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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

#51

Post by js2 »

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…

The trick is convincing customers to pay more for a domestic product. Consumers don't really seem to care in large enough numbers.

Re: Comparative advantage and when to blow up your island

#52

Post by 082349872349872 »

jbay808 wrote: post #50
082349872349872 wrote: post #49

Earlier quoted context omitted.

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...?

Swiss. It's been months since I was following this story, but the machines were chinese (air freighted in, along with copious supplies of masks for the interim, by our flag carrier airline, which had plenty of spare capacity at the time) and I believe the textile source is german. Our virus response the last two months has been pitiful, but we were doing well in our first wave.

Even the north koreans seem to have bought some machines, judging by their propaganda photos. https://news.ycombinator.com/item?id=23741907

As far as making cheaper than china, the following are old links for non-N95 masks, they may be stale:

Compare masks per month: https://www.reuters.com/article/us-health-coronavirus-autos-...

with masks per day: https://www.youtube.com/watch?v=_jWt-4YKBq4

Re: Comparative advantage and when to blow up your island

#53

Post by admax88q »

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…

On the other hand free trade stops wars. If each party is specialized in a needed item that the other side no longer knows how to produce, its much harder to go to war.

The fact that the US will always need steel helps ensure that they _will_ always be friends with China, so long as they also specialize in something that China needs.

Re: Comparative advantage and when to blow up your island

#54

Post by jbay808 »

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.

I think it took both China and Taiwan much less than 2 years to ramp up production. Why would it take you so long?

Re: Comparative advantage and when to blow up your island

#55

Post by geofft »

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…

How long would it take to figure out how to run a steel mill from (more or less) first principles? That is, if you're a country that has zero steel mills and zero people who have worked at one, and for some out-of-game reason (like a global pandemic) you can't travel to one, but you know that they exist, you have access to books, and perhaps you can interview people, how long will it take to build an acceptable-quality mill?

After all, a) humankind developed steel mills in the absence of any steel mills at all, and b) multiple countries have developed much more complicated things in secrecy from each other (like atomic weapons and orbital rockets and radar), so it seems like it should be doable.

It's to your advantage to give up your skills if the cost of regaining them if you need to is smaller than the comparative advantage of having China make steel for you in the meantime.

Re: Comparative advantage and when to blow up your island

#56

Post by walterbell »

admax88q wrote: post #53
merpnderp wrote: post #47

Earlier quoted context omitted.

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…

On the other hand free trade stops wars. If each party is specialized in a needed item that the other side no longer knows how to produce, its much harder to go to war. The fact that the US will always need steel helps ensure that they _will_ always be friends with China, so long as they also specialize in something that China needs.

Changing delta in values is an additional factor in changing the relationship between former partners.

Re: Comparative advantage and when to blow up your island

#57

Post by Ma8ee »

geofft wrote: post #55
merpnderp wrote: post #47

Earlier quoted context omitted.

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…

How long would it take to figure out how to run a steel mill from (more or less) first principles? That is, if you're a country that has zero steel mills and zero people who have worked at one, and for some out-of-game reason (like a global pandemic) you can't travel to one, but you know that they exist, you have access to books, and perhaps you can interview people, how long will it take to build an acceptable-quali…

It is certainly doable, but it will take time. Any country can probably get some kind of small scale steel mill up in a few months (or a long afternoon if the scale is small enough). But getting producing high quality steel at industrial scale with economy would probably take longer than a decade.

Re: Comparative advantage and when to blow up your island

#58

Post by cafard »

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…

According to Wikipedia, in 2014 the US was the world's third-largest producer of raw steel. The industry's website says that US has produced almost 55 million tons of steel this year through the week ending September 12.

Re: Comparative advantage and when to blow up your island

#59

Post by tsss »

cafard wrote: post #58
merpnderp wrote: post #47

Earlier quoted context omitted.

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…

According to Wikipedia, in 2014 the US was the world's third-largest producer of raw steel. The industry's website says that US has produced almost 55 million tons of steel this year through the week ending September 12.

It's not about the damn steel.

Re: Comparative advantage and when to blow up your island

#60

Post by soVeryTired »

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.

The notion of comparative advantage that's presented in the article is a little facile though. IMO there are quite a number of real-world practicalities that derail the analysis:

* The infant industry argument. The analysis in TFA assumes comparative advantage is fixed: in reality advantage shifts all the time. Fifty years ago China had a comparative advantage in farming and not much else.

* Measuring comparative advantage: in order to make a good policy recommendation, we don't just know what each country does produce, we need to know how much each country could produce under a huge range of scenarios. Does anyone honestly know how much value a given country could produce if it decided to shift its entire economy in a new direction?

* Mobility of labour: instead of trading with other countries, why not just allow their workers to work in your country and reap the benefits at home? (I recognise that some advantages don't come directly from labour, but we do see this happen in low-skilled jobs). Even Ricardo recognised that labour mobility hurt his argument.

For what it's worth, I'm not saying that trade doesn't usually benefit both parties: I'm saying that _this argument_ isn't the smoking gun that demonstrates that fact.

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