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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

#41

Post by redis_mlc »

whack wrote: post #4
nautilus12 wrote: post #2

What about strategies that involve blowing up the bridge instead of one of the islands? This seems much more real world feasible.

> What about strategies that involve blowing up the bridge This sounds like the cornerstone of Trump's trade policy. "Give me what I want, or I will end all trade between us." In theory, it works. In practice, you end up with a Dr Strangelove dystopian outcome.

> This sounds like the cornerstone of Trump's trade policy.

Nope, Trump's trade policy is based on reciprocity.

Re: Comparative advantage and when to blow up your island

#42

Post by shuntress »

extremeMath wrote: post #28
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…

>large numbers of N95 masks Certifications take time, masks are simple, testing takes time. This is a government problem, not a manufacturing problem.

"You cant break the unit tests if you don't have unit tests"

Re: Comparative advantage and when to blow up your island

#43

Post by bluGill »

nautilus12 wrote: post #2

What about strategies that involve blowing up the bridge instead of one of the islands? This seems much more real world feasible.

Once I realize there is a possible trade I can make a boat, or swim. The bridge is the easiest way, and allows us to ignore the (very real) cost of transport in this example. In the real world most trade involves third party delivery companies with trucks, trains, or boats.

Re: Comparative advantage and when to blow up your island

#44

Post by shuntress »

pyronik19 wrote: post #23
lotsofpulp wrote: post #14

Earlier quoted context omitted.

> In my opinion, we need trade rules that explicitly tax and tariff those countries who are only finding comparative advantages through exploitation and unethical activity. The US and Europe have this situation too, where some European countries have decent parental leave and overtime rules, non employer subsidized healthcare, and lack of employer dependent H1B workers. Even within the US, you have states like CA off…

Many people don't think all of the goodies you mentioned for workers are things they should have rights to. Why is a company responsible for your decision to have kids? That makes no sense. If CA wants to make up said rights then it has to suffer the consequences. The only way this logic makes sense to me is when it comes to environmental issues which everyone suffers the externalities.

Many people do think all of those necessities you mentioned for workers are things they should have rights to. Why is a company responsible for your decision to have kids? That makes perfect sense. If CA wants to uphold said rights then it gets to reap the benefits. The only way this logic does not make sense to me is when it comes to environmental issues from which everyone suffers.

Re: Comparative advantage and when to blow up your island

#45

Post by rbecker »

andybak wrote: post #36
rbecker wrote: post #26

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…

However historical contingency is such a huge factor in economic outcomes that it swamps any possibility of forming deductions from observation. So empirical evidence vs simulation is somewhat Hobson's choice.

True, but it still means the current status is: Several countries that reached prominent economic positions with protectionist policies, and zero countries that reached such positions without them.

Now perhaps those countries would have succeeded even more without protectionism. Do you go with something proven to work for your country, or experiment with an alternative with a worse track record?

Re: Comparative advantage and when to blow up your island

#46

Post by jgeada »

bluGill wrote: post #40
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…

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 only exist in the presence of a vibrant and active manufacturing ecosystem.

Re: Comparative advantage and when to blow up your island

#47

Post by merpnderp »

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 steel.

Re: Comparative advantage and when to blow up your island

#48

Post by keenmaster »

aklemm wrote: post #13

"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.

Free trade based on the principle of comparative advantage only survives so long as the gains of free trade are adequately distributed to the public. Otherwise, the public will revolt and show the elites who's really in control, even if they don't end up better off in the short-medium term. In the long run, this can lead to reestablishment of free trade on more equal terms. The elites must preemptively make free trade work for everyone. That's not only moral, but it's rational too. It can help avoid an age of wasted potential and strife. The Great Depression was preceded by isolationism. Who wants to go through that again? Not me.

The point is, the ball is in the court of corporations and the wealthy. Money in politics will work for them until it doesn't. No amount of donations, ear whispering, and cocktail parties can avert popular rage. Trump supporters are only a taste of what may be coming, because Trump was easy on the rich (of course). There's no guarantee that the next populist president will be as nice to the rich. There's no guarantee that the next populist president won't be more capricious on free trade. The underlying ailments that gave rise to populism must be addressed as soon as possible. Critically, free trade is not the problem. The problem, like I said, is that the rich capture too much of the surplus from trade. More of that surplus should be going to education, bullet trains, research, socialized healthcare, etc...and it's not.

Re: Comparative advantage and when to blow up your island

#49

Post by 082349872349872 »

bluGill wrote: post #40
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…

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.

It took longer than planned, but not 2 years, for us to import mask making machines and source textiles.

(and yes, our standards institute also was testing the resulting product)

Re: Comparative advantage and when to blow up your island

#50

Post by jbay808 »

082349872349872 wrote: post #49
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.

It took longer than planned, but not 2 years, for us to import mask making machines and source textiles. (and yes, our standards institute also was testing the resulting product)

For clarification -- who is "us"? Are you American, Chinese, Taiwanese, Korean...?
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