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To expand a bit - Ricardian comparative advantage argument relies on the following assumptions: - no transportation costs - no unemployment - barter economy

To expand a bit - Ricardian comparative advantage argument relies on the following assumptions: - no transportation costs - no unemployment - barter economy - 100% fungible labor - farmer, teacher, chemical engineer, doctor - they're all the same and can switch between jobs instantly, and immediately attain the level of productivity within that sector - prices are 100% determined by labor costs - demand for various types of items is static, and never changes - the demand structure is the same across all countries - i.e. if British prefer tea to coffee, we assume all countries prefer tea to coffee It's not just a "spherical cow" theory, it's more akin to "if a spherical cow rolls frictionlessly down a valley described by a parabola, then it will oscillate forever". True, but useless. Keynes, as usual, is ahead of the pack - calling out the theory's unrealistic assumptions, and predicting (in 1930s) that not the production, but the interest rates will do the adjustments - leading to persistent trade imbalances and move the economy further from full employment. Which is exactly what happened

germandiago 5y ago
I recommend a read of the Austrian School of economy. Not as influential as Keynes since he is at the top. But for me, the most correct theories (without being an expert in the matter) come from there.
- pydry 5y ago
  Comparative advantage (or rather, the fallacious notion that it is inevitable/static) is still weirdly treated as gospel by the Austrian school. E.g. https://mises.org/library/ricardian-law-comparative-advantage https://mises.org/library/ricardian-law-comparative-advantag... Austrians are a crotchety bunch and a bit stuck in their ways. They never really tried to explain the rise of China and are still somewhat in denial about it.
  - germandiago 5y ago
    The rise of China. Well. Taking into account that they adopted a somewhat economy market in many areas and that when there was more pure communism the economy was worse... I would say they did not get here faster because of too much intervention honestly... Nothing is pure capitalism or socialism. As you open the economy the cash flows more. That is what happened... BTW, I do not consider China a success since they are like one century late from America and on top of that there is no regike that has killed more than the Chinese. Do you really think it is a success? Well... I would say despite of the people managing it, not because of them... That said, I am not meaning austrians got everything right, just that I find them relatively convincing in many areas. Of course, they are subjrct to criticism, as everyone else.
    - pydry 5y ago
      The problem with ascribing China's success to being a market economy is India. India shared similar population size, geography and wealth to China initially. India had something closer to a market economy that was less interventionist/communist and for far longer and yet it has grown at a far slower pace. Austrian predictions from the 90s presumed that China keeping tight control of the economy/currency/inward flows of investment and high level of state ownership was shooting itself in the foot.
      - germandiago 5y ago
        I am not an economist to analyze this in-depth. And very likely you have your point. However, for me the discussion is also ethical: I do not find a reason to have an ellite forcing on all the others through coaction what to do. Whether it maximizes economy or not. In other words: peopke are ends not means for others. That is the fundamental point in my view. I would not take a regime with over 60 million deaths (big leap forward, Chinese cultural revolution, etc.) as an example of something ethical by any measure.
        imtringued 5y ago
        That's the damn point. Backwards governments can still succeed precisely because of the opposite, they can become (reasonably) good governments.
        justicezyx 5y ago
        Which standards judge the backwardness, and what a good one?
        germandiago 5y ago
        China is a reasonable government that has over a million Uyghurs muslims in concentration camps. The history of a reasonably good country that had successes as the Great Leap Forward, the Chinese Cultural revolution and now the Uyghurs, among many others. You know, Chinese government is not reasonably good at any level by any moral assessment. Capitalism has been superior in every aspect: as a proof, migration flows went from socialists to capitalists countries, being East/West Germany just one example.
- imtringued 5y ago
  The Austrian School of economics is just bad. Everyone knows that Keynes' policies are bandaids that make the wound recover faster. Meanwhile Austrian economists believe that people must let the wound heal as slowly as possible because of a tendency toward masochism and sadism. The truth lies in neither. The biggest economic problems stem from rigidity. Money has such an extreme degree of rigidity, it is capable of traveling through both space and time unhindered. It's a time machine and massless particle all in one. The reason why Austrian economics appeals to some people is either because they have an anti government axe to grind and want more trivial reasons to blame the government, they want to be on the receiving end of a regressive money system (gold bugs), macroeconomics are often abandoned in favor of microeconomics which hides the fact that local decision making can still result in seemingly coordinated failure and finally because they have mistaken moral beliefs about an amoral system most notably the myth of the protestant work ethic and the belief that the promise of work is their own personal property and it should be their right to delay redeeming that promise for all eternity. I will repeat it again. There are no morals in economics. Anyone who worships savings and frugality in monetary terms is worshipping poverty in real terms. Eat your economic cake, it will be bigger tomorrow because of that and when somebody needs you to show restraint and want to borrow your slice, they'll tell you.
  - germandiago 5y ago
    Ehat you are saying is not correct. You are missing that growing in permanent debt has consequences. Some countries have been ruined by external debt. We are on our way. We people do not manage wealth like that. A call for poverty is to live over our real outcome permanently (this does not mean we cannot invest and have debt as long as we are able to pay and as long as it has expected return in controlled ways). Eventually you go bankrupt. What is being poorer than not being able to finance your basic services? And yes, I admit to hsve become somewhat antistate. Because it is a scam, basically, to monopolize services, offer them more expensive, without the innovations that markets could provide you mich faster and on the way saying you are ok thanks to them and that you owe the state everything. I can deal with market prices and free choice and save a bunch of money, which is MY invested effort, so it is me who should manage it. States do not give me anything except poor justifications for their existence. The only exceptions could be (and I am not convinced either) security and justice. I really think they are way more correct than the alternative: that we must be forced in groups under the decisions of ellites. This is not morally right. And, BTW, a higher goal for the sake of others under coaction lead to fascisms and communism. Little by little we lose our freedom. Not a good thing.

germandiago 5y ago

I recommend a read of the Austrian School of economy. Not as influential as Keynes since he is at the top. But for me, the most correct theories (without being an expert in the matter) come from there.

pydry 5y ago
Comparative advantage (or rather, the fallacious notion that it is inevitable/static) is still weirdly treated as gospel by the Austrian school. E.g. https://mises.org/library/ricardian-law-comparative-advantage https://mises.org/library/ricardian-law-comparative-advantag... Austrians are a crotchety bunch and a bit stuck in their ways. They never really tried to explain the rise of China and are still somewhat in denial about it.
- germandiago 5y ago
  The rise of China. Well. Taking into account that they adopted a somewhat economy market in many areas and that when there was more pure communism the economy was worse... I would say they did not get here faster because of too much intervention honestly... Nothing is pure capitalism or socialism. As you open the economy the cash flows more. That is what happened... BTW, I do not consider China a success since they are like one century late from America and on top of that there is no regike that has killed more than the Chinese. Do you really think it is a success? Well... I would say despite of the people managing it, not because of them... That said, I am not meaning austrians got everything right, just that I find them relatively convincing in many areas. Of course, they are subjrct to criticism, as everyone else.
  - pydry 5y ago
    The problem with ascribing China's success to being a market economy is India. India shared similar population size, geography and wealth to China initially. India had something closer to a market economy that was less interventionist/communist and for far longer and yet it has grown at a far slower pace. Austrian predictions from the 90s presumed that China keeping tight control of the economy/currency/inward flows of investment and high level of state ownership was shooting itself in the foot.
    - germandiago 5y ago
      I am not an economist to analyze this in-depth. And very likely you have your point. However, for me the discussion is also ethical: I do not find a reason to have an ellite forcing on all the others through coaction what to do. Whether it maximizes economy or not. In other words: peopke are ends not means for others. That is the fundamental point in my view. I would not take a regime with over 60 million deaths (big leap forward, Chinese cultural revolution, etc.) as an example of something ethical by any measure.
      - imtringued 5y ago
        That's the damn point. Backwards governments can still succeed precisely because of the opposite, they can become (reasonably) good governments.
        justicezyx 5y ago
        Which standards judge the backwardness, and what a good one?
        germandiago 5y ago
        China is a reasonable government that has over a million Uyghurs muslims in concentration camps. The history of a reasonably good country that had successes as the Great Leap Forward, the Chinese Cultural revolution and now the Uyghurs, among many others. You know, Chinese government is not reasonably good at any level by any moral assessment. Capitalism has been superior in every aspect: as a proof, migration flows went from socialists to capitalists countries, being East/West Germany just one example.
imtringued 5y ago
The Austrian School of economics is just bad. Everyone knows that Keynes' policies are bandaids that make the wound recover faster. Meanwhile Austrian economists believe that people must let the wound heal as slowly as possible because of a tendency toward masochism and sadism. The truth lies in neither. The biggest economic problems stem from rigidity. Money has such an extreme degree of rigidity, it is capable of traveling through both space and time unhindered. It's a time machine and massless particle all in one. The reason why Austrian economics appeals to some people is either because they have an anti government axe to grind and want more trivial reasons to blame the government, they want to be on the receiving end of a regressive money system (gold bugs), macroeconomics are often abandoned in favor of microeconomics which hides the fact that local decision making can still result in seemingly coordinated failure and finally because they have mistaken moral beliefs about an amoral system most notably the myth of the protestant work ethic and the belief that the promise of work is their own personal property and it should be their right to delay redeeming that promise for all eternity. I will repeat it again. There are no morals in economics. Anyone who worships savings and frugality in monetary terms is worshipping poverty in real terms. Eat your economic cake, it will be bigger tomorrow because of that and when somebody needs you to show restraint and want to borrow your slice, they'll tell you.
- germandiago 5y ago
  Ehat you are saying is not correct. You are missing that growing in permanent debt has consequences. Some countries have been ruined by external debt. We are on our way. We people do not manage wealth like that. A call for poverty is to live over our real outcome permanently (this does not mean we cannot invest and have debt as long as we are able to pay and as long as it has expected return in controlled ways). Eventually you go bankrupt. What is being poorer than not being able to finance your basic services? And yes, I admit to hsve become somewhat antistate. Because it is a scam, basically, to monopolize services, offer them more expensive, without the innovations that markets could provide you mich faster and on the way saying you are ok thanks to them and that you owe the state everything. I can deal with market prices and free choice and save a bunch of money, which is MY invested effort, so it is me who should manage it. States do not give me anything except poor justifications for their existence. The only exceptions could be (and I am not convinced either) security and justice. I really think they are way more correct than the alternative: that we must be forced in groups under the decisions of ellites. This is not morally right. And, BTW, a higher goal for the sake of others under coaction lead to fascisms and communism. Little by little we lose our freedom. Not a good thing.