The Theory of Comparative Advantage

The International Economics Study Center ^ | Unknown | Steven Suranovic

[Willie Green]

Can't we have even just a couple of simultaneous differential or integral equations?

Ricardo's economic logic is essentially a precursor to optimization theories such as linear programming and the simplex method.

Don't be misled by his use of nations in his examples. David Ricardo was basicly an investment banker/stock broker who had little concern for what benefited either nation. His theory can be summarized as: "Maximize profits (the objective function) by minimizing inputs (the constraints -- labor, capital, etc.)" He did so by pitting one nation against each other to drive all inputs down to the commodity level.

It's a great theory for corporations engaged in transnational trade.
But that doesn't make it the best policy for a nation to pursue for the benefit of it's own citizenry. Actually, it's quite a darwinian abomination.

[neutrino]

Adam Smith is even older than Ricardo. For that matter, the Founding Fathers are older than Ricardo. Guess that makes their ideas even more wrong, in your book.

Some have been determined to be wrong - as witness our constitution, amended a number of times. Note that once Senators were appointed by the governors of the various states, whereas today they are directly elected. Times change, and we must change as well.

As for the US "always having high tariffs" -- after the demise of Smoot-Hawley, the US became the richest nation on earth, and remains so today.

The US was doing rather well from 1870 through 1910 - and tariffs were nearly as high as during Smoot-Hawley. Tariffs were reduced from 1933 onwards, but genuine recovery didn't occur until WW 2. So your correlation seems rather poor.

[CrucifiedTruth]

And why is it that the US, through most of its history, had high tariffs and did really well? I posted the data. I even provided a chart. You never responded. That speaks volumes.

I don't expect Lui to give you a reasonable answer. The chearleader's business is not to reason or find sollutions. Anyway, I looked up your posts and found the chart (hope you don't mind). It rocks, thank you. I'll try to stick it on my home page along with other relevant sources of hard data. They are not so easy to come by and a compilation would come handy. I hope (barely) to be able to do it soon. BTW, read post #202 if you get a chance.

[neutrino]

I read your post #202 - that is a superb idea!

And you're more than welcome to the chart. The more people who see it, the better!

[RightWhale]

optimization theories such as linear programming and the simplex method.

That's what it looks like. A command economy might like it; something like that worked so well for the USSR.

[neutrino]

Just curious, what's the per capita GDP in China and India?

 

China: (The Economist, Country Briefings)
 

Annual data	2002(a)	Historical averages (%)	1998-2002
Population (m)	1,284.3	Population growth	0.9
GDP (US$ bn; market exchange rate)	1,266.1(b)	Real GDP growth	7.7
GDP (US$ bn; PPP)	6,033.2	Real domestic demand growth	8.3
GDP per head (US$; market exchange rate)	986	Inflation	-0.4
GDP per head (US$; purchasing power parity)	4,698	Current-account balance/GDP	2.3
Exchange rate (av) :US$	8.3(b)	FDI inflows/GDP	3.9
(a) Economist Intelligence Unit estimates. (b) Actual.

 

India: (The Economist, Country Briefings)
 

Annual data	2002(a)	Historical averages (%)	1998-2002
Population (m)	1,046(b)	Population growth	1.6
GDP (US$ bn; market exchange rate)	505.8	Real GDP growth	5.4
GDP (US$ bn; PPP)	2,727(b)	Real domestic demand growth	5.5
GDP per head (US$; market exchange rate)	480	Inflation	5.9
GDP per head (US$; purchasing power parity)	2,610	Current-account balance/GDP	-0.3
Exchange rate (av) Rs:US$	48.6(c)	FDI inflows/GDP	0.8
(a) Economist Intelligence Unit estimates. (b) Economist Intelligence Unit estimate. (c) Actual.

Excerpt from the March 18th Economist:

China's progress since it first opened to foreign investment and reform in 1978 has been dazzling. Over the past 25 years, its real gross domestic product has expanded at an average of 9% a year. Growth in foreign trade has averaged 15% annually since 1978; China's trade surplus with America is now twice the size of Japan's. And every week, more than $1 billion of foreign direct investment flows into the country. All this testifies to the global integration of China's economy, now the sixth-largest in the world with a GDP of $1.4 trillion.  (Emphasis added)

 

 

[Willie Green]

That's what it looks like. A command economy might like it; something like that worked so well for the USSR.

Yeah, well capitalism is all about taking risks and competing in the marketplace.
Global corporatism is all about eliminating market risks.
Welcome to the NWO.

[CrucifiedTruth]

Just curious, what's the per capita GDP in China and India?

Rising quite fast. You obviously are not an investor. But do you know what the capita count is? Who dwarfs who? You are not suggesting that we get even with them on both counts do you?

[Luis Gonzalez]

"That speaks volumes."

That means that I have a life...get one yourself.

"...if free traitin' is so good, why are China and India doing so well with trade barriers?"

Then, why don't you go live in either INdia or China, if their system of government is more to your liking?

What I don't like, is that you want my country to mirror China.

[Luis Gonzalez]

"Rising quite fast."

But that only began after they entered the world market, and in order to even enter into that market, they had to relax their trade restrictions.

Mmmmm...

But that would be too obvious for you, wouldn't it?

No wonder you call yourself "CrucifiedTruth"...that's what you've done with it.

[neutrino]

Then, why don't you go live in either INdia or China, if their system of government is more to your liking?

I'd rather help America regain her strength after the damage done by the free traitors. Let's just say I like the challenge, and the goal is a worthy one.

What I don't like, is that you want my country to mirror China.

Really? Then why are you on the same side as Karl Marx? He was a strong proponent of free trade, you know.

[Luis Gonzalez]

"Really? Then why are you on the same side as Karl Marx? He was a strong proponent of free trade, you know."

Another ignorant post from you.

Karl Marx invented a system of government that made trade between two neighbors illegal, let alone free trade between nations.

That old tired "Karl Marx" was a fan of Free Trade line is simply idiotic.

A Communist that promoted free trade?

Idiotic.

Karl Marx preached that free trade would disrupt a nation, and bring about revolution and the rise of communism.

Did you expect the inventor of Communism to praise what is in fact the antithesis of communism?

If you believe that Karl Marx believed in free trade, then you must equally believe that Fidel Castro believes in free elections.

After all...he says that he does, and that's good enough for you.

Right?

[Luis Gonzalez]

You admire the system of government in China and India...then move there!

If their economic model is so superior to ours, then that's where you should go live.

Or are you simply lying when you hold them up as examples of a good economic model?

"I'd rather help America regain her strength after the damage done by the free traitors."

No, you want the US to mirror the Chinese economic model.

You've said it all over this forum.

[Luis Gonzalez]

By the way genius...

If Karl Marx was such a proponent of free trade, then why did the system of government that he created outlaw private property rights, private ownership if industry, and...well, and free trade?

[Luis Gonzalez]

Your problem is that the government is not stopping people from offshoring.

[CobaltBlue]

Really? Then why are you on the same side as Karl Marx? He was a strong proponent of free trade, you know.

I don't believe that Karl Marx favored free trade, but if he did, what of it?

If Karl Marx believed in using soap and water to combat germs, should I renounce soap and water?

If Karl Marx was faithful to his wife, should I renounce fidility?

If Karl Marx paid his bills on time, should I stiff my creditors?

[neutrino]

Karl Marx preached that free trade would disrupt a nation, and bring about revolution and the rise of communism.

Precisely. Which is why he favored it. I'm so proud of you for being able to figure that out! Well done!

[neutrino]

I don't believe that Karl Marx favored free trade, but if he did, what of it?

Read it for yourself. Here's a link

[Luis Gonzalez]

Hello!!!

We are here, and he is gone!!!

Figure that out!

The revolt overthrew his ideology!

Gat it yet?

[CrucifiedTruth]

But that only began after they entered the world market, and in order to even enter into that market, they had to relax their trade restrictions.

They began after the US started giving them the Most Favored Nation (MFN) status. In exchange, they started providing (Mostly) Slave Labor (MSL) status. BTW, their trade restrictions are WAY higher than ours. Their currency is even pegged to the dollar. But that's been repeated many times already.