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I remember reading in a PJ O'Rourke book about Comparative Advantage - I've found the section, as the 'non-trivial and non-obvious' sleight stuck with me, even
by Jedd 2y ago
I remember reading in a PJ O'Rourke book about Comparative Advantage - I've found the section, as the 'non-trivial and non-obvious' sleight stuck with me, even decades later:
> Todd G. Buchholz, in his book New Ideas from Dead Economists, says, “An insolent natural scientist once asked a famous economist to name one economic rule that isn’t either obvious or unimportant.” The reply was “Ricardo’s Law of Comparative Advantage.”
>
> The English economist David Ricardo (1772–1823) postulated this: If you can do X better than you can do Z, and there’s a second person who can do Z better than he can do X, but can also do both X and Z better than you can, then an economy should not encourage that second person to do both things. You and he (and society as a whole) will profit more if you each do what you do best.
There follows some droll examples around the implications of this law, comparing John Grisham and Courtney Love's contributions to society, which doubtless helped consolidate the lesson.
Point being - this foundational law would seem to trump any interest in mistakenly attempting to optimise for inputs vs outputs to your nation.
EDIT: From his book 'Eat The Rich: A Treatise on Economics' (1998)
- TZubiri 2y agoI've seen that postulate in the very first chapter of wealth of nations. But perhaps Ricardo expressed it in mathematical terms? And I'd argue that there are properties of nations that make them distinct from individual humans or even companies. The relative autarky possible for a country is much higher. I've read a similar position by a libertarian Hayek I think in "I pencil", but I never did buy the argument, the idea that a pencil is the product of global trade, I don't buy, you can make national pencils without a sweat.
- ViktorRay 2y agoIs the following video the “I pencil” you are referring to? https://youtu.be/67tHtpac5ws https://youtu.be/67tHtpac5ws
- TZubiri 2y agoThe original is an essay from Hayek
- marcosdumay 2y agoHum, no. Adam Smith didn't understand that people would trade even if one of the peers was better at every single thing. He got lots of stuff right, and even some things that took until the 19th century to make into mainstream economics. But not this one.
- TZubiri 2y agoIs it possible that he never posited the question? I'd say it unfolds naturally from his readings that it is the case. That said, isolating and framing the question and its consequences is not insignificant.
- marcosdumay 2y agoHe is clearly on the opinion that specialization means the best entity (person, company, country, he talks about all three) capable of creating each product will tend to work on it, and then trade. The theory of comparative advantages is a very unintuitive idea. There's a reason that it took until the 20th century for economists to notice it.
- roenxi 2y ago> the idea that a pencil is the product of global trade, I don't buy, you can make national pencils without a sweat. It is, obviously, possible. Pencils are about as simple as it gets. But it is hardly a no-sweat process. It made international news when China declared itself capable of producing a ballpoint pen using only native tech and materials. It was a point of significant pride to the Chinese government at the time - as well it should be, it was something of a manufacturing and policy tour-de-force. https://www.washingtonpost.com/news/worldviews/wp/2017/01/18/finally-china-manufactures-a-ballpoint-pen-all-by-itself/ https://www.washingtonpost.com/news/worldviews/wp/2017/01/18...
- TZubiri 2y agoPens I would say are significantly more complex than pencils. Props to china for that.
- Dracophoenix 2y agoThe paper Hayek wrote is titled The Use of Knowledge in Society. I Pencil is meant to be a simplified and poeticized example of Hayek's evaluation by Leonard Read.
- TZubiri 2y agoOh my bad!
- mikojan 2y agoAny model of international trade that does not also model externalities is worse than useless. International trade accounts for 30 percent of CO2 emissions alone. Maybe you should produce X and Z.
- topkai22 2y agoThat 30% number seems very wrong. The entire transportation sector is 12.5% of global emissions. International trade is more like 3% or less. https://ourworldindata.org/ghg-emissions-by-sector https://ourworldindata.org/ghg-emissions-by-sector
- trilbyglens 2y agoI think you could easily get into the 30% range if you factor in manufacturing that happens that otherwise would not without global trade.
- Jedd 2y agoIt seems like it would be extremely difficult to identify that breakdown. Not because it's difficult to identify emissions generated in order to produce those goods subsequently exported (it would be arduous to do so, but not infeasible), but because absent that particular manufacturing effort for those specific exports, what would that nation state instead be doing with those resources / what emissions would they be generating in the pursuit of domestic consumption needed to replace the income from those exports.
- washadjeffmad 2y agoIf only there were a mechanism to capture or deter those externalities and return them to the market. Are tariffs a veiled carbon tax?