of my head, a few for me are in-group/out-group behavior, path dependence, sunk cost fallacy, fundamental attribution error, and externalities.)
Re: Comparative advantage and when to blow up your island
#38Earlier quoted context omitted.
Note that Hershey's moving only works out for them if the resulting change in labor situation means that their customers can still afford their candy. If the excess labor instead means wages at home go down and now people cannot afford candybars it doesn't work out for them. In short, we are better off for not having Hershey's in the US. Mexico gets better wages (more competition) and out people are freed from making…
In theory, but > ...freed from making candybars and can move to more productive uses of our people relies on the presumption that there is sufficient local demand for laborers (who may not necessarily have any experience that doesn't involve the manufacture or distribution of chocolate) in positions of increased productivity. The decaying socioeconomic situation for wide swaths of the rural US suggests that this was…
US rural areas face a very different issue: high wages relative to other countries (shared with cities), but with the population density advantages of cities. I don't need to look to tell you Hersey didn't move to a rural area of mexico they moved to a city of some sort. They don't need the largest city, but a small town cannot supply their labor needs.
Re: Comparative advantage and when to blow up your island
#39What 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…
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 move up in development, so-called 'sweat shops' can represent a stepping stone forward (2 generations ago, South Korea had plenty of them), the question is how long that's an acceptable excuse?
Understanding comparative advantage helps answer this question. Sweat shops should not be banned by the exporting country as long as it provides a comparative advantage to workers. That is to say, if sweat shops are better than the next best option, they should be allowed. Once better jobs exist for workers, sweatshops should be disallowed. Otherwise, banning them doesn't make replacement jobs, it just pushes workers into worse options.
Changes can also be made on the buyers side to not import products made in sweatshops. This could have positive or negative effects on workers in the exporting country. If the manufacturing country still has an absolute advantage in shirt making after the import ban on sweatshop goods, their people will be better off. If the absolute advantage now goes to another country, the workers will be worse off.
Re: Comparative advantage and when to blow up your island
#40These 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…
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.