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You can falsify it with this experiment. Move into the wilderness and be self sufficient yourself starting tomorrow. Give up all the comparative advantage you c
by energy123 1y ago
You can falsify it with this experiment. Move into the wilderness and be self sufficient yourself starting tomorrow. Give up all the comparative advantage you currently experience through your trading with other people (labor for money, money for things you can't make). See what happens.
- js8 1y agoNo, first you need to make a formulation of the theory that you're trying to falsify. What economic advice would the theory of comparative advantage give to China in the 1960s? If it is "just do the free trade", it would have been wrong. China started to implement its market reforms with dual pricing to protect its own citizens from the foreign markets.
- AstralStorm 1y agoBut it appears their secret sauce is not dual pricing, but horizontal and vertical integration in manufacturing, combined with low labor costs. Same thing the USA companies did earlier. Now that is an actual comparative advantage that is actually hard to replicate due to huge entry costs. (To lower the costs of labor further you need to actually give out life basics for free! China gets away with this by having a huge population competing thus far, but it won't hold.)