2 ms·
One correction to your previous citizen of the world comment, the US Bill of Rights lists rights for all people, not just US Citizens (outside specific voting r
by valuearb 6y ago
One correction to your previous citizen of the world comment, the US Bill of Rights lists rights for all people, not just US Citizens (outside specific voting rights).
Ok, US manufacturing has nearly doubled in actual value since 1990.
https://fred.stlouisfed.org/series/OUTMS https://fred.stlouisfed.org/series/OUTMS
It doesn’t employ as many people, but that’s progress. Making more stuff with fewer people is the only way to grow wages over the long run.
The law of comparative advantage has remained an economic bedrock because none of the criticisms you cribbed from a web page have stood up outside of exceedingly narrow circumstances.
1. Producers always have a very good idea of their costs and where they are lower. Minor Exceptions don’t make a difference, a market doesn’t have to be perfectly efficient to be efficient.
2. Producers know transport costs, that’s a trivial calculation. Clearly CA works better the lower transportation costs are, and it’s harder the higher they are. But if you have free trade in gravel, it doesn’t rebut CA that gravel is frequently too cheap and heavy to transport, so while African gravel can be produced cheaper it’s not going to be shipped to America.
3. Monopolies and economies of scale just drive costs/pricing. Again it’s costs that drive CA, so not rebutting anything.
4. CA takes into account all costs, even such as tariffs. Protectionism is a way of eliminating the magical benefits of CA by increasing the costs of foreign goods and services to local levels or higher. So now the local economy is burdened with all the low value work that could have been cheaply exported, and has fewer resources for the most productive and valuable work.
1-7, really none of are coherent arguments against CA, it’s as if you don’t even understand how it works. An economic participant never needs perfect knowledge of costs, exchange rates, etc to enter into profitable transactions. For one example, interest and exchange rates are easy to hedge for relatively long periods. If you find a significantly cheaper assembler in China, hedging is just one of your costs, and if exchange rates move against you in such a huge amount that Chinese assembly becomes too expensive you simply move assembly when your hedges expire.
And 8) is just a rant about Guatemala. Whatever government runs Guatemala, the benefits of CA are available if it allows free trade. If Guatemalan workers can improve their living standards by taking on another countries low value work at a lower cost, both will benefit.