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"Ricardo's Difficult Idea"[1] (comparative advantage is available to all countries with free trade) is an example of an idea that sounds stupid on its face that
by tokenadult 13y ago
"Ricardo's Difficult Idea"[1] (comparative advantage is available to all countries with free trade) is an example of an idea that sounds stupid on its face that must (on reflection and examination of the evidence) be true. Only a minority even of educated people believe in comparative advantage, but it is indeed an idea that can be the basis of expanded social trust.
[1] http://web.mit.edu/krugman/www/ricardo.htm http://web.mit.edu/krugman/www/ricardo.htm
- Ologn 13y ago> an idea that sounds stupid on its face It still sounds stupid on its face. As I recall, Ricardo said England produced textiles, and Portugal produced wine, and both countries were each economically better off for their own specialization. Joan Robinson revisited this idea a century later and asked, how did that turn out economically for Portugal, which remained a backward, agriculturally based nation while England began an industrialization program, partly based around the industrialization of its textile industry?
- tokenadult 13y agoThe late Joan Robinson produced some interesting writings[1] but there are few economists indeed who credit her with proving Ricardo wrong about comparative advantage. That's because in fact her writings about Ricardo's ideas focused on different issues, and Ricardo was and is right that each party in free trade enjoys comparative advantage in trade with the other party. Economic growth through free trade has been the path to prosperity for Taiwan (where I have lived), Hong Kong (where I have visited more than once), and quite a few other countries all around the world. Portugal's economy during the years she studied was not characterized by following Ricardo's advice. [1] http://www.econlib.org/library/Enc/bios/Robinson.html http://www.econlib.org/library/Enc/bios/Robinson.html