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Comparitive advantage is a fundamental principle and cannot be violated, at least without causing a lot of nasty long term consequences
by missedthecue 4y ago
Comparitive advantage is a fundamental principle and cannot be violated, at least without causing a lot of nasty long term consequences
- imtringued 4y agoComparative advantage is mostly nonsense because humans are extremely good generalists and pretty much every country has every industry to some degree.
- xxpor 4y agoCivilization itself is the specialization of society.
- 988747 4y agoComparative advantage only works in a globalized economy with free trade - the world that is now ending.
- pydry 4y agoThe neoclassical theory of (static) comparative advantage is dead and buried. It was originally a kind of academic pretext for justifying exploitation of third world resources. Then western economists drank their own koolaid. They then tutted paternalistically at China in the 90s for engaging in export oriented industrialization and keeping their capital markets on a tight leash. They argued that China was shooting itself in the foot and should stick to things they were good at like making cheap tacky toys and clothes and open up their capital markets. Those 90s New York Times op eds hailing comparative advantage and chastising China aged really badly.
- fsckboy 4y agoChina would do better economically if they were open to more trade and competition, they are shooting themselves in the foot compared to where their economy could go. and comparative advantage operates just fine without trade barriers. Since it's just a mathematical relationship, i.e. it can't be wrong, it also operates with trade barriers, just not as efficiently.
- imtringued 4y agoAccording to comparative advantage most developing countries should just export raw resources and import everything else like food. After all, the west has all the absolute advantages: rule of law, educated workforce, public infrastructure, financial capital, fertile soil, intellectual property. No one should ever produce something in a developing economy. Just import all finished goods from the usual industrial nations until e.g. Greece is bankrupt from buying German made products. Suddenly the Germans introduce austerity policies and overall reduce the quality of life in Greece.
- fsckboy 4y agonone of what you are talking about has anything to do with comparative advantage.
- pydry 4y agoNo, they wouldnt. They'd have ended up yet another cheap labor colony without protectionism. It takes a generation of protectionism to make Huawei's tech good enough to make America shit its pants. The theory of comparative advantage assumes comparative advantage never changes and cant be changed by trade policy. 90s neoclassical economists pushing this cult werent just proved thoroughly and conclusively wrong by the ascendance of China, their koolaid might have spurred on the end the American empire.