5 ms·

This makes no sense. A person who studies medicine, knows what his comparative advantage is, or should be. A business that makes springs, knows where to focus t

by raj_o 10y ago

This makes no sense. A person who studies medicine, knows what his comparative advantage is, or should be. A business that makes springs, knows where to focus their energy in order to compete. The idea that a country doesn't know is because a country doesn't have an over-seeing rule-maker (a government) defining the rules of play. Outside of a regulatory framework, in modern economics, comparative advantage won't work. It will be those with the most power (derived from success or money or something else) will win. Those with the most resources wins. And yes those who can game the system will win. Otherwise you'd take the 'capital' out of capitalism. After all, who wouldn't capitalize over the stupidity of another country that let you take advantage of it? Outside of natural resources, can you please tell me how an area on this earth can have an advantage over another area. I am befuddled by this argument for free trade, in regards to countries.

snrplfth 10y ago
The point is that comparative advantage is discovered in the market. I may think that I'm the best at painting houses - and I may be better than most! - but in striving for the best gains I can, I may find that my comparative advantage in doing something else, something I'm more expert in, is greater. To wit, "what is the best use of my limited time?" An advantage can come out of any number of things - climate, location relative to a trade route, particular local demands or preferences, or just happenstance. As you note, comparative advantage is not just about whole countries, but also about regions, companies, and individuals - so that it's not just about an "area of earth" but about the variety of things that happen in each place. Comparative advantage is an argument that trade makes people (regions, cities, etc.) better off even if they have nothing they are the best at.
- sprafa 10y ago
  Markets and governments are necessarily linked. So even though you might "think" you are no good at painting houses, because you can't compete with foreign labor, actually what's happening is that their government has figured there is a huge multiplier for them to capture all the house painting work in your country, and therefore, they subsidise and protect their own house painters and help them in any they can. So that they can eventually force you out of the market. See China on consumer electronics, solar panels, etc. And if you say "but the perfect market wouldn't have any subsidies or aids" then you are living in a fantasy world made up by economists! They don't even have to subsidise, all they need to do is make it slightly easier for house painters to do their work there than anywhere else in the World, by easing legislation and lowering taxes. They will outcompete you just by following less laws and regulations and paying less tax. Because everyone ever has agreed that laws and tax should exist, you need to explain how "perfect" markets will ever exist. Again, look into China and it's the exact same thing. They don't need subsidies, they create Special Economic Zones. Anyway the idea that markets exist separate from governments is a fiction made up by economists. See "Debt the first 5000 years" on a description of how anthropologists have found that actually, the most common origin of a market is government intervention.
  - snrplfth 10y ago
    Well, I disagree with David Graeber on the very nature of money and exchange, so take that as you will. I'm well aware of the argument though. I don't think most economists have ever argued that markets exist outside frameworks of property rights and rules of trade. And while these things have often been laid out by governments, it does not necessarily mean that they always are, or always must be (where we take "government" to signify a usually-geographically-bounded entity with the monopoly of force.) Just the same, money has often been issued by governments, but does not necessarily mean that only governments can issue or create money. Markets exist wherever trade exists, and are shaped by governments - sometimes well, sometimes badly, and always within certain constraints of reality. As pertains to the supposed advantage of government support of industry - take a closer look at China. The most dynamic sectors of the economy there - in assembly and manufacturing - have been the least directly subsidized and encouraged. The big State Owned Enterprises, in steel, concrete, and other heavy industry insulated from competition, are the most saddled with debt and are not innovative and dynamic. The main effect of their subsidy to these industries is philanthropize everybody's consumption of their products. Sucks for the Chinese taxpayer, but everyone else gets cut-price goods. And you'll note that, even after getting "pseudo-monopolies" on various economic sectors, prices in those sectors have kept falling. The "drive-out-competitors-then-raise-prices" drama never seems to appear - and it's no surprise, because these companies are competing with each other.
    - sprafa 10y ago
      Is there any example of property rights existing without the monopoly of force by a government ?
      - snrplfth 10y ago
        I would say yes, historically and presently in various "unowned" regions like international waters and more importantly in "cross-border" exchanges where parties to a trade generate some system of property trust due to the fact that recourse to the government of the "other" country is impossible. (Here we get into the thorny question of whether self-defending individuals/organizations are themselves governments, and so forth.) But that's not the main point that most economists are making (except the rather unusual anarcho-capitalists like Rothbard and the like.) The point is that there are property rights that are more or less in accordance with certain aspects of reality, and attempts by governments (or indeed private actors) to enforce property rights at odds with physical and informational reality is going to cause serious problems. For example, if a system of property rights says that nobody can own title to exclusive use of land or water, then I've set up a system where the inevitability of needing to physically occupy some land or water conflicts with the impossibility of acquiring stable property in it. Conversely, if a system of property rights says that the first person to speak and claim a phrase owns all rights to it forever (like some super-copyright), then it's just made normal language extremely cumbersome. The primary point of economists in the whole Menger-Hayek-Mises-Hazlitt meta-tradition is that while a government of some kind is probably inevitable, it should recognize that appropriate property rights depend on certain properties of the things themselves, and not arbitrarily defined by the government. (This is a sort of compact way of saying "property rights need to be defined differently between private goods, public goods, club goods and pool goods, due to their actual physical differences.)

by raj_o 10y ago

snrplfth 10y ago

The point is that comparative advantage is discovered in the market. I may think that I'm the best at painting houses - and I may be better than most! - but in striving for the best gains I can, I may find that my comparative advantage in doing something else, something I'm more expert in, is greater. To wit, "what is the best use of my limited time?" An advantage can come out of any number of things - climate, location relative to a trade route, particular local demands or preferences, or just happenstance. As you note, comparative advantage is not just about whole countries, but also about regions, companies, and individuals - so that it's not just about an "area of earth" but about the variety of things that happen in each place. Comparative advantage is an argument that trade makes people (regions, cities, etc.) better off even if they have nothing they are the best at.

sprafa 10y ago
Markets and governments are necessarily linked. So even though you might "think" you are no good at painting houses, because you can't compete with foreign labor, actually what's happening is that their government has figured there is a huge multiplier for them to capture all the house painting work in your country, and therefore, they subsidise and protect their own house painters and help them in any they can. So that they can eventually force you out of the market. See China on consumer electronics, solar panels, etc. And if you say "but the perfect market wouldn't have any subsidies or aids" then you are living in a fantasy world made up by economists! They don't even have to subsidise, all they need to do is make it slightly easier for house painters to do their work there than anywhere else in the World, by easing legislation and lowering taxes. They will outcompete you just by following less laws and regulations and paying less tax. Because everyone ever has agreed that laws and tax should exist, you need to explain how "perfect" markets will ever exist. Again, look into China and it's the exact same thing. They don't need subsidies, they create Special Economic Zones. Anyway the idea that markets exist separate from governments is a fiction made up by economists. See "Debt the first 5000 years" on a description of how anthropologists have found that actually, the most common origin of a market is government intervention.
- snrplfth 10y ago
  Well, I disagree with David Graeber on the very nature of money and exchange, so take that as you will. I'm well aware of the argument though. I don't think most economists have ever argued that markets exist outside frameworks of property rights and rules of trade. And while these things have often been laid out by governments, it does not necessarily mean that they always are, or always must be (where we take "government" to signify a usually-geographically-bounded entity with the monopoly of force.) Just the same, money has often been issued by governments, but does not necessarily mean that only governments can issue or create money. Markets exist wherever trade exists, and are shaped by governments - sometimes well, sometimes badly, and always within certain constraints of reality. As pertains to the supposed advantage of government support of industry - take a closer look at China. The most dynamic sectors of the economy there - in assembly and manufacturing - have been the least directly subsidized and encouraged. The big State Owned Enterprises, in steel, concrete, and other heavy industry insulated from competition, are the most saddled with debt and are not innovative and dynamic. The main effect of their subsidy to these industries is philanthropize everybody's consumption of their products. Sucks for the Chinese taxpayer, but everyone else gets cut-price goods. And you'll note that, even after getting "pseudo-monopolies" on various economic sectors, prices in those sectors have kept falling. The "drive-out-competitors-then-raise-prices" drama never seems to appear - and it's no surprise, because these companies are competing with each other.
  - sprafa 10y ago
    Is there any example of property rights existing without the monopoly of force by a government ?
    - snrplfth 10y ago
      I would say yes, historically and presently in various "unowned" regions like international waters and more importantly in "cross-border" exchanges where parties to a trade generate some system of property trust due to the fact that recourse to the government of the "other" country is impossible. (Here we get into the thorny question of whether self-defending individuals/organizations are themselves governments, and so forth.) But that's not the main point that most economists are making (except the rather unusual anarcho-capitalists like Rothbard and the like.) The point is that there are property rights that are more or less in accordance with certain aspects of reality, and attempts by governments (or indeed private actors) to enforce property rights at odds with physical and informational reality is going to cause serious problems. For example, if a system of property rights says that nobody can own title to exclusive use of land or water, then I've set up a system where the inevitability of needing to physically occupy some land or water conflicts with the impossibility of acquiring stable property in it. Conversely, if a system of property rights says that the first person to speak and claim a phrase owns all rights to it forever (like some super-copyright), then it's just made normal language extremely cumbersome. The primary point of economists in the whole Menger-Hayek-Mises-Hazlitt meta-tradition is that while a government of some kind is probably inevitable, it should recognize that appropriate property rights depend on certain properties of the things themselves, and not arbitrarily defined by the government. (This is a sort of compact way of saying "property rights need to be defined differently between private goods, public goods, club goods and pool goods, due to their actual physical differences.)