On Tuesday, November 27, 2001 at 22:41:10 (-0600) [EMAIL PROTECTED] writes: >Michael, > >(and others) have been lamenting the failure of Pen-l to look at the >current economic problems etc. I have a practical (?) suggestion. > >I teach a course called "Canadian Economic Problems" and also >am frequently called upon to lecture on "free trade" and its >implications, etc. What I do not have is a comprehensive critique >of so-called free trade, all the agreements etc. What I would like to >see is pen-l put together a comprehensive critique of 'free trade' >(sic) that we could use in classes, public protests, media, etc. with >all the appropriate academic references to studies, reports, etc. > >I know of a number of studies (such as the excellent one by CEPR) >on globalism and (the failure of) growth. But I don't know them all. >Nor do I know of all of the studies on NAFTA and job destruction >such as the one by EPI/CCPA. What I would like to see is a >series of reports, not overly long, by interested pen-l members of >the evils of 'free trade' and its effects. Something that we could put >together and download (or get students to download) that would >give a comprehensive theoretical and empirical critique of the 'free >trade conspiracy' with all the appropriate footnotes/URLs to relevant >studies/reports/websites. > >I am not suggesting whole articles. Indeed that would make the >project useless -- but rather short 500-1000 word summaries of a >group of empirical and/or theoretical literature.
I posted an article to the PKT list on November 10, 1998, which may be a decent starting point for some of this. I am appending the text below my signature, and the hypertext version of the article can be found at http://csf.colorado.edu/forums/pkt/nov98/0101.html. I also noticed a book that looked interesting on the Harper's Magazine web site: *The Selling of "Free Trade": Washington and the Subversion of American Democracy* by John R. MacArthur. No idea if it is actually useful or not. Bill >Re: Comparative Advantage > > * Messages sorted by: [ date ][ thread ][ subject ][ author ] > * Next message: William S. Lear: "Re: A Better Money System?" > * Previous message: Joe Morgen: "Re: A Better Money System?" > * In reply to: John M. Legge: "Re: S=I, a new twist--Comparative > Advantage" > >Tue, 10 Nov 1998 03:30:46 -0600 (CST) >William S. Lear ([EMAIL PROTECTED]) > >On Mon, November 9, 1998 at 14:11:15 (+1100) John M. Legge writes: >>Even honest neoclassicals must recall that Ricardo assumed immobile >>capital ... > >Experience, however, shows that the fancied or real insecurity of >capital, when not under the immediate control of its owner, >together with the natural disinclination which every man has to >quit the country of his birth and connections, and intrust >himself, with all his habits fixed, to a strange government and >new laws, check the emigration of capital. These feelings, which >I should be sorry to see weakened, induce most men of property to >be satisfied with a low rate of profits in their own country, >rather than seek a more advantageous employment for their wealth >in foreign nations. > >---David Ricardo, *The Principles of Political Economy and >Taxation*, Chapter VII, "On Foreign Trade" (Everyman's Library, >1992, p. 83). > >> ... (either land or money that had to be closely watched in the >>absence of an IMF to act as debt collector) and the HOS model also >>assumes immobile capital and labour. > >Doesn't Ricardo also assume immobile labor? Though he does say that >"perfectly free commerce .... distributes labour most effectively and >most economically" (ibid, p. 81), he is really speaking about >"movement" of specialization, not workers. He goes on to say that >should wages rise, due to an "increase of capital and population >... it would not follow that capital and population would necessarily >move" (ibid, pp. 81-2). > >In his book *Money and Empire* (Blackwell, 1974) Marcello De Cecco >notes that Ricardo's model (and Smith's) is a static one that not only >assumes a homogenous world of producers --- "the civilised world" >(Ricardo, ibid, p. 81) --- but ignores increasing returns to scale, >"great inventions, the differences in levels of development that have >permitted colonisation, the huge migrations of Europeans to the new >continents, the massive exports of investment capital to the new >countries" (De Cecco, p. 6). > >M. Pani\'c elaborates upon this in a survey of "The Doctrine of Free >Trade: Internationalism or Disguised Mercantilism?", Chapter 7 in his >book *National Management of the International Economy* (St. Martin's >Press, 1988). He adds that the doctrine of comparative advantage >"assumed that the economies liberalising their trade are in >*fundamental equilibrium*, enjoying *full employment*; and that trade >liberalisation will do nothing to alter this position" (p. 123, >original emphasis). > >Pani\'c echoes De Cecco's observation about the assumption of >homogenous producers, noting that "belief in the existence of an >*international harmony of interests* is another important assumption >behind the argument for free trade" (p. 124, original emphasis). > >The principle of comparative advantage was part of the effort to >bolster free trade, itself a part of the larger project of bolstering >general (though, usually selectively applied) *laissez faire*. >Pani\'c observes "In conditions in which the balance of economic power >is unequally distributed, government inaction can be as beneficial to >an established interest as its intervention may be to an aspiring >one." (p. 126) > >He then immediately makes explicit why increasing returns to scale are >important: > >Considerations of this kind have become particularly important >... as modern industrial processes have [brought about] increasing >returns to scale .... This means that, other things remaining >equal, the already established, large, firms and markets enjoy an >important advantage over newcomers, in terms of costs and prices, >making it virtually impossible for the latter to compete on equal >terms (p. 126). > >It also seems to me that the Ricardian notion of comparative advantage >can entail a severe narrowing of a country's productive output. That >is, if country A makes shirts, pants, and shoes but makes shirts >"better" than it makes pants or shoes, and if country B makes shirts, >pants, and shoes but makes pants "better" than the other two goods, >and finally country C makes shirts, pants, and shoes but makes shoes >"better", it should follow that A produce only shirts, B produce only >pants, and C produce only shoes. Again, assuming homogenous (equally >endowed) states, if you have N states, and M goods, each state will >produce only M/N goods on average (though, as Doug rightly points out, >comparison of goods is often tricky at best). > >Pani\'c then sums up the problems with free trade: > >There is obviously no guarantee, under these conditions, that >world resources will be optimally allocated, whatever the trading >regime; or that private and social benefits from trade >liberalisation will be equal --- as money costs and prices will >not reflect now social opportunity costs. Firms in countries >which industrialise earlier may gain important advantages even in >those activities in which the countries have not comparative >advantage. If they can use their market power to prevent firms >from countries in which such advantages exists from entering >these activities, free trade can easily lead to a greater >misallocation of the world's productive resources than >protection! The likelihood of such developments is particularly >strong in conditions of continuous technical changes which often >alter national comparative advantages. (pp. 126-7) > >To finish on a political note, De Cecco recalls the thoughts of >Friederich List, who believed "the classics were liberal because >liberalism suited England at the time" (De Cecco, p. 12). De Cecco >also relays the hypothesis that > >Smith's free trade is the result of the coincidence of interests >that existed between entrepreneurs and the landed aristocracy of >his time, and that Ricardo's free trade is a testimony to the >conflict between entrepreneurs and the landed aristocracy. ... One >could say that if Ricardo had been Smith's contemporary, he would >have been a protectionist and if Smith had been Ricardo's >contemporary he would have been a protectionist too, preoccupied >as he was with the welfare of the gentry. (pp. 12-13) > >Both De Cecco and Pani\'c have many more interesting things to say, >particularly about the monetary side of things, but I'll leave them >for another day. > >Bill > > * Next message: William S. Lear: "Re: A Better Money System?" > * Previous message: Joe Morgen: "Re: A Better Money System?" > * In reply to: John M. Legge: "Re: S=I, a new twist--Comparative > Advantage"
