[Vanity] 1823 Science - Time for an upgrade?

Neutrino | 03/06/2004 | Neutrino

[neutrino]

The originator of the free trade argument is David Ricardo, who lived from 1772 to 1823. You can read a brief biography at the link:

Ricardo

Here's an excerpt:

At age twenty-seven, after reading Adam Smith's The Wealth of Nations, Ricardo got excited about economics. He wrote his first economics article at age thirty-seven and then spent only fourteen years—his last ones—as a professional economist.

The world has changed considerably since 1823. We have new technologies, new political and social paradigms, and entire new fields of science. Nevertheless, we ignore all of that and continue to use economic ideas from 1823.

Is this wise? Can an economist who lived during the era of King George IV - predecessor of Queen Victoria - tell us how to conduct trade in an era of quantum physics, instant global communications, and robotic factories?

Many financial instruments were unknown then. The NYSE was conducting trades under a buttonwood tree in 1792. Yet we direct the course of our nation according to such out-dated concepts based on a single man’s intuition?

It's time to take a long, hard look at the underlying assumptions that are directing us to national economic disaster. Antique economics are not the solution to modern problems. Free trade, as promulgated by Ricardo, may not be the panacea presently claimed.

[neutrino]

Respectfully submitted for your comments.

[Publius6961]

Nice vanity

[Joe Bonforte]

Calling something old or obsolete does not tell what's wrong with it. What specific evidence do you have that Ricardo was wrong, or that conditions have changed to invalidate his theory?

Contrariwise, there are many studies that show that the best single predictor of economic health for a nation in the last two hundred years is how open it is to trade with the rest of the world. That would seem to completely validate Ricardo.

Newton discovered the Theory of Gravity in the same general time period. We now plot rocket courses with it. Ricardo's theory of comparitive advantage, while not quite so clean and elegant, it is ultimately based in simple mathematics. (See http://william-king.www.drexel.edu/top/prin/txt/trade/itrade1.html for details.)

Now, you may claim that a simple model does not account for complex conditions, but you must show where it breaks down. For Newtonian physics, the famous three-body problem was never exactly solved for gravitation attraction and motion, though one can use the theory to get estimates that agreed closely with reality. So even when the complexity ramped up, the theory worked.

Then relativity came along, and showed that Newtonian physics failed in some extreme circumstances (particularly high velocity). The theory was refined by Einstein for those extreme conditions. This did not affect the theory for routine cases.

So - where do you think Ricardo's theory is breaking down? What evidence do you have? Note that anecdotes don't count - you have to provide evidence about overall or aggregate effects, since that's what Ricardo's theory talks about.

And how do you explain that the US unemployment rate has dropped since NAFTA was implemented? How do you explain how protectionist regimes like Japan have such terrible economic problems? (They have protected their internal industries for decades, and run a huge trade surplus. If Ricardo were wrong, then they would be doing great, right? But they're not - a fifteen year recession so far. Why?)

I know you anti-free-trade guys want in your hearts desperately for the facts and the economic theory to support you. Unfortunately for you, they don't. (Fortunately for the rest of us, because open trade is the source of much of our wealth as a society.)

[JLS]

Excellent idea, let me add to it that Newton wrote in the latter part of the 17th century.

http://www-gap.dcs.st-and.ac.uk/~history/Mathematicians/Newton.html

The world has changed considerably since the late 1600s. We have new technologies, new political and social paradigms, machines that Newton could not have imagined and entire new fields of science. Nevertheless, we ignore all of that and continue to use physics and mathematical ideas from the late 1600s.

We could establish a sunset rule for all knowledge and once it got old enough we could be as dim as the Dims. But as a higher tax guy you probably are a Dim.

[sully777]

Let's throw in the trash all the classics. We can add Newton, Locke, and Smith. Einstein's theories and laws are getting old. In fact, Karl Marx wrote his easily-refutable crap around 1844. Better throw that in the can! Come to think of it the US constitution is old, but not as old as the Magna Carta. Let's throw all things in the trash as we walk down this Maoist/Khmer Rouge nightmare

Idiot!

[tallhappy]

This is like the argument liberals make about the Consstitution. They love to say how different things are today compared to the 1700's and how, therefore, these old documents written way back when, or old ideas and ideals of men like Jefferson or Washington cannot possibly apply today and need to be updated etc...

[Joe Bonforte]

This is like the argument liberals make about the [Constitution].

Excellent point. I thought one of the major tenets of conservatism was respect for established ideas that have been shown to pass the test of time. I guess the author of the vanity must not be conservative...

[billybudd]

You're right. We should also throw out Aristotle and Plato.

[Libertarianize the GOP]

On a Conservative discussion forum why would an idea be dismissed as invalid just because it has been around for a while and is generally accepted.

[neutrino]

Calling something old or obsolete does not tell what's wrong with it. What specific evidence do you have that Ricardo was wrong, or that conditions have changed to invalidate his theory?

The present economic trends are a case in point. Notice that the economists who attempt to make job predictions are consistently wrong. This at least suggests a flaw in the theories they apply.

Then relativity came along, and showed that Newtonian physics failed in some extreme circumstances (particularly high velocity). The theory was refined by Einstein for those extreme conditions. This did not affect the theory for routine cases.

As you so aptly point out, Newtonian physics breaks down in extreme conditions. The economies are far larger today than was the case in 1823. The speed and efficiency of the transfer of capital and information has also changed. My premise is that as the economies represented by Ricardo's underlying assumptions have changed from those he was familiar with, the theories he promulgated may have become inaccurate.

[neutrino]

But as a higher tax guy you probably are a Dim.

You presume that I am in favor of higher taxes, an assumption both incorrect and without basis.

A variety of revenue neutral measure could be implemented to correct the trade problem.

Would you like an end to the death tax? How about an end to all taxes on capital gains? And, as long as we're at it, perhaps we could end the double taxation of divideds. I'd like that too. A variety of taxes on certain specified trade activities might let us accomplish those ends.

[neutrino]

Einstein's theories and laws are getting old.

Indeed they are. Einstein never did accept quantum physics, which was the reason for his famous quotation "God does not play dice with the universe." We now realize that God does indeed let random events rule at the quantum level.

Your post seems to suggest an emotional attachment to a concept; this is all the more reason to consider carefully if your views are really quite rational.

[neutrino]

This is like the argument liberals make about the Consstitution.

You've noticed, of course, that the Constitution has been updated from time to time with amendments. Perhaps the concepts of free trade need to be updated too.

[neutrino]

I thought one of the major tenets of conservatism was respect for established ideas that have been shown to pass the test of time.

And a major tenent of being intelligent is that one changes a behavior that has ceased to work.

[js1138]

I believe Newton and Galileo did their best work before 1823. What is it about age that makes a idea obsolete? Come to think of it we are still using a Constitution written before 1823.

[neutrino]

You're right. We should also throw out Aristotle and Plato.

We should reconsider their ideas based on new information. Or are we to worship Zeus and Hera?

[neutrino]

On a Conservative discussion forum why would an idea be dismissed as invalid just because it has been around for a while and is generally accepted.

No - one considers whether an idea still has validity when results indicate that it may not be working. And since Conservatives are intelligent and think - instead of merely reacting to emotions and feelings - where better to investigate the underpinnings of ideas?

[neutrino]

I believe Newton and Galileo did their best work before 1823. What is it about age that makes a idea obsolete? Come to think of it we are still using a Constitution written before 1823.

Newton had some fine ideas - that Einstein corrected. And Einstein has some fine ideas - that were corrected in Quantum physics.

Age does not make an idea obsolete. A change in the underlying assumptions and conditions may. Economists are making predictions that are wildly incorrect, and by their own words they don't know why. I merely propose the the world has changed sufficiently to invalidate Ricardo.

As for the Constitution - keep in mind, it has changed through various amendments.

[neutrino]

Ping for your consideration and comments.