10 ms·

Money Out of Nowhere: How Internet Marketplaces Unlock Economic Wealth

148 points by gmishuris 8y ago

deogeo 8y ago
> "What Ricardo proved mathematically, is that if one country has simply a comparative advantage (not even an absolute one), it still is in everyone’s best interest to embrace specialization and free trade. [...] It is quite bizarre to see modern day politicians throw caution to the wind and ignore these fundamental tenants of economic science." Good old mathematical proof with spherical cows in a frictionless vacuum. Should be complemented with some empiricism. From https://en.wikipedia.org/wiki/Comparative_advantage#Criticism https://en.wikipedia.org/wiki/Comparative_advantage#Criticis...: "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."
- asnrk 8y ago
  I don't get why people name-drop Ricardo as the final authority on why free trade, in practice, is definitely in everyone's best interest. Ricardo's work was very narrow and didn't have much to say about the distribution of gains from free trade even under the conditions in which his work held.
  - barbecue_sauce 8y ago
    My best friend is an economics PhD. He often laments on the fact that the average college-educated person has enough Economics exposure to make glib, dismissive comments like "That's Economics 101" or reference early economic thinkers, when Economics is really a broad, constantly-evolving field that is much more complex and nuanced than the GER courses would lead you to believe.
    - sharemywin 8y ago
      But, that's partially because that's the way its taught.
    - jgeada 8y ago
      It isn't particularly helpful that economics as a discipline seems to have the same predictive value as soothsayers and court jesters(). Mostly economic theory in the western world is used as a cudgel to justify particular policies that benefit a few at the expense of many. () eg: all the following were justified by "economists": trickle down economics were promised to increase middle class (nope), prediction of inflation caused by quantitative easement (hasn't happened yet), devaluation of dollar due to trade deficit (hasn't happened yet), gains in tax revenues by unlocking growth through tax cuts (nope), etc ...
      - RHSeeger 8y ago
        > It isn't particularly helpful that economics as a discipline seems to have the same predictive value as soothsayers and court jesters That's a wonderful quote. Thank you for that.
      - rhizome 8y ago
        Everything with an -ism suffix is ideological.
        azangru 8y ago
        Botulism?
        dredmorbius 8y ago
        Etymooicaly, yes, actually: https://www.etymonline.com/word/botulism https://www.etymonline.com/word/botulism
      - barbecue_sauce 8y ago
        You're right, and, as a self-hating economist, I think he would agree with most of what you said. Here are his thoughts on supply-side "trickle-down" economics: "It's basically what happens when a college sophomore attends the first 8 weeks of an intro macro course and is like, 'ok, I've heard enough. I'm going to go write policy now'." It makes sense in the context of basic economic theory devoid of complication introduced later, but no legitimate economists still believe in supply-side economics and very few did to begin with. The powers that be reached for, and continue to reach for, economic theory that supports their agenda; they don't look for consensus in the academic community.
    - Mirioron 8y ago
      The problem with economics is that you can't tell which parts you can take seriously and which parts you can't. Both sides of the argument tend to offer a lot of criticism to the other side and it's not obvious which side is politically motivated or stands to gain from a specific policy and which side is doing it because it would be a net positive to society. There are many people who think socialism will be better than our current economic system and many of these people even have political power.
- harimau777 8y ago
  It seems like what's missing is that being in "everyone's" best interest isn't the same as being in "every individual's" best interest. I don't know enough to say about this situation specifically, but something that helps society as a whole could still hurt a large segment of society.
  - jpollock 8y ago
    Nothing a society does is in every individual's best interest. The question tends to end up - are the costs and benefits diffuse or focused. Focused costs tend to be negatives (loud complaints from small groups), and diffuse benefits aren't perceived. Free trade (at the start) is a diffuse benefit, and a focused injury. It's like arguing for action on climate change.
  - blotter_paper 8y ago
    I think it's actually the other way around. Ricardo's models show that individuals stand to gain from trading with individuals who have different opportunity costs, and at least in simplified scenarios it seems to check out. It's when you look at the bigger picture that things get tricky. Does country A want to rely on country B for oil/food/weapons/whatever-else-they-need-to-survive? That could cause issues. Are imports causing competition with a fledgling segment of your economy that you want to become competitive on the global stage, but which isn't yet? Maybe importing massive amounts of cheap electronics today will prevent you from becoming a major exporter of electronics in the future, because local investment of time and money will be directed elsewhere; maybe this is fine, and maybe it isn't, depending on your goals. There are reasons to block trade that don't have to do with immediate efficiency. Absent of these reasons, Ricardo (sadly) seems to be mostly correct. Edit: "the other way around" isn't quite right, I thought you were making a point besides the one you were actually making. Hurpadurpa.
    - devoply 8y ago
      If you want to ever have a chance to progress and develop your economy then these criticisms are everything. On the other hand if you have a developed economy and already lead in many sectors then you can follow these sorts of rules and still be fine. The point of this as ideology is simply to try to cement the "natural" order of things. It's failed mostly because of work of heterodox economists from the countries effected negatively by such ideology like South Korea.
- scottlocklin 8y ago
  The Wiki page is pretty good, but there are simply vast lacunae in this idea. For example: https://www.nber.org/papers/w5625 https://www.nber.org/papers/w5625 Economists treat it like it was a proof, but it wasn't; it's a sort of shaggy dog story in service of an ideology.
  - devoply 8y ago
    Well you want people you have making clothes for $2/hr to believe economic nonsense like that.
    - barry-cotter 8y ago
      Those people don’t know anything about comparitive advantage. They just know that working in a sweatshop pays better than working on a subsistence farm, which is their other option.
      - Mirioron 8y ago
        They also know that working indoors on manufacturing is an easier job than farming. Farming is one of the more dangerous professions even.
- lazyjones 8y ago
  Don’t be so dismissive, we all know everyone buys Wine only from the one country where it’s cheapest to make. /s
- barry-cotter 8y ago
  Hong Kong did. It went from being a bombed out port with no natural resources and 3m people to a first world country in less than 50 years while taking in millions of refugees with unilateral free trade. If you want to learn more read Architect of Prosperity. http://sir-john-cowperthwaite.com/ http://sir-john-cowperthwaite.com/
  - ABCLAW 8y ago
    I think it might have had to do more with being the logistics hub of the largest empire in the world, with an influx of that empire's capital for a century. Capital favouring policies seem to work great for capital - if you have capital.
    - barry-cotter 8y ago
      Hong Kong was always an afterthought in the British Enpire. It was never important when they had India, which they actually cared about and which was gone in 1947. Hong Kong was also less important in terms of trade than Shanghai was, that’s why HSBC, the Hong Kong and Shanghai Banking Corporation, was headquartered in Shanghai until shortly before the communist takeover. Hong Kong was not the logistics hub of an empire after WWII. It was the remnant of one, a place that had never been important before and wasn’t a priority to anyone in the metropole. Capital favouring policy work great for people who live anywhere with rule of law and security of contract. If you do that you can go from bombed out war zone poverty to the first world in one lifetime, as South Korea, Japan, Singapore and Hong Kong all did. Hong Kong’s importance is on showing that industrial policy and tariffs are completely unnecessary to that process.
      - boomboomsubban 8y ago
        >Hong Kong was not the logistics hub of an empire after WWII. It was the remnant of one, a place that had never been important before and wasn’t a priority to anyone in the metropole. Hong Kong is situated at the mouth of the Pearl River Valley, one of the most densely populated areas in the world. Important enough that the UK fought two wars to maintain the territory, and it benefited tremendously from being a border city during the Cold War.
- Ozzie_osman 8y ago
  This! Ricardo's model assumes that every country stays at the same level of productivity. In reality sometimes it makes sense to protect industries a little so they can develop. That said, free trade works better 90% of the time (even outside the simplistic in-a-vacuum model).
- antidesitter 8y ago
  Key paragraph in your link: However, the overwhelming consensus of the economics profession remains that while these arguments are theoretically valid under certain assumptions, these assumptions do not usually hold and should not be used to guide trade policy. Gregory Mankiw, chairman of the Harvard Economics Department, has said: ″Few propositions command as much consensus among professional economists as that open world trade increases economic growth and raises living standards.″ It's sad to have to rehash this every time people on HN who've never studied economics figure they're experts on the subject, much like happens with climate change denialists, so I'll have to repeat it again. There is an overwhelming consensus among people who study the subject that protectionism has a negative effect on economic growth and economic welfare [1][2][3][4][5][6]. Even economists who lean interventionist like Paul Krugman strongly agree, and have tried time and time again to explain why free trade is a good thing to an ignorant public. It is shameful that so many people feel obligated to opine strongly on a subject which they don't understand, causing bad policies to be enacted. Protectionism makes society worse off. It makes the world poorer. [1] https://www.nytimes.com/2015/04/26/upshot/economists-actually-agree-on-this-point-the-wisdom-of-free-trade.html https://www.nytimes.com/2015/04/26/upshot/economists-actuall... [2] https://research.stlouisfed.org/publications/review/2004/09/01/free-trade-why-are-economists-and-noneconomists-so-far-apart https://research.stlouisfed.org/publications/review/2004/09/... [3] https://www.jstor.org/stable/2117691 https://www.jstor.org/stable/2117691 [4] http://www.igmchicago.org/surveys/free-trade http://www.igmchicago.org/surveys/free-trade [5] http://www.igmchicago.org/surveys/import-duties http://www.igmchicago.org/surveys/import-duties [6] http://www.igmchicago.org/surveys/trade-within-europe http://www.igmchicago.org/surveys/trade-within-europe
  - deogeo 8y ago
    So we can go with a mix of trade and protectionism, which has been proven to build a nations economy multiple times, or we can risk it and go with what economists assure us works even better? And do their assurances only work if everyone adopts unbiased free trade, and break down when a group favors its own, such as shown in http://jasss.soc.surrey.ac.uk/16/3/7.html http://jasss.soc.surrey.ac.uk/16/3/7.html ?
- tha_nose 8y ago
  That's because all of those countries adopted US economic model of development ( aka protectionism ). We used protectionism to protect our industries and helped them grow. https://en.wikipedia.org/wiki/Protectionism_in_the_United_States https://en.wikipedia.org/wiki/Protectionism_in_the_United_St...
cryoshon 8y ago
i agree with the general trend that new platforms drive new growth, which is great. but they don't necessarily work out for the participants in the platforms, and in fact the very platforms themselves can be highly exploitative depending on how people engage with them. example: uber is a marketplace for transferring illiquid wealth assets from drivers to uber itself, along with a fraction of the revenues from each ride. put differently, uber may be making its drivers poorer in an abstract way which they may not understand because they are being paid for the labor required to extract value from their vehicle. another example: freelancing platforms. everyone knows that these platforms depress wages for the freelancers and are a race to the bottom. businesses can grow more because labor costs less on the platform than off of the platform, and they can expect the platform to handle the infrastructure of paying and managing the labor to an extent. but freelancers on the platform could almost certainly make more money if they weren't on the platform because then they wouldn't be competing with as many others for a given opportunity. sure, some people make it work. but on average, people earn far less and expectations are much higher.
- Scoundreller 8y ago
  > uber is a marketplace for transferring illiquid wealth assets from drivers to uber itself, along with a fraction of the revenues from each ride The same could be said of the taxi medallion system. Low-income drivers with illiquid value for their time, with most of the value going to medallion owners, car owners and dispatchers.
- wutbrodo 8y ago
  > uber is a marketplace for transferring illiquid wealth assets from drivers to uber itself, along with a fraction of the revenues from each ride. I feel like I'm of two minds about this, as all of the pieces from rags like the NYT use analyses that assign 100% of the depreciation of the car to driving, which is obviously absurd: your car loses something like half it's value the minute you drive it off the lot. For some reason, none of the analyses I've seen attempt to address this (in fairness, it's probably pretty difficult). The upshot is the difference between unlocking wealth that was going to be unlocked anyway, and unlocking wealth that was going to be wasted. A person's car is a criminally underutilized asset (from both a personal finance and a societal perspective), and increasing its utilization so you get more value out of it during its trip from full value to $0 is a concrete gain for both society and the Uber driver (and along the way, passengers and Uber itself). The dynamic you describe is certainly a factor too; It seems to me to be an open question how big a component of an Uber ride's value each of these is. At any rate, I don't think your confident assertion that being an Uber driver is simply giving up your liquid asset value is warranted.
jondubois 8y ago
>> The second, and less discussed, requirement is for the two parties that should trade to be aware of one another’s goods or services. >> Fortunately, the rise of the Internet, and specifically Internet marketplace models, act as accelerants to the productivity benefits of the division of labour AND comparative advantage by reducing information asymmetry and increasing the likelihood of a perfect match with regard to the exchange of goods or services. That is false. Maybe it was the case at the beginning, but now with a small number of big gatekeepers like Google, Amazon and Facebook, the internet actually increases information asymmetry. Mostly by concentrating user attention to a small number of companies/products and thereby encouraging herd mentality and distracting users away from real value which would make their lives better.
- holoduke 8y ago
  They basically represent sperate countries. Without any anti monopoly rules and other regulations we have constructed last 400 years to make the business landscape a healthy one. It's sad to see these giants taking over entire markets and collect insane cuts
  - deleted 8y ago
    [deleted]
  - edmundsauto 8y ago
    Another perspective is that they created those markets, so this is a way to recoup that (heavily risky) investment. They survived and are collecting the spoils of a million failed marketplaces.
- soared 8y ago
  What? That makes literally no sense at all. The author is comparing a world with the internet to one without. Attention is nowhere near concentrated on a small number of products. Google, facebook, and amazon are ALL networks that connect users to info. Not a single one of those is a product or is even capable of 'herding' attention.
  - 8y ago
ip26 8y ago
Does anyone else ever get the feeling that popular terms & phrases for this subject, e.g. "unlock value", strike that perfect balance of vaguery and reverence as to evoke a cargo cult?
- adamisom 8y ago
  Yes. It's also just a cliche word--I wonder what a better one would be: "open up" value/wealth? Too clunky.
- wutbrodo 8y ago
  Is it vague? I've always taken it to refer to a Kaldor-Hicks improvement, ie positive-sum, which is very well-defined (though of course, as with everything utility-related difficult to measure). It never even occurred to me that it would mean something else.
  - ip26 8y ago
    I understand there's real economics in the background, and plenty of earnest & legitimate economists. But sometimes when I read the pundits, I can't help but hear Jack D. Ripper in my head. A foreign substance is introduced into our precious bodily fluids without the knowledge of the individual, and certainly without any choice. That's the way your hard-core Commie works. I first became aware of it, Mandrake, during the physical act of love... Yes, a profound sense of fatigue, a feeling of emptiness followed. Luckily I — I was able to interpret these feelings correctly. Loss of essence. I can assure you it has not recurred, Mandrake. Women, er, women sense my power, and they seek the life essence. (Dr. Strangelove) I realize the above has nothing to do with economics, but it strikes me as the same mystical thinking, specific-yet-vague phrases, and reverence. Exaggerated, yes, but it's satire.
- hitekker 8y ago
  Good catch. The phrase does indeed suggest a metaphorical treasure chest, filled with riches that we can reap if we only just use the key that the author promotes. The thought-terminating cliche "Money Out of Nowhere" reinforces that deception, as though the title was drawn from the self-help or the MLM industry. Finally, the website name: "Above the crowd". Yuck. An article written by the fatuous, for the fatuous.
clairity 8y ago
the "money from nowhere" phrase is a bit disingenious. in many cases, money is being redirected from an old industry into the new marketplace--from taxis to uber, from hotels to airbnb, from recruiters to indeed, etc. sure, there is some incremental added value that's "new money", but unless it also generates new jobs to employ the un-/under-employed, that money is being funneled from another part of the economy (like being extracted from family savings or materialized through loans). and information asymmetries aren't being destroyed, so much as concentrated in the marketplace to extract rents (e.g., uber's opaque pricing). and while free trade "works" in a homogenous steady-state global economy, we're not there yet. there are a lot of dynamics (i.e., economic, social and political disparities) to work through before that happens.
- forrestthewoods 8y ago
  Wealth isn’t zero-sum. The world is radically richer compared to 30 years ago.
  - moosey 8y ago
    Wealth is zero-sum. We've just been ignoring the ecological impacts of our economy since the industrial revolution. I think that the true mark of wealth is the amount of high density energy you can use: Those private jets, huge homes, yachts, etc. require massive quantities of energy to use. Should the human race decide to fight climate change, for real, then it will be one of the greatest wealth equalizers of all time: we'll all end up a good deal 'poorer' than we were before.
    - matt4077 8y ago
      You're describing something, but it isn't "wealth". Or, if it is, it's useless. And if wealth is zero-sum, how can we "all end up a good deal 'poorer' than we were before."? NB: that whole sentence seems to be missing an odd number of negations. But here's an indicator you'll like: "Energy Intensity" is, basically, production / energy usage. This was surprisingly stable over most of the 20th century, lending some support to the gist of your objection. But, two good news: (1) it's now on a definitive downward trend, proving that thinking does produce value (yeah!). And (2) renewable energy is rising, meaning that energy usage is now decoupling from the harms you allude to (CO_2 et al).
carapace 8y ago
Here's one that I'd like to do but lack the time/commitment: Movie theaters, movies, moviegoers... Connect them on a platform that accepts data about customers' available movie nights and preferences, and then allocates movies and moviegoers to available theaters. As a user, you'd enter the dates and times you want to see a movie, the theaters you prefer, and which movies you want to see, and the system presents you with a menu of options. Theater owners would get full(er) houses; movie studios could get feedback about audience preferences; and it would make it much easier to go see the movies you want. Neat, eh?
- elliekelly 8y ago
  That is (perhaps was?) the premise behind MoviePass's long-term business plan.
  - carapace 8y ago
    ..oh, der.
zackmorris 8y ago
Since it's Friday, how about a little devil's advocate. Does anyone here ever think about alternative economic systems similar to getting rid of money, like what the Federation does on Star Trek? Why hasn't an online group (similar to a utopia) formed where members contribute a portion of their incomes and receive a UBI? A single unicorn could pay everyone to work on unrelated projects and solve real global problems. I'm not really driven by money. I work more for the betterment of society, to help important projects that could change the world, to help others start their careers, and for self-actualization, or to not have to work someday, things like that. If I had solar panels on my roof and a little robotic hydroponic garden in my backyard, there's not a whole lot else I would need from the world. I might consider putting the bulk of my income into a pool for everyone if it meant that I could finally be left alone to research and invent on my own and make a larger contribution to society than the narrow goals that capitalism has for my skills.
- dlg 8y ago
  There's a (relatively new) book, Radical Markets[0] by Eric Posner and Glen Weyl that looks at how mechanisms for this might actually work in practice. Core to their argument is that most things we care about in society have increasing returns to scale so that under our current system we systematically under-allocate and mis-allocate to public goods. While I disagree with a lot of it in practice, I highly recommend reading it if you're thinking the way the parent comment of this comment does. [0] https://www.amazon.com/Radical-Markets-Uprooting-Capitalism-Democracy/dp/0691177503 https://www.amazon.com/Radical-Markets-Uprooting-Capitalism-...
  - selimthegrim 8y ago
    Was this the Eric Posner who was suggesting adopting immigrants?
    - matt4077 8y ago
      That does sound like him. Posner is probably best known for (a) suggesting an open market for babies, and (b) being one of the smartest humans of our era. He's a Chicago School market-mechanisms fetishist, but a reasonable one believing in the necessity of regulations to tackle externalities and anti-trust. His writings sit in that perfect spot where I instantly notice the author is way smarter than me, but can still understand the jokes.
maehwasu 8y ago
Heuristic: if your premise contains the phrase "Ricardo proved mathematically", your conclusion is likely fucked.
mlamat 8y ago
You had me until Thomas Friedman.

148 points by gmishuris 8y ago

> "What Ricardo proved mathematically, is that if one country has simply a comparative advantage (not even an absolute one), it still is in everyone’s best interest to embrace specialization and free trade. [...] It is quite bizarre to see modern day politicians throw caution to the wind and ignore these fundamental tenants of economic science." Good old mathematical proof with spherical cows in a frictionless vacuum. Should be complemented with some empiricism. From https://en.wikipedia.org/wiki/Comparative_advantage#Criticism https://en.wikipedia.org/wiki/Comparative_advantage#Criticis...: "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."

asnrk 8y ago
I don't get why people name-drop Ricardo as the final authority on why free trade, in practice, is definitely in everyone's best interest. Ricardo's work was very narrow and didn't have much to say about the distribution of gains from free trade even under the conditions in which his work held.
- barbecue_sauce 8y ago
  My best friend is an economics PhD. He often laments on the fact that the average college-educated person has enough Economics exposure to make glib, dismissive comments like "That's Economics 101" or reference early economic thinkers, when Economics is really a broad, constantly-evolving field that is much more complex and nuanced than the GER courses would lead you to believe.
  - sharemywin 8y ago
    But, that's partially because that's the way its taught.
  - jgeada 8y ago
    It isn't particularly helpful that economics as a discipline seems to have the same predictive value as soothsayers and court jesters(). Mostly economic theory in the western world is used as a cudgel to justify particular policies that benefit a few at the expense of many. () eg: all the following were justified by "economists": trickle down economics were promised to increase middle class (nope), prediction of inflation caused by quantitative easement (hasn't happened yet), devaluation of dollar due to trade deficit (hasn't happened yet), gains in tax revenues by unlocking growth through tax cuts (nope), etc ...
    - RHSeeger 8y ago
      > It isn't particularly helpful that economics as a discipline seems to have the same predictive value as soothsayers and court jesters That's a wonderful quote. Thank you for that.
    - rhizome 8y ago
      Everything with an -ism suffix is ideological.
      - azangru 8y ago
        Botulism?
        dredmorbius 8y ago
        Etymooicaly, yes, actually: https://www.etymonline.com/word/botulism https://www.etymonline.com/word/botulism
    - barbecue_sauce 8y ago
      You're right, and, as a self-hating economist, I think he would agree with most of what you said. Here are his thoughts on supply-side "trickle-down" economics: "It's basically what happens when a college sophomore attends the first 8 weeks of an intro macro course and is like, 'ok, I've heard enough. I'm going to go write policy now'." It makes sense in the context of basic economic theory devoid of complication introduced later, but no legitimate economists still believe in supply-side economics and very few did to begin with. The powers that be reached for, and continue to reach for, economic theory that supports their agenda; they don't look for consensus in the academic community.
  - Mirioron 8y ago
    The problem with economics is that you can't tell which parts you can take seriously and which parts you can't. Both sides of the argument tend to offer a lot of criticism to the other side and it's not obvious which side is politically motivated or stands to gain from a specific policy and which side is doing it because it would be a net positive to society. There are many people who think socialism will be better than our current economic system and many of these people even have political power.
harimau777 8y ago
It seems like what's missing is that being in "everyone's" best interest isn't the same as being in "every individual's" best interest. I don't know enough to say about this situation specifically, but something that helps society as a whole could still hurt a large segment of society.
- jpollock 8y ago
  Nothing a society does is in every individual's best interest. The question tends to end up - are the costs and benefits diffuse or focused. Focused costs tend to be negatives (loud complaints from small groups), and diffuse benefits aren't perceived. Free trade (at the start) is a diffuse benefit, and a focused injury. It's like arguing for action on climate change.
- blotter_paper 8y ago
  I think it's actually the other way around. Ricardo's models show that individuals stand to gain from trading with individuals who have different opportunity costs, and at least in simplified scenarios it seems to check out. It's when you look at the bigger picture that things get tricky. Does country A want to rely on country B for oil/food/weapons/whatever-else-they-need-to-survive? That could cause issues. Are imports causing competition with a fledgling segment of your economy that you want to become competitive on the global stage, but which isn't yet? Maybe importing massive amounts of cheap electronics today will prevent you from becoming a major exporter of electronics in the future, because local investment of time and money will be directed elsewhere; maybe this is fine, and maybe it isn't, depending on your goals. There are reasons to block trade that don't have to do with immediate efficiency. Absent of these reasons, Ricardo (sadly) seems to be mostly correct. Edit: "the other way around" isn't quite right, I thought you were making a point besides the one you were actually making. Hurpadurpa.
  - devoply 8y ago
    If you want to ever have a chance to progress and develop your economy then these criticisms are everything. On the other hand if you have a developed economy and already lead in many sectors then you can follow these sorts of rules and still be fine. The point of this as ideology is simply to try to cement the "natural" order of things. It's failed mostly because of work of heterodox economists from the countries effected negatively by such ideology like South Korea.
scottlocklin 8y ago
The Wiki page is pretty good, but there are simply vast lacunae in this idea. For example: https://www.nber.org/papers/w5625 https://www.nber.org/papers/w5625 Economists treat it like it was a proof, but it wasn't; it's a sort of shaggy dog story in service of an ideology.
- devoply 8y ago
  Well you want people you have making clothes for $2/hr to believe economic nonsense like that.
  - barry-cotter 8y ago
    Those people don’t know anything about comparitive advantage. They just know that working in a sweatshop pays better than working on a subsistence farm, which is their other option.
    - Mirioron 8y ago
      They also know that working indoors on manufacturing is an easier job than farming. Farming is one of the more dangerous professions even.
lazyjones 8y ago
Don’t be so dismissive, we all know everyone buys Wine only from the one country where it’s cheapest to make. /s
barry-cotter 8y ago
Hong Kong did. It went from being a bombed out port with no natural resources and 3m people to a first world country in less than 50 years while taking in millions of refugees with unilateral free trade. If you want to learn more read Architect of Prosperity. http://sir-john-cowperthwaite.com/ http://sir-john-cowperthwaite.com/
- ABCLAW 8y ago
  I think it might have had to do more with being the logistics hub of the largest empire in the world, with an influx of that empire's capital for a century. Capital favouring policies seem to work great for capital - if you have capital.
  - barry-cotter 8y ago
    Hong Kong was always an afterthought in the British Enpire. It was never important when they had India, which they actually cared about and which was gone in 1947. Hong Kong was also less important in terms of trade than Shanghai was, that’s why HSBC, the Hong Kong and Shanghai Banking Corporation, was headquartered in Shanghai until shortly before the communist takeover. Hong Kong was not the logistics hub of an empire after WWII. It was the remnant of one, a place that had never been important before and wasn’t a priority to anyone in the metropole. Capital favouring policy work great for people who live anywhere with rule of law and security of contract. If you do that you can go from bombed out war zone poverty to the first world in one lifetime, as South Korea, Japan, Singapore and Hong Kong all did. Hong Kong’s importance is on showing that industrial policy and tariffs are completely unnecessary to that process.
    - boomboomsubban 8y ago
      >Hong Kong was not the logistics hub of an empire after WWII. It was the remnant of one, a place that had never been important before and wasn’t a priority to anyone in the metropole. Hong Kong is situated at the mouth of the Pearl River Valley, one of the most densely populated areas in the world. Important enough that the UK fought two wars to maintain the territory, and it benefited tremendously from being a border city during the Cold War.
Ozzie_osman 8y ago
This! Ricardo's model assumes that every country stays at the same level of productivity. In reality sometimes it makes sense to protect industries a little so they can develop. That said, free trade works better 90% of the time (even outside the simplistic in-a-vacuum model).
antidesitter 8y ago
Key paragraph in your link: However, the overwhelming consensus of the economics profession remains that while these arguments are theoretically valid under certain assumptions, these assumptions do not usually hold and should not be used to guide trade policy. Gregory Mankiw, chairman of the Harvard Economics Department, has said: ″Few propositions command as much consensus among professional economists as that open world trade increases economic growth and raises living standards.″ It's sad to have to rehash this every time people on HN who've never studied economics figure they're experts on the subject, much like happens with climate change denialists, so I'll have to repeat it again. There is an overwhelming consensus among people who study the subject that protectionism has a negative effect on economic growth and economic welfare [1][2][3][4][5][6]. Even economists who lean interventionist like Paul Krugman strongly agree, and have tried time and time again to explain why free trade is a good thing to an ignorant public. It is shameful that so many people feel obligated to opine strongly on a subject which they don't understand, causing bad policies to be enacted. Protectionism makes society worse off. It makes the world poorer. [1] https://www.nytimes.com/2015/04/26/upshot/economists-actually-agree-on-this-point-the-wisdom-of-free-trade.html https://www.nytimes.com/2015/04/26/upshot/economists-actuall... [2] https://research.stlouisfed.org/publications/review/2004/09/01/free-trade-why-are-economists-and-noneconomists-so-far-apart https://research.stlouisfed.org/publications/review/2004/09/... [3] https://www.jstor.org/stable/2117691 https://www.jstor.org/stable/2117691 [4] http://www.igmchicago.org/surveys/free-trade http://www.igmchicago.org/surveys/free-trade [5] http://www.igmchicago.org/surveys/import-duties http://www.igmchicago.org/surveys/import-duties [6] http://www.igmchicago.org/surveys/trade-within-europe http://www.igmchicago.org/surveys/trade-within-europe
- deogeo 8y ago
  So we can go with a mix of trade and protectionism, which has been proven to build a nations economy multiple times, or we can risk it and go with what economists assure us works even better? And do their assurances only work if everyone adopts unbiased free trade, and break down when a group favors its own, such as shown in http://jasss.soc.surrey.ac.uk/16/3/7.html http://jasss.soc.surrey.ac.uk/16/3/7.html ?
tha_nose 8y ago
That's because all of those countries adopted US economic model of development ( aka protectionism ). We used protectionism to protect our industries and helped them grow. https://en.wikipedia.org/wiki/Protectionism_in_the_United_States https://en.wikipedia.org/wiki/Protectionism_in_the_United_St...

cryoshon 8y ago

i agree with the general trend that new platforms drive new growth, which is great. but they don't necessarily work out for the participants in the platforms, and in fact the very platforms themselves can be highly exploitative depending on how people engage with them. example: uber is a marketplace for transferring illiquid wealth assets from drivers to uber itself, along with a fraction of the revenues from each ride. put differently, uber may be making its drivers poorer in an abstract way which they may not understand because they are being paid for the labor required to extract value from their vehicle. another example: freelancing platforms. everyone knows that these platforms depress wages for the freelancers and are a race to the bottom. businesses can grow more because labor costs less on the platform than off of the platform, and they can expect the platform to handle the infrastructure of paying and managing the labor to an extent. but freelancers on the platform could almost certainly make more money if they weren't on the platform because then they wouldn't be competing with as many others for a given opportunity. sure, some people make it work. but on average, people earn far less and expectations are much higher.

Scoundreller 8y ago
> uber is a marketplace for transferring illiquid wealth assets from drivers to uber itself, along with a fraction of the revenues from each ride The same could be said of the taxi medallion system. Low-income drivers with illiquid value for their time, with most of the value going to medallion owners, car owners and dispatchers.
wutbrodo 8y ago
> uber is a marketplace for transferring illiquid wealth assets from drivers to uber itself, along with a fraction of the revenues from each ride. I feel like I'm of two minds about this, as all of the pieces from rags like the NYT use analyses that assign 100% of the depreciation of the car to driving, which is obviously absurd: your car loses something like half it's value the minute you drive it off the lot. For some reason, none of the analyses I've seen attempt to address this (in fairness, it's probably pretty difficult). The upshot is the difference between unlocking wealth that was going to be unlocked anyway, and unlocking wealth that was going to be wasted. A person's car is a criminally underutilized asset (from both a personal finance and a societal perspective), and increasing its utilization so you get more value out of it during its trip from full value to $0 is a concrete gain for both society and the Uber driver (and along the way, passengers and Uber itself). The dynamic you describe is certainly a factor too; It seems to me to be an open question how big a component of an Uber ride's value each of these is. At any rate, I don't think your confident assertion that being an Uber driver is simply giving up your liquid asset value is warranted.

jondubois 8y ago

>> The second, and less discussed, requirement is for the two parties that should trade to be aware of one another’s goods or services. >> Fortunately, the rise of the Internet, and specifically Internet marketplace models, act as accelerants to the productivity benefits of the division of labour AND comparative advantage by reducing information asymmetry and increasing the likelihood of a perfect match with regard to the exchange of goods or services. That is false. Maybe it was the case at the beginning, but now with a small number of big gatekeepers like Google, Amazon and Facebook, the internet actually increases information asymmetry. Mostly by concentrating user attention to a small number of companies/products and thereby encouraging herd mentality and distracting users away from real value which would make their lives better.

holoduke 8y ago
They basically represent sperate countries. Without any anti monopoly rules and other regulations we have constructed last 400 years to make the business landscape a healthy one. It's sad to see these giants taking over entire markets and collect insane cuts
- deleted 8y ago
  [deleted]
- edmundsauto 8y ago
  Another perspective is that they created those markets, so this is a way to recoup that (heavily risky) investment. They survived and are collecting the spoils of a million failed marketplaces.
soared 8y ago
What? That makes literally no sense at all. The author is comparing a world with the internet to one without. Attention is nowhere near concentrated on a small number of products. Google, facebook, and amazon are ALL networks that connect users to info. Not a single one of those is a product or is even capable of 'herding' attention.
- 8y ago

ip26 8y ago

Does anyone else ever get the feeling that popular terms & phrases for this subject, e.g. "unlock value", strike that perfect balance of vaguery and reverence as to evoke a cargo cult?

adamisom 8y ago
Yes. It's also just a cliche word--I wonder what a better one would be: "open up" value/wealth? Too clunky.
wutbrodo 8y ago
Is it vague? I've always taken it to refer to a Kaldor-Hicks improvement, ie positive-sum, which is very well-defined (though of course, as with everything utility-related difficult to measure). It never even occurred to me that it would mean something else.
- ip26 8y ago
  I understand there's real economics in the background, and plenty of earnest & legitimate economists. But sometimes when I read the pundits, I can't help but hear Jack D. Ripper in my head. A foreign substance is introduced into our precious bodily fluids without the knowledge of the individual, and certainly without any choice. That's the way your hard-core Commie works. I first became aware of it, Mandrake, during the physical act of love... Yes, a profound sense of fatigue, a feeling of emptiness followed. Luckily I — I was able to interpret these feelings correctly. Loss of essence. I can assure you it has not recurred, Mandrake. Women, er, women sense my power, and they seek the life essence. (Dr. Strangelove) I realize the above has nothing to do with economics, but it strikes me as the same mystical thinking, specific-yet-vague phrases, and reverence. Exaggerated, yes, but it's satire.
hitekker 8y ago
Good catch. The phrase does indeed suggest a metaphorical treasure chest, filled with riches that we can reap if we only just use the key that the author promotes. The thought-terminating cliche "Money Out of Nowhere" reinforces that deception, as though the title was drawn from the self-help or the MLM industry. Finally, the website name: "Above the crowd". Yuck. An article written by the fatuous, for the fatuous.

clairity 8y ago

the "money from nowhere" phrase is a bit disingenious. in many cases, money is being redirected from an old industry into the new marketplace--from taxis to uber, from hotels to airbnb, from recruiters to indeed, etc. sure, there is some incremental added value that's "new money", but unless it also generates new jobs to employ the un-/under-employed, that money is being funneled from another part of the economy (like being extracted from family savings or materialized through loans). and information asymmetries aren't being destroyed, so much as concentrated in the marketplace to extract rents (e.g., uber's opaque pricing). and while free trade "works" in a homogenous steady-state global economy, we're not there yet. there are a lot of dynamics (i.e., economic, social and political disparities) to work through before that happens.

forrestthewoods 8y ago
Wealth isn’t zero-sum. The world is radically richer compared to 30 years ago.
- moosey 8y ago
  Wealth is zero-sum. We've just been ignoring the ecological impacts of our economy since the industrial revolution. I think that the true mark of wealth is the amount of high density energy you can use: Those private jets, huge homes, yachts, etc. require massive quantities of energy to use. Should the human race decide to fight climate change, for real, then it will be one of the greatest wealth equalizers of all time: we'll all end up a good deal 'poorer' than we were before.
  - matt4077 8y ago
    You're describing something, but it isn't "wealth". Or, if it is, it's useless. And if wealth is zero-sum, how can we "all end up a good deal 'poorer' than we were before."? NB: that whole sentence seems to be missing an odd number of negations. But here's an indicator you'll like: "Energy Intensity" is, basically, production / energy usage. This was surprisingly stable over most of the 20th century, lending some support to the gist of your objection. But, two good news: (1) it's now on a definitive downward trend, proving that thinking does produce value (yeah!). And (2) renewable energy is rising, meaning that energy usage is now decoupling from the harms you allude to (CO_2 et al).

carapace 8y ago

Here's one that I'd like to do but lack the time/commitment: Movie theaters, movies, moviegoers... Connect them on a platform that accepts data about customers' available movie nights and preferences, and then allocates movies and moviegoers to available theaters. As a user, you'd enter the dates and times you want to see a movie, the theaters you prefer, and which movies you want to see, and the system presents you with a menu of options. Theater owners would get full(er) houses; movie studios could get feedback about audience preferences; and it would make it much easier to go see the movies you want. Neat, eh?

elliekelly 8y ago
That is (perhaps was?) the premise behind MoviePass's long-term business plan.
- carapace 8y ago
  ..oh, der.

zackmorris 8y ago

Since it's Friday, how about a little devil's advocate. Does anyone here ever think about alternative economic systems similar to getting rid of money, like what the Federation does on Star Trek? Why hasn't an online group (similar to a utopia) formed where members contribute a portion of their incomes and receive a UBI? A single unicorn could pay everyone to work on unrelated projects and solve real global problems. I'm not really driven by money. I work more for the betterment of society, to help important projects that could change the world, to help others start their careers, and for self-actualization, or to not have to work someday, things like that. If I had solar panels on my roof and a little robotic hydroponic garden in my backyard, there's not a whole lot else I would need from the world. I might consider putting the bulk of my income into a pool for everyone if it meant that I could finally be left alone to research and invent on my own and make a larger contribution to society than the narrow goals that capitalism has for my skills.

dlg 8y ago
There's a (relatively new) book, Radical Markets[0] by Eric Posner and Glen Weyl that looks at how mechanisms for this might actually work in practice. Core to their argument is that most things we care about in society have increasing returns to scale so that under our current system we systematically under-allocate and mis-allocate to public goods. While I disagree with a lot of it in practice, I highly recommend reading it if you're thinking the way the parent comment of this comment does. [0] https://www.amazon.com/Radical-Markets-Uprooting-Capitalism-Democracy/dp/0691177503 https://www.amazon.com/Radical-Markets-Uprooting-Capitalism-...
- selimthegrim 8y ago
  Was this the Eric Posner who was suggesting adopting immigrants?
  - matt4077 8y ago
    That does sound like him. Posner is probably best known for (a) suggesting an open market for babies, and (b) being one of the smartest humans of our era. He's a Chicago School market-mechanisms fetishist, but a reasonable one believing in the necessity of regulations to tackle externalities and anti-trust. His writings sit in that perfect spot where I instantly notice the author is way smarter than me, but can still understand the jokes.

maehwasu 8y ago

Heuristic: if your premise contains the phrase "Ricardo proved mathematically", your conclusion is likely fucked.

mlamat 8y ago

You had me until Thomas Friedman.