David Ricardo and Comparative Advantage

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[VoodooEconomics]

David Ricardo and Comparative Advantage The Theory of Comparative Advantage David Ricardo, working in the early part of the 19th century, realised that absolute advantage was a limited case of a more general theory. Consider Table 1. It can be seen that Portugal can produce both wheat and wine more cheaply than England (ie it has an absolute advantage in both commodities). What David Ricardo saw was that it could still be mutually beneficial for both countries to specialise and trade.

[VoodooEconomics]

This has probably been posted - but I thought the link is useful.

[Rodney King]

Watch out for the Buchanan Brigade. Ricardo single handedly proves them to be morons.

[GEC]

Thanks for the link.

Ricardo's only downside was his lack of attention to the demand side of the market equilibrium.

It would be another 40 or 50 years until economic theory caught up with this concept.

That said, CA is second only to slightly more general concept of opportunity cost which is embedded in it in terms of importance in economic theory (not to mention the way people live and make decisions).

[annalex]

David Ricardo and Comparative Advantage

The Theory of Comparative Advantage

David Ricardo, working in the early part of the 19th century, realised that absolute advantage was a limited case of a more general theory. Consider Table 1. It can be seen that Portugal can produce both wheat and wine more cheaply than England (ie it has an absolute advantage in both commodities). What David Ricardo saw was that it could still be mutually beneficial for both countries to specialise and trade.

Table 1

Country	Wheat	Wine
.	Cost Per Unit In Man Hours	Cost Per Unit In Man Hours
England	15	30
Portugal	10	15

In Table 1, a unit of wine in England costs the same amount to produce as 2 units of wheat. Production of an extra unit of wine means foregoing production of 2 units of wheat (ie the opportunity cost of a unit of wine is 2 units of wheat). In Portugal, a unit of wine costs 1.5 units of wheat to produce (ie the opportunity cost of a unit of wine is 1.5 units of wheat in Portugal). Because relative or comparative costs differ, it will still be mutually advantageous for both countries to trade even though Portugal has an absolute advantage in both commodities.

Portugal is relatively better at producing wine than wheat: so Portugal is said to have a COMPARATIVE ADVANTAGE in the production of wine. England is relatively better at producing wheat than wine: so England is said to have a comparative advantage in the production of wheat.

Table 2 shows how trade might be advantageous. Costs of production are as set out in Table 1. England is assumed to have 270 man hours available for production. Before trade takes place it produces and consumes 8 units of wheat and 5 units of wine. Portugal has fewer labour resources with 180 man hours of labour available for production. Before trade takes place it produces and consumes 9 units of wheat and 6 units of wine. Total production between the two economies is 17 units of wheat and 11 units of wine.

Table 2

C o u n t r y	Production	Production
.	BeforeTrade	After Trade

.	Wheat	Wine	Wheat	Wine
E n g l a n d	8	5	18	0
P o r t u g a l	9	6	0	12
T o t a l	17	11	18	12

If both countries now specialise, Portugal producing only wine and England producing only wheat, total production is 18 units of wheat and 12 units of wine. Specialisation has enabled the world economy to increase production by 1 unit of wheat and 1 unit of wine.

The simple theory of comparative advantage outlined above makes a number of important assumptions:

• There are no transport costs.
• Costs are constant and there are no economies of scale.
• There are only two economies producing two goods.
• The theory assumes that traded goods are homogeneous (ie identical).
• Factors of production are assumed to be perfectly mobile.
• There are no tariffs or other trade barriers.
• There is perfect knowledge, so that all buyers and sellers know where the cheapest goods can be found internationally.

Here is the full text of David Ricardo's On The Principles of Political Economy and Taxation, . Please note that this is 740k long.

---

Biographical Details

Birthplace London, England.

Posts Held Stockjobber and loan contractor, 1793-1814; Country landowner, 1814-23.
Offices and Honours Founder Member, Geological Soc.; MP Portarlington, Ireland, 1819-23; Founder, Polit. Econ. Club, 1821.
Publications Books: 1. The High Price of Bullion (1810); 2. Essay on the Influence of a Low Price of Corn on the Profits of Stock (1814); 3. On the Principles of Political Economy and Taxation (1817); 4. On Protection to Agriculture (1822); 5. Plan for the Establishment of a National Bank (1824); 6. David Ricardo: Works and Correspondence , 11 vols, eds. P. Sraffa and M. H. Dobb(CUP, 1951-73).

Career Successor to Adam Smith's pre-eminent position in British economics, his influence continued to dominate the aims and methods of the discipline throughout the nineteenth century. Despite his own considerable practical experience, his writings are severely abstract and frequently difficult. His chief emphasis was on the principles of diminishing returns in connection with the rent of land, which he believed also regulated the profits of capital. He attempted to deduce a theory of value from the application of labour, but found it difficult to separate the effects of changes in distribution from changes in technology. The questions thus raised about the labour theory of value were taken up by Marx and the so-called `Ricardian socialists' as a theoretical basis for criticism of established institutions.

Ricardo's law of rent was probably his most notable and influential discovery. It was based on the observation that the differing fertility of land yielded unequal profits to the capital and labour applied to it. Differential rent is the result of this variation in the fertility of land. This priciple was also noted at much the same time by Malthus, West, Anderson, and others. His other great contribution, the law of comparative cost, or comparative advantage, demonstrated the benefits of international specialisation of the commodity composition of international trade. This was at the root of the free trade argument which set Britain firmly on the course of exporting manufactures and importing foodstuffs. His success in attaching other economists, particularly James Mill and McCulloch, to his views largely accounted for the remarkable dominance of his ideas long after his own lifetime. Though much of this was eventually rejected, his abstract method and much of the theoretical content of his work became the framework for economic science at least until the 1870s.

Secondary Literature M. Blaug,`Ricardo, David', International Encyclopedia of the Social Sciences , D. L. Sills(ed.)(Macmillan and Free Press, 1968), vol. 13; M. Blaug, Ricardian Economics. A Historical Study (Greenwood Press, 1973); B. Gordon, Political Economy in Parliament, 1819-23 (Barnes & Noble, 1977); S. Hollander, The Economics of David Ricardo (Univ. Tronto Press, 1979).

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Other Resources

Try the Ricardo Page at McMaster University, which include a portrait and some of his other essays.

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These details were all cribbed off of the Internet, and were produced by AC Mulligan, Rod Hay at McMaster University (Canada), Tony Brewer at University of Bristol (Britain), and others.

[Rodney King]

I assume by "moron" you mean that the Buchananites consider other values besides "the bottom line" more important--like preserving a nation of our own

No, I meant that they simply don't understand the entire concept of comparative advantage.

[Willie Green]

The simple theory of comparative advantage outlined above makes a number of important assumptions:

• There are no transport costs.
• Costs are constant and there are no economies of scale.
• There are only two economies producing two goods.
• The theory assumes that traded goods are homogeneous (ie identical).
• Factors of production are assumed to be perfectly mobile.
• There are no tariffs or other trade barriers.
• There is perfect knowledge, so that all buyers and sellers know where the cheapest goods can be found internationally.

It should also be pointed out that there is no provision for national security considerations or government intervention in the form of environmental regulations, health and safety standards, child labor, etc. etc. etc.

It is also worth noting that, in this same treatise, Ricard asserted that labor wages would stabilize at the subsistance level.

That's just what we need: American labor earning the same paltry wages as Third World peasants. That'll do wonders for our standard of living! </sarcasm>

[hjp]

The Buchanan Brigades understand Ricardo's theory of comparative advantage.

We live in a dangerous world where national interests in fact dominate the globe. The globalists, citing Ricardo, argue that an economic interpendence and corresponding elimination of sovereign states is the key to global peace.

As suggested in the title to von Mises' book Human Action, economics is really the study of human action--read human nature. Ricardo's theory of comparative advantage is an abstract theory which doesn't fit with human nature.

[911]

Ricardo's theory of comparative advantage is an abstract theory which doesn't fit with human nature.

Ricardo's theory of comparative advantage is put into practice every day in the multi-trillion-dollar global swaps market.

[L_Von_Mises]

Ricardo's theory of comparative advantage is an abstract theory which doesn't fit with human nature.

One could say the same thing about Alfred Marshall but it doesn't mean that the underlying theory of supply and demand does not apply to real world applications. Businesses make decisions every day based on this principle. Is it more cost effective to produce a good themselves or to purchase it in the marketplace? A simple make or buy decision. Whether someone is applying it to a small shop or an entire nation, the principle still applies.

The important point to his theory was that it took Adam Smith's theory of absolute advantage to the next level - therefore improving upon it.

When reading Ricardo's examples he reduces them to their simplest forms for illustrative purposes. This technique is still used today. In microeconomics one typically uses a commodity like corn in mathematical models because it can be the final product as well as the capital used to create it. It does not mean that in the theory of comparative advantage one should not factor in added costs such as tarriffs or transportation costs into the equation when conducting a cost benefit analysis. One always has to include all of the costs and benefits.

Now if you are saying that all businesses should include social costs into the equation, that is a normative argument - in other words what ought to be rather than what is. Most people in the business world use positive economics (based on quantitaive analysis) to make decisions. My experience has shown me that normative economics is used primarily by those on the left to argue for social justice which has nothing to do with economic efficency.

[annalex]

Sorry for not responding sooner.

The simplifications in the model make the model possible. To refute the model on the basis that it oversimplifies you will have to show that the simplification not merely removes other factors, but removes the essense of the phenomenon. For example, you will have to prove that transportation costs are always a greater order of magnitide that productivity gain manifest in Table 2. Failing that, pointing out the simplifications in the model merely shows that the model is correct to the extent to which the simplifications are indeed negligible. E.g. if the transportation cost (or any other friction factor you mention) is high, then of course no argument for foreign sourcing holds.

The national security argument indeed trumps the productivity gain considerations. It doesn't invalidate the theory any more than the fact that ambulances and fire engines remove the need for cheap gas or fuel efficient vehicles.

The wages stabilize at the subsistance level for the given productivity. When the productivity rises as per Table 2, the unit of labor both in Britain and in Portugal yields more wine and more wheat. What happens to the wage is not indicative of the living standard, which rises for both countries as a function of productivity.

[annalex]

Correction:

It doesn't invalidate the theory any more than the fact that ambulances and fire engines are built with certain priorities in mind removes the need for cheap gas or fuel efficient vehicles.

[Willie Green]

Now if you are saying that all businesses should include social costs into the equation, that is a normative argument - in other words what ought to be rather than what is.

I am not saying that at all.

What I am saying is that Ricardo's theory only serves the interests of transnational corporations seeking to optimize profits. It is NOT a theory upon which to base our national economic policies because of the myriad ways it will undermine our national security and social stability.

[Jethro Tull]

#2) Up yours Rodney.

David Ricardo, Karl Marx's favorite economist.

Marx, Karl Date: 01-01-1993; Publication: The Columbia Encyclopedia, Fifth Edition

*********
*********

Marx, Karl 1818-83, German social philosopher, the chief theorist of modern socialism and communism.

Early Life

Marx's father, a lawyer, converted from Judaism to Lutheranism in 1824. Marx studied law at Bonn and Berlin, but became interested in philosophy and took a Ph.D. degree at Jena (1841). He early rejected the idealism of Georg Wilhelm Friedrich Hegel and turned toward materialism, partly through the influence of Ludwig Feuerbach and Moses Hess.

Early Work

In 1842 he became editor of the Rheinische Zeitung, but his demands for radical reforms led to its suppression in 1843. He then went to Paris, where he began his lifelong association with Friedrich Engels. At this time Marx became a socialist. He devoured the works of Adam Smith, David Ricardo, the comte de Saint-Simon, and many others. Antagonized by the individualistic radicalism of Pierre Joseph Proudhon, Marx attacked him in The Poverty of Philosophy (1847, tr. 1910), an early attempt to systematize his own thought. In this period also he wrote, with Engels, The German Ideology (tr. 1933), which provided an exposition of his dialectical materialism. Breaking with the tradition of justifying social reform by appeal to natural rights, he invoked "inevitable" laws of history to predict the eventual triumph of the working class.

[Jethro Tull]

David Ricardo

David Ricardo

Yousuf Dhamee '96 (English 73, 1995)

n The Wealth of Nations Adam Smith focuses most of his attention on the problem of economic growth. His interest in this subject stems from the belief that an evolving capitalist system could benefit society as a whole. According to Smith's analysis the economy possesses unlimited upward potential. Events failed to confirm this hypothesis, however. In Britain war and crop failure stymied economy development. As a result, the economists following in Smith's footsteps adopted a more skeptical view towards the market's potential.

David Ricardo maintained that the economy generally moves towards a standstill. His analysis is rooted in a modified version of the labor theory of value. He held out the belief that the rate of profit for society as a whole depends on the amount of labor necessary to support the workers who farm "the most barren land that can still maintain agriculture" This model breaks land down into categories based on average fertility rates. The most fertile land naturally produces more food than land of poorer quality. As a result it commands a higher rent. The poorest land utilized for agriculture receives no rent, with all of its earnings going to cover labor and capital costs. The difference between the output from the least fertile land which can still be farmed and that of a higher quality constitutes the source of rent on the better land. As the population grows, poorer land must be cultivated in order to meet the growing demand. The cost of rent for good land then increases. This, coupled with the fact that poor land necessitates increased labor input to maintain minimal output results in falling profit levels. As rents rise, profits fall. Essentially, rent costs gobble up profits as the population increases. Since profits lead to reinvestment and thus growth rising rent costs indirectly prevent economic progress.

In Ricardo's model the interests of landowners directly oppose those of general society. Ricardo preempted Karl Marx in describing adversarial class relations. Marx, in fact, based a great deal of his economic theory on Ricardo's writings. Although Marx identified capitalists, not landlords, as the source of societal grief he co-opted Ricardo's labor theory of value. Marx also utilized Ricardo's forecast of economic stagnation in predicting a working class uprising. When capitalism eroded its own underpinnings the resulting misery was expected to bring social strife and revolution. It is unlikely that Ricardo would have supported Marx's revolutionary brand of political economics, but the ties between the schools of thought are undeniable.

It is ironic that although Ricardo's ideas helped provide a basis for Marxist critiques of the capitalist system, he own policiy recommendations, like those of Robert Malthus, are grounded in the doctrine of free trade. Ricardo believed that the Corn Laws, in particular, constituted a burden to the agricultural economy. He believed that these trade barriers kept food prices artificially high and encouraged a bloated rent rate. In Parliament Ricardo actively campaigned against the Corn Laws as well as other government interventions. Essentially this economic stance mirrors Adam Smith's teachings: the market, although imperfect, is best left untouched. Government action only prevents the economy from righting itself. Although Ricardo did not share Smith's complete confidence in the market he recognized that tampering with the system would only result in further economic stagnation.

---

[Rodney King]

#2) Up yours Rodney

Zing! You sure know how to make a good argument.

David Ricardo, Karl Marx's favorite economist......At this time Marx became a socialist. He devoured the works of Adam Smith, David Ricardo,

An even worse argument. You should have stuck to the ad hominem attack. So Marx read Adam Smith and Ricardo, and your conclusion is Ricardo was Marx's favorite economist? By that standard, Adam Smith is also Marx's favorite economist. Leaving aside the obvious problem that one can't have two favorite economists, to suggest that Adam Smith is Marx's favorite economist would be laughably absurd. This then disproves your point that because Marx read Ricardo, that means that Ricardo is his favorite economist.

[Rodney King]

From your own post:

It is ironic that although Ricardo's ideas helped provide a basis for Marxist critiques of the capitalist system, he own policiy recommendations, like those of Robert Malthus, are grounded in the doctrine of free trade. Ricardo believed that the Corn Laws, in particular, constituted a burden to the agricultural economy. He believed that these trade barriers kept food prices artificially high and encouraged a bloated rent rate. In Parliament Ricardo actively campaigned against the Corn Laws as well as other government interventions. Essentially this economic stance mirrors Adam Smith's teachings: the market, although imperfect, is best left untouched. Government action only prevents the economy from righting itself. Although Ricardo did not share Smith's complete confidence in the market he recognized that tampering with the system would only result in further economic stagnation.

Enough said.

[Jethro Tull]

"So Marx read Adam Smith and Ricardo, and your conclusion is Ricardo was Marx's favorite economist?"

Putz...

#15 reads, "Marx, in fact, based a great deal of his economic theory on Ricardo's writings."

Notice the difference between reading Ricardo and Marx basing a great deal of his economic theory on Ricardo's writings.

Moron...

[Jethro Tull]

#17) "Ricardo believed that the Corn Laws, in particular, constituted a burden to the agricultural economy."

So did Marx.

Marx fought along side of Ricardo during the Corn Law argument.

Ricardo and Marx. What a pair of economists...

[Rodney King]

I typed my first reply while you were apparently posting number 15.

This is my last response, there is no need for your continual personal attacks, and I don't have time to bother with them.

[LSJohn]

Comparative advantage should be considered by whom?

Unless Ricardo is advocating that the governments involved should forbid the production of wine in England and wheat in Portugal, understanding comparative advantage seems as interesting and useful as understanding why some people like the taste of apples and some don't.

What am I missing?

BTW, in the cited example (is it the best he could find?) we don't have to go to national security to obviate CA's application -- transportation costs alone would do the trick.

[major-pelham]

Those not willing to listen to historical data or understand the information missing from their favorite theorist's intellectual data base reveal themselves the true morons. Ricardo knew nothing of a yet to come unimaginable world colossus such as the United States, he knew nothing of England's future problems in merely feeding itself, he knew nothing of the absurdist extent to which taxation and regulation would eventually dominate the global economy, he knew nothing of the extent to which transfer payments would addle economic analysis. To try and defend Free Trade theory as it would apply to a nation such as Austria or South Korea is to deny the existence and circumstances of the United States of America. I, like you, once thought Free Trade theory, Wilsonian style, was akin to sacred text. But in a systemic examination that includes libertarianism, immigration, trade, defense and foreign policy wanting to understand the point of view of your so-called 'Morons', I came to understand that at best that free trade is merely empowerment of special interests (that incidentally do not coincide with localized national interests) and at worst a dumbing down of living standards to the lowest common denominator. As usual, libertarian theory, while providing seeming benefits to individuals, in the end causes so many problems that the whole, and in turn the individual, is worse off in the end. Ricardan theory in the end is but a fool's errand.

[LSJohn]

...there is no need for your continual personal attacks.

Oh, really?

Then maybe you shouldn't have embarrassed yourself and insulted others with your first post on the thread.

[Rodney King]

I think there is a big difference between referring to a vauge group rather than by individual freepers. I think that JimRob understands this as well when he says "no personal attacks" rather than no "attacks upon on unnamed amorphous groups".

[Jethro Tull]

ON THE QUESTION OF FREE TRADE

Public Speech Delivered by Karl Marx before the Democratic Association of Brussels January 9, 1848

Gentlemen,

The Repeal of the Corn Laws in England is the greatest triumph of free trade in the 19th century. In every country where manufacturers talk of free trade, they have in mind chiefly free trade in corn and raw materials in general. To impose protective duties on foreign corn is infamous, it is to speculate on the famine of peoples.

Cheap food, high wages, this is the sole aim for which English free-traders have spent millions, and their enthusiasm has already spread to their brethren on the Continent. Generally speaking, those who wish for free trade desire it in order to alleviate the condition of the working class.

-SNIP

Ricardo, the apostle of the English free-traders, the most eminent economists of our century, entirely agrees with the workers upon this point. In his celebrated work on political economy, he says:

"If instead of growing our own corn... we discover a new market from which we can supply ourselves... at a cheaper price, wages will fall and profits rise. The fall in the price of agricultural produce reduces the wages, not only of the laborer employed in cultivating the soil, but also of all those employed in commerce or manufacture."

[David Ricardo, _Des principes de l'economie politique et de l'impot_. Traduit de l'anglais par F. S. Constancio, avec des notes explicatives et critiqus par J.-B.- Say. T. I., Paris 1835, p.178-79]

-SNIP

This law of commodity labor, of the minimum of wages, will be confirmed in proportion as the supposition of the economists, free-trade, becomes an actual fact. Thus, of two things one: either we must reject all political economy based on the assumption of free trade, or we must admit that under this free trade the whole severity of the economic laws will fall upon the workers.

To sum up, what is free trade, what is free trade under the present condition of society? It is freedom of capital. When you have overthrown the few national barriers which still restrict the progress of capital, you will merely have given it complete freedom of action. So long as you let the relation of wage labor to capital exist, it does not matter how favorable the conditions under which the exchange of commodities takes place, there will always be a class which will exploit and a class which will be exploited. It is really difficult to understand the claim of the free-traders who imagine that the more advantageous application of capital will abolish the antagonism between industrial capitalists and wage workers. On the contrary, the only result will be that the antagonism of these two classes will stand out still more clearly.

Let us assume for a moment that there are no more Corn Laws or national or local custom duties; in fact that all the accidental circumstances which today the worker may take to be the cause of his miserable condition have entirely vanished, and you will have removed so many curtains that hide from his eyes his true enemy.

He will see that capital become free will make him no less a slave than capital trammeled by customs duties.

Gentlemen! Do not allow yourselves to be deluded by the abstract word _freedom_. Whose freedom? It is not the freedom of one individual in relation to another, but the freedom of capital to crush the worker.

Why should you desire to go on sanctioning free competition with this idea of freedom, when this freedom is only the product of a state of things based upon free competition?

We have shown what sort of brotherhood free trade begets between the different classes of one and the same nation. The brotherhood which free trade would establish between the nations of the Earth would hardly be more fraternal. To call cosmopolitan exploitation universal brotherhood is an idea that could only be engendered in the brain of the bourgeoisie. All the destructive phenomena which unlimited competition gives rise to within one country are reproduced in more gigantic proportions on the world market. We need not dwell any longer upon free trade sophisms on this subject, which are worth just as much as the arguments of our prize-winners Messrs. Hope, Morse, and Greg.

For instance, we are told that free trade would create an international division of labor, and thereby give to each country the production which is most in harmony with its natural advantage.

You believe, perhaps, gentlemen, that the production of coffee and sugar is the natural destiny of the West Indies.

Two centuries ago, nature, which does not trouble herself about commerce, had planted neither sugar-cane nor coffee trees there.

And it may be that in less than half a century you will find there neither coffee nor sugar, for the East Indies, by means of cheaper production, have already successfully combatted his alleged natural destiny of the West Indies. And the West Indies, with their natural wealth, are already as heavy a burden for England as the weavers of Dacca, who also were destined from the beginning of time to weave by hand.

One other thing must never be forgotten, namely, that, just as everything has become a monopoly, there are also nowadays some branches of industry which dominate all others, and secure to the nations which most largely cultivate them the command of the world market. Thus in international commerce cotton alone has much greater commercial than all the other raw materials used in the manufacture of clothing put together. It is truly ridiculous to see the free-traders stress the few specialities in each branch of industry,throwing them into the balance against the products used in everyday consumption and produced most cheaply in those countries in which manufacture is most highly developed.

If the free-traders cannot understand how one nation can grow rich at the expense of another, we need not wonder, since these same gentlemen also refuse to understand how within one country one class can enrich itself at the expense of another.

Do not imagine, gentlemen, that in criticizing freedom of trade we have the least intention of defending the system of protection.

One may declare oneself an enemy of the constitutional regime without declaring oneself a friend of the ancient regime. Moreover, the protectionist system is nothing but a means of establishing large-scale industry in any given country, that is to say, of making it dependent upon the world market, and from the moment that dependence upon the world market is established, there is already more or less dependence upon free trade. Besides this, the protective system helps to develop free trade competition within a country. Hence we see that in countries where the bourgeoisie is beginning to make itself felt as a class, in Germany for example, it makes great efforts to obtain protective duties. They serve the bourgeoisie as weapons against feudalism and absolute government, as a means for the concentration of its own powers and for the realization of free trade within the same country. But, in general, the protective system of our day is conservative, while the free trade system is destructive. It breaks up old nationalities and pushes the antagonism of the proletariat and the bourgeoisie to the extreme point. In a word, the free trade system hastens the social revolution. It is in this revolutionary sense alone, gentlemen, that I vote in favor of free trade.

[ Marx's speech appeared in French, in Brussels, in early February 1848; translated into German the same year and published in Germany by Joseph Weydemeyer -- friend of Marx and Engels. In compliance with a wish expressed by Engels, this speech was appended to the first German edition of _The Poverty of Philosophy_ (1885). It has usually been included in appendix in printings of that book ever since. ]

[Rodney King]

Unless Ricardo is advocating that the governments involved should forbid the production of wine in England and wheat in Portugal, understanding comparative advantage seems as interesting and useful as understanding why some people like the taste of apples and some don't.

What Ricardo says is that a nation is best off doing what it does comparatively better than other nations. This is useful when U.S. textile mills complain about Mexican competition. Ricardo would say that the U.S. is better off focuisng on high-tech and other stuff we do well, and letting the Mexicans make our underwear. You may not agree, but this is how is theory is relevent, to answer your question.

[Jethro Tull]

So,,,now you going to cry to JIMROB?

Go ahead you Harry Browne wannabe.

But remember, it was you who hurled the first insult.

[Rodney King]

I did not cry to JimRob, never have, never will. I did not hurl an insult at you. You have hurled a number at me.

[Rodney King]

Go ahead you Harry Browne wannabe.

It's really quite amazing how you try to make points with totally irrelevent topics.

[LSJohn]

Are "Brigadeers" or "Republicans" un-named amorphous groups?

Would you take it personally if I said "Republicans are morons"?

You insulted a clearly identifiable group, many of whose members are well known to us. You were counter-attacked by a member of that group for doing so. You provoked it. You asked for it. You got it. Now you're shocked and insulted.

[Cu Roi]

Yes, Ricardo was Marx's favorite economist. Marx, however, was very critical of Ricardo's view of history and human nature and supplemented it with his own, coming to radically different political conclusions.

Economics was a new field at the time of Marx's writing, and there were very few good economists. The Corn Laws were nothing but an attempt by the plundering class to extract rents at the expense of society as a whole. The fact that Marx agreed with Ricardo on this doesn't reflect poorly on Ricardo but rather on the Brigadiers who fail to posess the few insights on the subject that even Marx had.

[Rodney King]

But, in general, the protective system of our day is conservative, while the free trade system is destructive. It breaks up old nationalities and pushes the antagonism of the proletariat and the bourgeoisie to the extreme point. In a word, the free trade system hastens the social revolution. It is in this revolutionary sense alone, gentlemen, that I vote in favor of free trade

I think this hardly qualifies Ricardo as Marx's favorite economist. For example, I prefer when real far left liberals win office to moderate liberals, because the far-left liberals quickly show themeselves to be idiots, which hastens a conservative reaction, where as the moderate-liberal is able to con all of the soccer moms. So, for example, I was rooting for Freddy Ferrer in the Primary against Mark Green (At the time I thought Bloomberg had no chance, thank god I was wrong). That does not mean that "Ferrer is my favorite politician." In fact, it is the exact opposite.

For Marx to say that he supports the free traders like Ricardo because they are going to make his revolution easier does not mean that Ricardo is his favorite economist.

[Jethro Tull]

"I did not hurl an insult at you."

Re-read your #2.

It's an insult to me, and all members of Pat's Brigade.

[Jethro Tull]

From # 15,

"Marx, in fact, based a great deal of his economic theory on Ricardo's writings."

[Rodney King]

Are "Brigadeers" or "Republicans" un-named amorphous groups?

Well, I would tend to think so. For example, if someone said to me before "Is LSJohn a brigadier", I would have said I have no idea.

Would you take it personally if I said "Republicans are morons"?

Not at all, and in fact it is said a thousand times per day on this forum.

You insulted a clearly identifiable group, many of whose members are well known to us. You were counter-attacked by a member of that group for doing so. You provoked it. You asked for it. You got it. Now you're shocked and insulted.

Look, I am not shocked and insulted. I have a thicker skin than that. He insulted me, and that was fine. Then, while debating the logical points, he came at me again and again and again. I simply don't have time for that. Then he did it again calling me a cry-baby for whining to Jim Robinson, when in fact I did no such thing. Call me what you want, I don't care. But I am not going to sit here all day and debate someone whose only respone is "twit", "moron", "cry-baby", etc. Is it simply a waste of time.

[Rodney King]

OK, well if you took that personally than I apologize.

[LSJohn]

Ricardo would say that the U.S. is better off focuisng on high-tech and other stuff we do well, and letting the Mexicans make our underwear.

I think your example is a case of absolute advantage, but if the point is that the U.S. should do nothing to protect the U.S. textile industry from the advantages enjoyed by the Mexican textile industry, as a purely economic question, we agree. National security considerations shouldn't be thrown out the window, but they probably don't much apply to underwear.

[Rodney King]

"Marx, in fact, based a great deal of his economic theory on Ricardo's writings."

You may be right, and you have posted a lot of info that I have not seen before, and haven't had time to digest. However, I would point out that if I were ever famous and someone asked me what I based a lot of my political theores on, one would certainly be Hillary Clinton, as she has shown me that tyranny and facism are actively lurking in this country and capable of attaining power. Hillary Clinton has made me more anti-government than anyone else. That doesn't mean that I like her.

[Rodney King]

think your example is a case of absolute advantage, but if the point is that the U.S. should do nothing to protect the U.S. textile industry from the advantages enjoyed by the Mexican textile industry, as a purely economic question, we agree. National security considerations shouldn't be thrown out the window, but they probably don't much apply to underwear

Then we are in agreement. I would not want to see the U.S. steel industry completly disappear, nor many others. However, I don't bemoan every low-end job that is lost to mexico, particulalry textiles.

[LSJohn]

Go ahead you Harry Browne wannabe

Hey, now. You've done what he did.

[LSJohn]

OK, well if you took that personally than I apologize.

Now I'm shocked . . . . . and impressed.

Good show.

[annalex]

The way I understand it is that a free market will seek the higher productivity through the pricing mechanisms; there is no government planing involved or advocated. The logic of comparative advantage shows that, if free markets are allowed to operate (1) England would specialize in wheat and Portugal -- in wine; (2) both England and Portugal will see living standards rise.

[Nick Danger]

Marx, in fact, based a great deal of his economic theory on Ricardo's writings

That is not an argument against Ricardo. That is an argument against allowing arm-waving ignoramuses to dominate a conversation.

That is about as stupid and weak an argument against Ricardo as exists. Lots of people have based their work on Ricardo, for the simple reason that Ricardo was right. There is nothing he says about comparative advantage that isn't obvious, common sense. He just happened to be the first guy to write it down. We're not talking here about some esoteric theory of econometric gravitation, we are talking about the everyday observation that some people are better at some things than others. Trying to tie that observation to Marx, or Hitler, or whatever Devil you choose, just sounds like idiot-speak.

If you want to argue against Ricardo, at least do it right. The theory of comparative advantage stops at economic efficiency. There are other concerns in the world. For example, it is true that most Middle Eastern countries can produce crude oil more cheaply than other countries. All Ricardo says, correctly, is that from an economic efficiency standpoint we should buy our oil from the Middle East, and sell the Middle Easterners food, which we can grow more cheaply than they can.

However, there might be reasons having nothing to do with economic sufficiency -- having to do with survival, for example -- that trump economic efficiency when we are deciding what to do about getting oil. Finding non-economic reasons to avoid dealing with a more efficienct supplier is about the only way to defeat Ricardo's argument. Trying to tie him to Marx is just throwing obvious red herrings around.

[justshutupandtakeit]

It is not the display of armwaving ignorance which amuses me so much as the posting of excerpts which undermine the ignoramuse's arguments while he believes them to support him. LoL

[L_Von_Mises]

Comparative advantage should be considered by whom?

It's a simple make or buy decision. It does not necessarily have to translate to broad economic policy of a nation, but implicitly it does. What are our productive advantages? Do we excel at high tech or menial labor? Is it better to export software and semiconductors and import cheap clothing and sugar? Would we be better off making all of it ourselves, or is it better to apply our resources towards areas that we have a competitive advantage instead of those that we have a competitive disadvantage? Granted, my examples could probably be better applied to absolute advantage, but comparative advantage is similar in principle.

Regarding your question about his examples, he picked two that would be blatantly obvious to his contemporaries. They are used simply for illustrative purposes. Additionaly, books of this type were written to be read by one's peers who all understood the concept of using simple examples to present a model or idea. Granted economics is less scientific than physics but many economic theories are certainly valid. More is usually better - at least if it is positive good (not something like pollution), we would like to pay the lesser price for similar goods, it is possible to rank our preferences, and so on.

Ricardo was far from perfect, he simply made a major improvement to an existing idea. He was a horrible writer (his stuff is darn near impenetrable) and he still believed in the labor theory of value. It would take several years for the marginalists' ideas to develop and take hold. A great summary can be found here.

Certainly, the book containing his argument is almost 175 years old and many improvements in the study of economics have come about in that time. But, again, this does not mean that the basic premise of his argument is wholly ivalid.

Looking at your earlier comment: That's just what we need: American labor earning the same paltry wages as Third World peasants. That'll do wonders for our standard of living! This is exactly what it says not to do. Do what you do best or have an advantage with. In our case it says that we should not produce goods here that could be produced at a lower cost elsewhere such as clothing. If unskilled labor used to produce a good elsewhere is sufficiently cheap so as to offset any tarriffs, transportation costs, or productivity advantages that could come from added technology utilized here then we should let them make it so we can buy it cheaper. Does it make more sense for Bangladesh to make t-shirts or airplanes? Would you fly on an airplane made there if they made them?

[LSJohn]

Thanks. As a justification for not protecting domestic industries from more efficient foreign competition, comparative advantage is well worth understanding. As justification for government dictating specialization . . . . well, you know.

I think what bothers Buchanan and those who tend to agree with him is not that English wine-makers might decide to produce wheat instead, but that they would move their wine production capacity (and jobs) to Portugal, but Portugese wheat producers wouldn't move to England to balance the equation. Given a true free market (and no national security concerns) things might be expected to balance out to the benefit of everyone. Problem is it's not always wise nor entirely possible to graft some true free market principles onto a heavily controlled and regulated market -- just as IMO it would be unwise to graft the possibly valid libertarian idea of open borders onto our current welfare state.

What I detest is that the term "free trade" now appears to have many meanings to its alleged advocates, the most common of which seems to be "Trade managed only to the extent which benefits me." (Of course I refer to political and corporate advocates, and their supporters, not theoreticians.) It seems more free trade opponents use the term correctly than its (alleged) supporters.

BTW, I didn't (and wouldn't) write this:

[Looking at your earlier comment:] That's just what we need: American labor earning the same paltry wages as Third World peasants. That'll do wonders for our standard of living!

Although I agree with the sarcasm of that statement, I don't agree it applies to the concept of comparative advantage and/or non-protectionism.

[L_Von_Mises]

My apologies - it was Willie Green that made that comment. I was a little hasty when I copied and pasted not paying attention to the poster's name.

On your other point about special interests - I completely agree. It seems as though a lot of the disparities in tarriff rates are based on who has the most pull in Washington. Some of this might possibly be scaled back if more info were available to the voters on who is pushing specific tarrifs. Businesses don't like bad PR. Unfortunately, no one sees a tarrif when they purchase a good.

[Jethro Tull]

#36: "OK, well if you took that personally than I apologize."

Thanks Rodney, and I accept your apology.

You're an OK guy....

[Jethro Tull]

#43:"That is about as stupid and weak an argument against Ricardo as exists. Lots of people have based their work on Ricardo, for the simple reason that Ricardo was right."

Oh really...

In hindsight, free people throughout the world now know Marxist philosophy has enslaved and killed hundreds of millions of people.

And you consider Marx's embrace of Ricardo a "stupid and weak argument"?

I'm convinced Free Traitors are hopeless.

Just as it took 9-11 to change the immigration debate, so to will it take a national tragedy to change the mindset that allows Communists China to enjoy a $40-$60 billion American trade surplus per annum...

[general_re]

It's just not a very good argument, from a logical standpoint. It's essentially an ad hominem attack on Ricardo - he had no control over whether Marx liked his theories or not, and you're just trying to smear him by associating him with Marx.

Really, think about it. Rejecting something simply because Marx thought highly of it means you're going to be rejecting an awful lot of things. I hear Marx wore clothes and ate food, too, so I assume in your zeal to shed all things Marxist, you're sitting in front of your computer, naked and starving.