>I'm sorry to be so elliptical about this, but I am swamped. > >I like to show my students how Sraffa's reswitching illustrate how the >market does not minimize inputs, even when the only basic input is labor >of various vintages. In Sraffa's scheme, within the pricing systen, the >values of the inputs of labor are distorted by the profit markup, causing >strange and unpredictable effects.
Michael, if you have this demonstration as a file, please send it along. Ricardo seems to be saying that given Portugal's dual absolute advantage, she will initially export both cloth and wine. But if paid in gold, then gold flows out of England, which then raises prices in Portugal relative to England. So English goods become progressively cheaper. Ricardo assumes that the outflow continues until England can undersel Portugal in something. Within England comparative advantage is with cloth over wine, so Ricardo seems to assume that this will be what England specializes in. But this is calculated in labor values. There is no reason to assume that in terms of cost prices (c + v) and market prices (or prices of production, k +p) English cloth has a comparative advantage over English wine. In fact it was easy to construct an example where this was easy to reverse in terms of cost prices and prices of production. So England could end up specializing in wine! In short, IF SUPPLY PRICES ARE NOT PROPORTIONAL TO LABOR COSTS OF PRODUCTION , it is possible that the pattern of specialization that would result would actually maximize the abstract, homogeneous labor time needed to production a given output. I have more than a few histories of economic thought in front of me, and I just can't find where this point is made. But it seems obvious, but then I may be missing something even more obvious. No training as an economist (got an "A" in Laura Tyson's Econ I course though; well at least I am speaking about economics on an economics list!) I think this is a more fundamental criticism than a relaxation of the many assumptions that Ricardo makes, e.g., constant returns, no capital mobility, full labor mobility within nations, etc. Peter says that Steedman has made it somewhere, and I don't have his book on trade. Rakesh
