No, JOBS are disposable. Theoretically, there is nothing stopping the person from retraining and finding a new job.
Wow, you’ve reversed decades of study as well as fundamental logic in an SDMB post. I’m impressed…
… oh, no, wait, you haven’t.
Since when was the concept of comparative advantage considered immune from, you know, comparative advantages changing?
Can you name one such economist? One name will be fine, thanks.
Seriously, what economist is suggesting the United States make ONE THING? The United States is the most diversified economy in the history of humanity.
Where do you think jobs come from? I’m asking that question with absolute sincerity; what creates jobs?
*Theoretically. *Is that good enough?
Never mind for you. I get the feeling it’s more than good enough for you. Is it good enough in the real world? Not the one conservatives use to thump liberals over the head; the real real world.
Yes? And? Theoretically, there’s a lot of things that are supposed to happen. Theoretically, the stimulus should have sprung us out of the recession and showered us with all kinds of blessings. Theoretically, the free market would have been self-regulating and the travesty of the housing bubble would have never happened. I have a theory that if I flapped my arms fast enough, I can fly like Superman. So theoretically, it could happen (yes, I know it’s not a theory, just a delusional hypothesis. No nitpickiness allowed here). Theories abound, but they don’t necessarily match up against reality.
Yes, an office worker putting out spreadsheets for 10 years could theoretically could retrain as a machinist–this is assuming that they are mechanically inclined in the first place and have saved enough money for classes. But the second part of that theory is where that it falls a part. There may be new jobs for mechanists, but who’s going to get hired: the one who’s got 5, 10, 15 years under his belt or the one who has none under his belt,? And if the office worker was pulling in $25 an hour with benefits, they will need to make a serious reduction in their lifestyle if they’re going to go from that to $15 an hour, especially if their new job is in a place with a more expensive cost of living, they have kids, and they now have to pay a mortage on a house they can’t afford on TOP of rent for a 2-bedroom apartment closer to their new job.
Theories are fun, especially when you put them in your navel and gaze at them all day. But in the real world, theories don’t put bread in your pockets.
And JOBS have to be disposable or there is no increase in productivity. And increases in productivity drive gains in the standard of living.
Isn’t this exactly what Ricardo’s Trade Theory says? I know it is simplified down to two countries, two goods; but it suggests it is optimal for country A to concentrate the majority of its production capabilities on one economic activity, and country B to concentrate on another.
The problem with this theory is it doesn’t take into account the different growth potential of different types of economic activity. It’s true that the US has an extremely diverse economy, and is rich; meanwhile other countries that don’t, and concentrate entirely on one good/industry are generally poor - the banana republics being a prime example of that. They specialised in the sector they had a comparitive advantage in. Now they specialise in an industry with little hope for increasing levels of production or increasing wages.
I fail to see how an economy that specialises in farming/ raw materials can keep up with another economy that specialises in manufacturing. It seems obvious that over time, the gap between the manufacturing country and the agricultural industry will continuously increase as the agricultural economy’s output peaks when all the land is being used, while the manufacturing economy’s output can potentially increase forever, as innovation leads to new products and more higher production capabilities. The theory of comparitive advantage makes no distinction between different types of economic activity, and whether they are subject to increasing (manufacturing) or decreasing (agricultural) returns.
To counteract this, the idea is that the farming economy is supposed be forward thinking and invest their money into future industries or technologies that will bring in money. You deliberately remake your economy to handle a future world that’s different even though your current cash cow happens to be exporting bananas.
For example, Dubai leaders know that oil exports won’t last forever so they invest today’s oil profits heavily in infrastructure to attract tomorrow’s tourism. Did they make right bet to make? Only time will tell. Perhaps Dubai should have put their money into elaborate genetic research centers and become a mecca for future bio technology. Or maybe they should have sunk all their money into cutting edge solar energy technology which they could sell to Europe in 50 years. Who knows?
The idea isn’t to think that country A’s “bananas” will magically keep up with country B’s “microchips.” That’s static thinking. Instead, you you make sure that country A’s citizens are empowered to provide something of value to Country B. That “something” will inevitably change.
If your country’s leaders assume a static picture of world preferences, the next generation of your citizens will suffer economically.
No.
The concept of comparative advantage is an economic explanation of why some things happen. It’s not a policy, it’s science. Believing that atoms can be split through fusion does not commit you to one position or another on nuclear weapons deployment or usage; similarly, understanding the concept of comparative advantage does not commit you to one position or another on matters of national economic policy.
Life is not so simple as to allow a big country to have all its citizens make one thing - that’s impossible, anyway - and there are lots of arguments for many different nuances in national trade strategy. But if you don’t understand comparative advantage you don’t know what you’re talking about. Spouting off about economics and international trade without understanding the concept of frickin’ opportunity cost is like spouting off about biology without knowing what a cell is.
The point I was trying to illustrate by asking Susanann to explain it is that she doesn’t understand it; she’s woefully ignorant of most of the things she’s talking about, but that’s a common thing when it comes to the subjects we’re discussing here. Discussions of international trade and immigration always seem to have a xenophobic edge to them that is constantly defying the science of economics and a healthy dose of common freakin’ sense.
I note, for instance, that still nobody has explained to me why, if immigrants cause unemployment, the unemployment rate is not 90%.
First of all, which banana republics had a comparative advantage in growing bananas? How do you figure this was true? Just because bananas grow in Guatemala (I assume) better than they do in the USA or Canada or Europe doesn’t mean Guatemala has a comparative advantage in growing bananas.
I suspect, in fact, that a lot of Third World countries that were colonized and preyed upon probably didn’t and don’t have a comparative advantage in the things the First World made them produce. Just because it’s good for us for Bangladesh to produce pineapples does not mean it’s good for Bangladesh (I don’t know if it’s not, but I needed to cite a place where you can grow pineapples.)
There isn’t a “Banana republic” on earth whose poverty is explained by their being too devoted to David Ricardo. Such countries are poor largely because they’re horribly governed, corrupt kleptocracies where the rule of law is flimsy and much of the money stolen, and in many cases their actual national interests and trade advantages were under attack by First World countries, who historically were very predatory in their use of tariffs and trade barriers towards such countries and to a large extent still are. And such countries are in fact quite famously protectionist with tariffs and trade barriers; their histories are for the most part not one of free trade grinding them down. It’s a nice, simple explanation for us First World folk to say “well, they’re poor because all those dummies go is grow our bananas” but that isn’t why they’re poor. They’re poor because they’ve been led by thieves, were robbed by colonial governments, and are in many cases racked by civil strife.
Look at the few African countries who’s managed to actually acheive a measure of political stability and freedom. Botswana, South Africa, recently Namibia. Their standards of living have soared over the African average. Per capita GDP in Botswana is about $11,000 a year; in most subn-Saharan countries it’s a small fraction of that. Why is Botswana so much more successful? It’s not because they raised a bunch more tariffs than Tanzania or Malawi, it’s because they built a functioning country, governed by elected officials, where the laws and fairly applied and people can more or less do as they please as long as they don’t hurt anyone. It’s been running that way for fifty years. If you give human beings a chance to freely engage in economic activity, they WILL find a way to be productive and better their lives.
The data came from the Bureau of Labor Statistics, so I highly doubt it counts anything that wasn’t produced by American workers.
A little late to the thread, but this specific point bears further discussion.
Yes, free trade and the rules of comparative advantage are positives in the proper economic system. One of the current ‘structural’ (popular term) issues is China’s fixed exchange rate.
In a normal system, China’s currency should have appreciated as we buy more of their goods. That in turn would make China’s pervailing wage rise (in USD terms) and US good cheaper to Chinese consumers. Exchange rates are the mechanism that are supposed to keep the system in balance.
Unfortunately the Chinese, by fixing their exchange rate at a below-market level, have subsided their exports, built their industry, and used their surplus dollars to buy US Treasuries. This in turn keeps our interest rates artificially low, encourages unsustainable leverage in the US, and strains US manufacturing.
I am 100% in support of Free Trade and a believer in the economic wonder of comparative advantage. However, we DO NOT have free trade with China. They are a mercantilist economy and are abusing the current global currency regime. This has real costs to the US’ manufacturing base and our economic vitality.
I wasn’t talking about policy, I was referring to the two country example of comparitive advantage. Where only two types of goods exist, and the countries pick one to specialise in.
So teach me. I don’t have an economics degree, although in a few years I will. I’m eager to learn, but to be honest, a lot of economic theory seems extremely iffy to me.
Is economics a science? Social science isn’t the same thing as a science.
And economic theory has a lot of critics, who don’t believe it is effective in real world situations. I’m not saying they’re right, just that “defying the science of economics” is not as ridiculous as defying the laws of physics or chemistry.
If they can grow more bananas per acre, then they have an absolute advantage. Unless they also have an absolute advantage in Product B as well, then surely their comparitive advantage is in bananas?
What would their comparitive advantage be in then? Is it possible for a country not to have any comparitive advantage in any goods?
So. The more people get downsized, the better it is for everybody. What am I missing here?
That machines manufacture product cheaper than people do, allowing you to buy a $49 DVD player. How much do you think cars would cost if they were built by people instead of robots and those people were paid a living wage? Cell phones? Clothes? Frozen pizza?
Your last post had 17 words in it.
Would it be better if telegraph operators were not downsized or eliminated so that you could pay a human being to tap out Morse code to broadcast your 17-word message?
Do you have ice cubes in your refrigerator? Or is the world better if we pay human drivers to drop off blocks of ice at your door. You would then carry the heavy block of ice and put it in your a storage container we used to call an “ice box.”
Has our “standard-of-living” improved? Or is Morse code and blocks of ice the superior standard-of living?
It sounds like you’re falling into the same self-centered thinking. If SOMEONE ELSE’s job got eliminated through efficiency, it’s good for me and my quality-of-life. But if it’s MY job that got eliminated, it’s not better for society.
I think the point is that those “someone elses” are not Americans. If we’re continually lowering 300 million Americans’ quality of life so that every one of China’s billion or so peasants can earn 200 dollars a month instead of 100 – well, call me self centered, but that doesn’t sound like such a great deal for anyone but the Chinese peasant.
That’s only part of the story.
One American’s quality of life is reduced; one Chinese peasant’s quality of life is increased; and the quality of life of an unknown number of people (Americans and furriners) is improved because they can now buy the cheaper Chinese widget for less.
Until all widgets across all categories are witnessing progressively lower prices as they’re churned out by China, and the result is chronic deflation in the US. Then things are not so fun, to put it mildly.
Yes, which is a simple way of illustrating the point. It’s akin to using an apple falling out of a tree as an example of gravity. It doesn’t mean that everything that falls is an apple, or that everything falls at exactly the same rate of speed, or that things can’t avoid falling if you attach rockets to them.
Imagine you were sitting in a high school physics lecture and a teacher used a ball falling a specified distance to demonstrate gravity, and someone jumped up and said “I think this theory of gravity is iffy. Why, just the other day I saw a balloon float. It didn’t fall at all! And how to airplanes fly? And why does a feather fall so much more slowly than a bowling ball? This physics stuff is iffy.”
If you’re taking economics, I doubt I can teach you anything your professors can’t teach you more effectively. Crack the ol’ textbooks open.
I can certainly try, but… and I mean this with total sincerity, and mean no malice… you sound like you’re determined to not believe it. When you go into something saying “I don’t understand it but it sounds iffy to me” doesn’t that strike you as being a poor position from which to learn?
Chemistry isn’t the same as physics. Physics isn’t the same as biology. Of course economics is a science. Science means to find answers to the nature of our universe by using systematic methods of inquiry. Economics isn’t any less a science than physics. Just because it’s a relatively new discipline and isn’t necessarily EASY doesn’t mean it isn’t a science. Social sciences have challenges but they’re still sciences.
Physics was no less a science in 1660 despite the fact that it was primitive as compared to today (and wasn’t called “science” - back then they called it “natural philosophy” - but never mind) and was practiced by people who knew less about science than today’s eighth graders. Science is a process; there exists in every branch of science a base of knowledge, but the real good stuff is when you use that base of knowledge to explore the unknown by asking questions and finding the facts that support or disprove your hypothesis.
A lot of what is foisted off in the media as “Economics” is in fact politics and policy. I suppose that’s true of other sciences as well; look at the nonsense thrown around around stem cell research, or global warming. Is climatology any less scientific because a lot of the global warming doubters are full of horse crap?
I should hope economic theory has critics. That’s what science is. The entire point of science is to challenge what you know by looking at the real world.
Possibly. Again, it depends what Product B - or C, or D, or E - does for them. We agree, though, on the salient point, which is that comparative advantage is not absolute advantage.
And in real economies, you have different levels of comparative advantage at different economies of scale. Just because Bananaland has a comparative advantage in producing X bananas does not mean they will enjoy the same advantage in producing Y bananas. At the same time that governments forcing diversification is risky, forcing specialization could be equally risky, because you may be forcing banana production beyond comparative advantage.
It would appear, for instance, that my country, Canada, to some extent enjoys significant comparative advantage in producing Blackberrys. (Or as RIM insists on calling them, “Blackberry devices.”) I say that based on the fact they keep producing more of them and hire people by the fricking busload. They can’t hire 'em fast enough. But it’d be a bit nuts for the government to intercede in the market and force everyone to make Blackberrys, wouldn’t it? There’s rather obviously not going to be a continuation of the trade advantages in making Blackberrys all the way up the ladder from ten thousand people making them to 35 million people making them.
No, it isn’t, in any practical sense. Comparative advantage is a measurement of opportunity cost between goods the nation itself produces.
Theoretically you could have a nation that
A) Produces no goods or services of any kind, or
B) Where every single good or service you can possibly produce has exactly equal opportunity cost in every respect as compared to all available foreign trade partners,
… in which case there would be no comparative advantage, but practically speaking that obviously would not happen in the real world. I would assume Bangladesh has many things they can profitably trade (their clothing industry would be my first guess.)
Except that not all widgets across all categories will be made in China, just the ones that can be made more cheaply there.
Where did you get the idea I agree with massive unemployment for anyone as a boost to “standard of living”?
Usually when someone says “What am I missing here?”, it means “It doesn’t add up, and I ain’t buying it.”