We get our clothes from the tailor - or from Penny's or Marks and Sparks
We get our meat from the butcher and our produce from the greengrocer.
We get our milk from the milkman.
Isn't this more sensible than keeping two cows - one to slaughter - growing 17 different vegetable, running up tee-shirts on the sewing machine, and spending a couple of weeks producing an ill-fitting suit?
So, why does this all change at the docks?
Free Trade is not a political policy. It is natural for humans to exchange.
Protection is a policy that tries to prevent this natural cooperation from happening.
How simple this all is. Why make it complicated? Perhaps because that's the way the Neo-Classicals make a living.
Harry
_____________________________________
Arthur wrote:
Somewhat correct with the following assumptions:
That countries produce according to their resource endowment (the wine and
cloth argument from Ricardo vis a vis Portugal and England)
But in the networked knowledge age we find that resource endowment is also
intelligence and knowhow and economies can develop in ways that wouldn't
have been guessed, given their natural resource endowment. Consider
Singapore or South Korea. The latter doing very well in ranges of
technoology intensive products. Or India with its software industry. And
what would Keith's outline tell China: do what you have always done, play to
your resource strengths and leave high tech to the west? Also resource rich
countries can do quite poorly given internal commercial and cultural
considerations, viz., Argentina.
The outline below offered by Keith is appropriate for a relatively fixed
pattern of natural resource endowment. Somewhat as the early British
writers saw things and appropriate too for their view of England vis a vis
the rest of the trading world.
arthur
-----Original Message-----
From: Keith Hudson [mailto:[EMAIL PROTECTED]]
Sent: Friday, February 01, 2002 4:21 AM
To: Harry Pollard
Cc: [EMAIL PROTECTED]; Cordell, Arthur: ECOM
Subject: Economics as a science (was Re: Double-stranded Economics)
Hi Harry and Arthur,
For the time being, let me take just one strand from your (HP's) latest
mail and attempt to show how economics can be used as a science. This will
never make the whole story at all times as we (HP and KH) both agree --
human nature is also involved -- but the overall structure over the longer
term ought to be scientifically analysable *and* predictions made with a
high degree of confidence:
At 12:48 31/01/02 -0800, you wrote:
(HP)
<<<<
You are right to separate the two strands.
However, my separation would be different.
The "science" you speak of I think is mostly mathematics. Mathematics is a
great tool, but is never better than its premises. And they are often
highly suspect.
These scientists have drawn around themselves a self consistent world which
is not part of the real world. (As is said, Arthur, to an economist,
reality is a special case!)
This is why they are completely unable to predict.
>>>>
I will attempt to prove that the composition of world trade will be largely
predictable over the long term (that is, subject to temporary wayward
swings of, what Greenspan calls "irrational exuberance") .
-----
My five basic premisses are as follows -- the first two contributed by you
(with which I obviously agree). I think these premisses are reasonable but
I'm not going to attempt to justify these here:
1. Man's desires are unlimited;
2. Man seeks to satisfy his desires with the least exertion;
3. Ricardo's Law of Comparative Advantage holds;
4. As world-wide competitiveness increases, all national currencies (or a
single world currency in due course) will increasingly represent the
economic (that is, energy) efficiency of operations of supply of goods and
services in any country, region, city, whatever;
5. As world-wide competitiveness increases, then the pattern of spending of
all customers on staple goods and services will become increasingly similar.
--------
Proof:
Let the world consists of two countries only -- X and Y.
Let X and Y have similar standards of living and similar patterns of
consumer spending at a given instant.
Let each country produce goods and services A,B,C,D,E,F,G,H.
Let the efficiency of production of country X is in the order:
A,B,C,D,E,F,G,H; and that the efficiency of production of country Y is
E,F,G,H,A,B,C,D.
Then, clearly, the standard of living of both countries can be maximised
when country X makes and exports A,B,C,D only to country Y, and country Y
makes and exports E,F,G,H only to country X.
This can now be generalised to all goods and services and to all countries,
regions, cities and, indeed individual producers and consumers.
Therefore:
Given enough computing power, then the overall pattern of world trade can
be predicted.
------
Now the above can't account for new discoveries and innovative goods and
services. But, given that important new ones come along now and again,
then, as soon as they become incorporated in one statistically valid region
(that is, one with enough consumers to give a sensible sample), then a
reformulation of future world trade can be arrived at.
------
This has some important consequences:
1. Maximising world trade is desirable for all;
2. However, the shunting of production or service operations around the
world (say, on the basis of the cost of labour only) by individual
corporations with a narrow range of products is not desirable, nor stable,
over the long term.
This is the valid core of the argument of the anti-globalisation protesters
and if they were to confine themselves to this point only then I would
agree wholeheartedly with them.
3. Ideally, each country, region, city, of individual (any entity with
aspirations) should not copy the staple operations of others but should
maximise those operations which are unique to it/he/she (or to which
it/he/she is especially benefited by location, climate, etc.).
Very good examples of the dangers of not doing this are those of the
'copycat countries' of Asia which tried to replicate the production of
consumer goods of other more established countries. They may succeed very
well for a while with temporary increases in efficiency, particularly if
they have a large domestic market, but unless they can show clear
efficiency advantages over the longer term then they're in trouble as
regards exports. Today, for example, Japan is not able to invest profitably
at the present time because its present production mix is too similar to
America's and doesn't seem to be developing anything which gives it a clear
comparative advantage.
The lesson is that all entities should specialise in what they are already
particularly good at, or in the unique benefits which their region
possesses. (As the pattern of consumer spending becomes increasingly
similar, or aspired to, in all countries, this explains why tourism is
becoming increasingly important to all countries, developed and undeveloped
-- and speciality holidays even more so.) This isn't to say that they
shouldn't also produce what other countries are able to but this won't
increase their standard of living because they could import quite as easily
-- this would only be 'make-work'.
Keith Hudson
******************************
Harry Pollard
Henry George School of LA
Box 655
Tujunga CA 91042
Tel: (818) 352-4141
Fax: (818) 353-2242
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