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IMO your logic is all wrong. Comparative Advantage ist just applied "opportunity cost" of time. Humans and resources are unique, everyone has their theoreticall

IMO your logic is all wrong. Comparative Advantage ist just applied "opportunity cost" of time. Humans and resources are unique, everyone has their theoretically "optimal" use of time in terms of economic output. The invisible hand of the market will let you know what aspect of your output is most valuable for others. The benefit of this invisible hand is that the "economy" as a whole does not need to know how good they are at producing everything. People just need to know if what they are producing now is more valuable than the next best alternative. Everything else will be sorted out with market forces. In university lectures we were given the famous argument about olive oil from Greece and that it would never make sense to do our own olive oil because we both lack the natural resources (unique soil + sunshine) which allow olive trees to grow easily and we'd also have much better yields growing other things on the fields. So to me, both opportunity cost and comparative advantage are really basic building blocks of economic understanding and I'm a bit dumbfounded that someone wouldn't understand these concepts.

cardanome 2y ago
It is good that you paid attention to economics 101 but we don't live in the 19th century anymore and economic theory has progressed a bit since Ricardo. We don't have pure free market economies. Neither in China nor in the USA nor anywhere else. The see big monopolistic companies dominating most markets. We see an closer interlink between state and private corporations. Even just with the currency manipulation that China engages in, things get screwed a lot. Or the special status the US has with the dollar. Real world is more complicated. But even if we assume free markets, you misunderstood what the previous poster said. The problem with Ricardo's comparative advantages is that is assumes fixed advantages. It is like optimizing for a local optimum. You might be super inefficient in producing X because you have never done it but if you actually invested in learning how to produce X you might discover that you are really good at it and the comparative advantages would go in your favor. I do still believe that trading with each others can lead to more net wealth in most cases and obviously full autarky is not realistic these days but like anything in economics, it shouldn't be taken as a dogma.
- geysersam 2y ago
  Absolutely agree. It's ridiculous that low wage labor is considered a "comparative advantage". It's an advantage to capital owners perhaps, but certainly not to workers. And like you said, advantages are not static. In my opinion it's intrinsically valuable to have a diverse regional economy. Culture and economy are fundamentally inseparable, imagine a society where everyone is doing the same thing because of "comparative advantage" making them 10% more efficient than the other country... What poverty!
  - energy123 2y ago
    This aestheticization of factory jobs is something I've noticed to be driving the New Right's worldview. It's not dissimilar to and no less dangerous than the aesthetic fixation on the agrarian economy of Mao and Pol Pot. Frankly, no, sweatshops are not important to the cultural fabric of a country. The US has problems with housing affordability, with medical costs, and with service sector costs emerging from Baumol's cost disease, which are all things that will get worse with tariffs, ranging from higher construction costs, to higher pharmaceutical prices, to less service employees making the cost disease worse. It's also untrue that comparative advantage only benefits capital. Consumers are hurt by higher prices and less job opportunities driving down demand on the labor market. This worldview of a zero sum contest between capital and labor is a populist fiction.
    - Yeul 2y ago
      Tech bros who are frustrated with their job fantasizing about doing "real work". An entire generation has grown up without assembly lines so it is easy to mystify it. People in Vietnam don't enjoy making Nikes but it is better than what came before: subsistence farming. But the Vietnamese factory worker trying to send their kids to university too.
      - collingreen 2y ago
        Perhaps this is the inevitable cycle of prosperity? We see this in so many facets now as generations progress - your comment reminds me of antivax social media people who haven't ever seen anyone more sick than a cold or tech bros thinking a trade job would be better since it might magically be "more rewarding" (I'm guilty of this!) with no regard for how much privilege is inherent in sitting at a desk all day and getting paid to think. Like the stereotypical kid who grew up rich not understanding the value of hard work maybe the inevitable result of easy and safe living is a blind spot so big we're doomed to fall back down as a society and start over again and again.
specialist 2y ago
What role does governmental industrial policy have your in thesis?
- bflesch 2y ago
  IMO industrial policy is the way to mitigate risks of war or extortion vis-a-vis a specific trading partner. Only once this safety criteria is fulfilled, politicians can think about tackling other issues with industrial policy - and unfortunately these further initiatives often fail or have unintended second-order effects (e.g. we want Intel chip factory in Germany). My understanding is that due to human nature wars mostly start due to religious or extremist views of individuals leading a nation. Such a risk of your trade partner invading you because they don't like your skin color can be hardly formalized in an economic theory (maybe there exists one already, idk). So role of industrial policy would be to ensure that a certain balance is kept with regards to creating dependencies to other nations, which could be abused in case of war. Famous negative examples of failed industrial policy for Germany would be the dependence on gas mostly from russia and the dependence on oil mostly from middle east. Another example would be the agricultural subsidies to ensure all citizens can be fed even when other nations would not export any food. A current example in Germany would be the production of "German steel" using fossil energy instead of production of CO2-neutral swedish steel. As Germany is part of EU, this is a conflicting view: We can't on one side ask for more trade and integration of supply chains between democratic EU countries, but on the other side assume that Sweden will deny steel exports to us when we'd need it. Producing steel in Germany with fossil energy instead of doing it in Sweden with hydroelectric power is both more expensive and has more negative externalities (CO2 emissions due to use of fossil fuels). Therefore such industrial policy reduces welfare that would otherwise be available for German people.

cardanome 2y ago

It is good that you paid attention to economics 101 but we don't live in the 19th century anymore and economic theory has progressed a bit since Ricardo. We don't have pure free market economies. Neither in China nor in the USA nor anywhere else. The see big monopolistic companies dominating most markets. We see an closer interlink between state and private corporations. Even just with the currency manipulation that China engages in, things get screwed a lot. Or the special status the US has with the dollar. Real world is more complicated. But even if we assume free markets, you misunderstood what the previous poster said. The problem with Ricardo's comparative advantages is that is assumes fixed advantages. It is like optimizing for a local optimum. You might be super inefficient in producing X because you have never done it but if you actually invested in learning how to produce X you might discover that you are really good at it and the comparative advantages would go in your favor. I do still believe that trading with each others can lead to more net wealth in most cases and obviously full autarky is not realistic these days but like anything in economics, it shouldn't be taken as a dogma.

geysersam 2y ago
Absolutely agree. It's ridiculous that low wage labor is considered a "comparative advantage". It's an advantage to capital owners perhaps, but certainly not to workers. And like you said, advantages are not static. In my opinion it's intrinsically valuable to have a diverse regional economy. Culture and economy are fundamentally inseparable, imagine a society where everyone is doing the same thing because of "comparative advantage" making them 10% more efficient than the other country... What poverty!
- energy123 2y ago
  This aestheticization of factory jobs is something I've noticed to be driving the New Right's worldview. It's not dissimilar to and no less dangerous than the aesthetic fixation on the agrarian economy of Mao and Pol Pot. Frankly, no, sweatshops are not important to the cultural fabric of a country. The US has problems with housing affordability, with medical costs, and with service sector costs emerging from Baumol's cost disease, which are all things that will get worse with tariffs, ranging from higher construction costs, to higher pharmaceutical prices, to less service employees making the cost disease worse. It's also untrue that comparative advantage only benefits capital. Consumers are hurt by higher prices and less job opportunities driving down demand on the labor market. This worldview of a zero sum contest between capital and labor is a populist fiction.
  - Yeul 2y ago
    Tech bros who are frustrated with their job fantasizing about doing "real work". An entire generation has grown up without assembly lines so it is easy to mystify it. People in Vietnam don't enjoy making Nikes but it is better than what came before: subsistence farming. But the Vietnamese factory worker trying to send their kids to university too.
    - collingreen 2y ago
      Perhaps this is the inevitable cycle of prosperity? We see this in so many facets now as generations progress - your comment reminds me of antivax social media people who haven't ever seen anyone more sick than a cold or tech bros thinking a trade job would be better since it might magically be "more rewarding" (I'm guilty of this!) with no regard for how much privilege is inherent in sitting at a desk all day and getting paid to think. Like the stereotypical kid who grew up rich not understanding the value of hard work maybe the inevitable result of easy and safe living is a blind spot so big we're doomed to fall back down as a society and start over again and again.

specialist 2y ago

What role does governmental industrial policy have your in thesis?

bflesch 2y ago
IMO industrial policy is the way to mitigate risks of war or extortion vis-a-vis a specific trading partner. Only once this safety criteria is fulfilled, politicians can think about tackling other issues with industrial policy - and unfortunately these further initiatives often fail or have unintended second-order effects (e.g. we want Intel chip factory in Germany). My understanding is that due to human nature wars mostly start due to religious or extremist views of individuals leading a nation. Such a risk of your trade partner invading you because they don't like your skin color can be hardly formalized in an economic theory (maybe there exists one already, idk). So role of industrial policy would be to ensure that a certain balance is kept with regards to creating dependencies to other nations, which could be abused in case of war. Famous negative examples of failed industrial policy for Germany would be the dependence on gas mostly from russia and the dependence on oil mostly from middle east. Another example would be the agricultural subsidies to ensure all citizens can be fed even when other nations would not export any food. A current example in Germany would be the production of "German steel" using fossil energy instead of production of CO2-neutral swedish steel. As Germany is part of EU, this is a conflicting view: We can't on one side ask for more trade and integration of supply chains between democratic EU countries, but on the other side assume that Sweden will deny steel exports to us when we'd need it. Producing steel in Germany with fossil energy instead of doing it in Sweden with hydroelectric power is both more expensive and has more negative externalities (CO2 emissions due to use of fossil fuels). Therefore such industrial policy reduces welfare that would otherwise be available for German people.