The Theory of Comparative Advantage

The International Economics Study Center ^ | Unknown | Steven Suranovic

[Luis Gonzalez]

I'm a friggin' saint.

:-)

[cyborg]

I wonder if the Japanese whine about outsourcing going on in American Honda.

[Luis Gonzalez]

Not at all.

But Toyota pissed off the Unions by setting up their assembly plants in right to work States, thus making it nearly impossible for Unions to organize.

[cyborg]

No wonder why Toyota is just about the best besides Honda... right to work!

[Luis Gonzalez]

"China is using OUR technology in their nationalistic drive to build their own manufacturing & technology industries."

Our industry is becoming the developing of industry because we are nearly fully developed. In fact, we are reducing the number of workers needed via technological advances.

So, here's the theory at work:

The U.S. can develop industry at five times the capacity of China, and it can manufacture cars at ten times their productivity.

So the US engages in the practice of developing China's industry, and China spends its time manufacturing cars.

The more time China spends trying to mimic western economic models, the farther they get away from communism.

[Luis Gonzalez]

There were bridges long before there were engineers.

[Luis Gonzalez]

Again, no one, including Adam Smith, is suggesting that the manufacturing of our weapons, and defense systems, can be offshored or even outsourced, that's suicidal.

All the points contained apply to consumerism, not national defense.

[lewislynn]

The father estimates that it will take him three hours to prepare the garden if he works alone, as shown in the following table.

That's three man hrs.

Notice that the total time needed to prepare the garden has fallen from 3 hours to 2 hours....

----

Overall efficiency is enhanced when both resources (the father and son) are fully employed.

That's four man hrs for the same task...You're fired!

[HighWheeler]

Comparitive Advantage may be easier to understand if the example was taken down to single people.

Assume I am both a better engineer and a better plumber than the guy down the street. If I make $100/ hour as an engineer, but only $65 as a plumber, then it is advantageous for me to hire the guy down the street to do my plumbing while I continue to do engineering. He can only get $80 doing engineering and $50 and hour doing plumbing.

I have a $35 dollar an hour advantage doing engineering over plumbing, while he gets to do plumbing for $50 an hour.

Since people are paid by their output, my output of engineering and plumbing is higher than his, so I get paid more per hour for my services. The total value of output in the world for us is $150 with this arrangement, but only $145 per hour if we reversed our roles.

Now an importatnt point: notice how efficiency plays a key part. If he was at $90 per hour for engineering and still could only get $50/hr as a plumber, the reversing of the roles would produce more for the world.

[HighWheeler]

"There were bridges long before there were engineers."


But as more and more engineers entered the picture, the total cost, the time to build, and the rate of failure have gone down for all bridges.

[tpaine]

Luis Gonzalez says:
"The manufacturing of weapons for national defense is the business of the government."

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Precisely. And if the means of production are offshore?
-civil-

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"You can't confuse issues of national defense with issues involving trade."
-luis-

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No one is confusing them. I'm simply pointing out that we need a bit more infrastructure for weapons development and making than a handful of gun manufacturers.
There has to be a balance and trade is absolutely not independent from defense.

Yet again..China is not our friend and India was considered too socialist to be our friend until recently.
46 civil discourse

______________________________________


Again, no one, including Adam Smith, is suggesting that the manufacturing of our weapons, and defense systems, can be offshored or even outsourced, that's suicidal.

All the points contained apply to consumerism, not national defense.
49 -luis-

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Luis, have you ever considered that our entire american economy ["consumerism"], is worth defending?

As 'Civil' correctly points out, -- we can't build weapons without the entire infrastructure of a healthy self sustaining economy. -- Correct?

[Lael]

I find this whole discussion SO NINETEENTH CENTURY!!!

[jpsb]

Excellent explaination, much better then the article, thanks.

[bondserv]

The point he was making is that we must keep the critical decisions in the hands of the people overseeing the project. For example, if you let a Fire Marshall oversee the building of all homes in a town, you would end up with a town full of castles with no electricity. Fire Marshall's experience is skewed to overcompensate for safety because they are exposed to an overabundance of death and destruction.

The brilliance of our Founding Fathers cannot be measured. They put together a system where the Fire Marshall's (add your own specialist) can only advise the policy makers. Policy makers (originally) were elected officials drawn from various communities with no "dog in the hunt" on most of the decisions they end up making. This balancing of the power and information made for an amazing propelling of inventive, unrestricted progress the world has never seen before.

Competence at every level of the way, is the great scale of success. Competence implies intimate understanding of each task, creative freedom to improve methods or research new ideas, an intuitive balance of efficiency and quality.

America will fall because leftist greed mongers oppose paying for training so that people can be creative (public schools love affair with evolution convincing children they have no greater purpose than to be a corralled animal "school to work"). Recognizing God given creativity propels people to reach for new levels of production. America's greatest contribution to history! The "Source" of creativity must be acknowledged in order for a nation to continue to progress.

P.S. I gleaned the Fire Marshall illustration from Dennis Prager.

[cyborg]

A lot of scientific discovery happened because scientists wanted to know God and get to know diversity of HIS creation. The British didn't dispatch the royal botanists and such as to the colonies for their health. People forget that.

[jpsb]

Excellent rebuttal!

[Willie Green]

Protectionism and nativism unbound gave the world communism and Nazism

That's quite a naively false and shallow theory, Luis.
Especially when it comes from you.
Is "protectionism and nativism unbound" what gave Castro to Cuba?
As I recall, the United States didn't ban trade with Cuba until AFTER Castro came to power.
Prior to that, we enjoyed the importation of many Cuban products, most notably cigars, sugar and rum.
And many American products were exported to Cuba, such as many of the automobiles that they're still driving.
And American tourists regularly visited Havana for the swingin' nightlife.
But then, I'm hardly qualified to lecture you about conditions in pre-Castro Cuba.
You of all people should know that we didn't suspend trade with Cuba until AFTER Castro came to power.

Communism is a cancer that festers in the despair and poverty of a people when a nation's wealth and political power are concentrated and controlled by an elite, upper crust. It spreads through the very conditions that you're attempting to create with the economic erosion of the American Middle Class.

[CrucifiedTruth]

In other words, fixing the problem created by protectionist policies will not be easy.

You have to pay attention. The problem is not restraining imports per se! The problem is that American corporations export investment resources and knowhow that cost a lot to build but is given free to the commies. Why? So that they can pilfer a few dimes more back at home. Adam Smith wouldn't even think of such a lunacy. Do you remember GATT? It forbade the export of high tech to the Soviet Union. It's the same now. We have a strategic enemy but we are feeding it ourselves.