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Cayman Islands24199 Posts
when we are considering a long run situation, the decision is not simply 'good' or 'bad' but how quickly the desired conditions are reached, how strong the various feedback effects are, and whether these can be manipulated by either government action or altered corporate behavior.
thus, while we may recognize that trade in general is a good direction, leading to, again eventually, the development of less capitalized countries and higher wages for their workers, it is still true that those who are driving for opening markets and labor pools are looking for short term gains, and they are driving hard bargains in trade agreements. the marxian view of this situation is not that ridiculous when we look at the way corporations make investment decisions. here efficiency is really not a simple measurement anymore. the difference in wages for the short term between a worker in india and one in chicago reflects their bargaining power more than productivity. for the firm, that difference is not so much reflected in scaled up production but in the balance sheets and higher stock prices. merely equating what the firms want with efficiency is not a sensible way of going about development.
in any case, the issue here is not trade versus no trade at all, but the rules of the game. when developing countries are competing against each other for capital, their leverage is low without effective international standards or 'collusion' between them. for the people, while it is true that working for nike etc is better than staying on the farm or eeking out a living in the city, their situation is not that good in itself. for people who care about labor conditions etc, their lives would not be held up as shining examples of capitalist success. the movement toward long term prosperity would eventually lead to basic labor regulations being implemented anyway.
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On March 04 2009 06:11 cUrsOr wrote:
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Ok, it sounds like you're actually making an effort to learn, and I can respect that. But can you try not to insert your extraordinary personal bias into everything and keep an open mind? Try not to reject ideas before you understand them. Even economists who argue for "fair trade" acknowledge that the concept of comparative advantage tends to generate more value in the long run. But they argue that there are market failures. Nobody, I mean NOBODY, believes that local production is more efficient, and there is sound empirical and theoretical basis for that. You're in good company here and we're not just feeding you capitalist pig propoganda ok, so please quit the cynical remarks about oil and what da fa not.
that said, let's begin with ahrara's lesson in absolute and comparative advantage. sit round ya'll! i've many a tale to tell...
Absolute advantage
Say Bob has a tract of land on which he can grow 4 apples or 2 bananas a day. To live, he needs one of each every day. So he splits his time: every day he grows 2 apples and 1 banana.
Say there is another farmer Jim that has land suited for growing 2 apples and 4 bananas a day. To live, he needs one of each every day. So he grows 1 apple and 2 bananas.
In a world without free trade, together Bob and Jim grow 6 pieces of fruit a day. But say they meet up one day and decide to specialize and focus on what they produce best. Bob grows 4 apples a day, Jim grows 4 bananas a day. They trade so that each have enough fruit to live on, but they are now growing 8 fruits total. Instead of 2 leftover fruits, they have 4. They can take the surplus and sell it so they can buy more land or hire employees. This creates wealth twice as fast. That is absolute advantage. Once you've digested that, let's move on to
Comparative Advantage
Now let's say Bob has production capacity for
3 apples/day,
2 bananas/day,
or some combination of both.
Jim, who is a noob farmer can produce
1 apples/day,
2 bananas/day,
or some combination of both.
In a world without trade:
Bob produces 1.5 apples and 1 banana a day (this isn't the mathematical max, but just for example...)
Jim produces .5 an apple and 1 banana a day.
Jim can hardly feed himself, since he needs a whole apple a day. Moreover, the total production (their total "GDP") is 4 fruit a day. But if the two traded and specialized in what they can produce best:
Bob produces 3 apples a day
Jim produces 2 bananas a day
Jim trades 1 banana for one apple so he has enough to eat, and Bob does as well. Moreover, their GDP is 5 fruit a day, so there is more of value being created in a world of trade. Even though bob has an absolute advantage, the fact that Jim gets to specialize in what he makes the fastest (bananas) means he is creating more wealth for himself and others. That is to say, Jim has a comparative advantage in bananas.
Here's another way of thinking about it. If Bob sacrificed production of apples to produce 1 banana, because he cannot trade for it, he has to give up production of 1.5 apples. That's a .5 net loss in total production.
If Jim were to sacrifice production of 1 apple for bananas, on the other hand, he would be able to produce two bananas. As a result of specialization, Jim would be able to produce one additional piece of fruit a day! But he can't specialize unless he is able to trade for apples he needs, but can't produce as efficiently. Thus, Jim has a comparative, or relative advantage in producing bananas.
Even though the US has an absolute advantage in every respect to most nations with which we trade, other nations could have a comparative advantage. For reasons that have already been described, while some of that wealth is taken back to the home country, much of it remains in the "exploited" country in the form of wages and added productivity.
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On March 04 2009 06:19 ahrara_ wrote:
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Sir, I salute you for your patience and humour (e.g. noob farmer).
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there is enough elitism on this starcraft site without this. you guys know that.
so... you support free trade 100%. no one should have restrictions. okay. and free markets? or you guys support some sort of regulations on owernship, in these developing countries? im really interested.
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On March 04 2009 06:07 Boblion wrote:I think that sweat shops will last forever so  Private investors won't come and say '"I'm gonna build an university, an hi-tech research centre, a bank and an airport " Those things are really profitable for a country and its people ( higher profit margins :p ) whereas the profits made by sweat shops will mostly benefits the foreign firms. Of course the workers of the sweat shop will get paid but on the long term the state should definitly helps its growing industries. Especially if it is clearly evident that with of productivity/tech progress those industries will be competitive enough to flood the foreign countries markets. That the very strategy of Japan and the tigers/dragons.
Well sir you think wrong.
Just look at Shenzen, China. It is a Special Economic Zone, and first started as a bunch of sweatshops using cheap Chinese labour close to the financial centre of Hong Kong. These days, Shenzen rivals Hong Kong in new high-tech and financial developement, and sure as hell has a good airport (by the way, in what country do private investors build universities and airports?).
This process is working in all of China's free trade zones - high economic growth and hightech investments. Sweatshops are moving on further into China, to places which without doubt will soon see the boon of increased wages and education.
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On March 04 2009 06:32 cUrsOr wrote:
there is enough elitism on this starcraft site without this. you guys know that.
so... you support free trade 100%. no one should have restrictions. okay. and free markets? or you guys support some sort of regulations on owernship, in these developing countries? im really interested.
I never said that. There is a place for governments to step in and correct for market failure, and I do think income inequality is a problem. But I also acknowledge that free markets tend to be more efficient than public management and that savings are necessary for growth.
What I disagree with you on is your entire understanding of trade.
Anyway I don't want to go down this path. I'm honestly trying to teach some basic economic concepts here, and I'm curious if you're just going to ignore me. I updated my post earlier.
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partly my confusion, assuming free trade and free markets went 100% hand in hand.
so, Afghanistan is just exercising their Comparative Advantage in the Opium Market.
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oh fuck this i give up
ecael you were right
cursor you have the density of depleted uranium.
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On March 04 2009 06:32 cUrsOr wrote:
there is enough elitism on this starcraft site without this. you guys know that.
so... you support free trade 100%. no one should have restrictions. okay. and free markets? or you guys support some sort of regulations on owernship, in these developing countries? im really interested.
This is elitism that amounts to you being mocked for not knowing any basic build order at all but try to post in a strategy thread anyway. If you take the time to try to understand the concept then that's one thing, if you are trying to sum up the posts here to fit your own view without even trying to educate yourself in anyway that's another. Ahara took a lot more time than I am willing to spend to try to explain to you the concept of Comparative Advantage upon which the theories about trade is based on, you refuse to learn, you continue to then go on about the opinions expressed in our posts. Yet you expect your opinions to be taken with any degree of seriousness and to be responded to politely?
EDIT - If possible, cursor, stop posting on this thread about that matter for a bit, PM me about what you are trying to get at with your examples. It'll save a lot of frustration.
Ahara, I would have to disagree with this part while some of that wealth is taken back to the home country, much of it remains in the "exploited" country in the form of wages and added productivity.
That much is uncertain and is pending the government of that country as well as other factors, the only thing that I can say for sure is that purchasing power increases definitely under the Ricardian model, whether Investment and such follow is another affair. If that was simply meant to address the fact that regardless of real wage value the "exploited" country has a higher purchasing power then ignore this.
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The problem is that in real world apples and bananas, like sweat shops and high tech firms don't lead to the same profit margins.
So Bob who is a noob ananas farmer but a smart guy might want to borrow some money and make his own automatic pruning shears thus gaining a lot of productivity and making more ananas and profit than the poor and corny Jim.
But Bob is even smarter. He knows that he can make even more if he sells this gear to his pathetic neighbours. So he chops down all his ananas trees and build a pruning shears factory instead.
Then he teachs the notion of competitive advantage to his dear Jim. And when Jim finally understand that he can make more money making pruning shears, Bob is already producing his own farm tractor robots each with twelve automatic pruning shears.
That's how real world works.
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On March 04 2009 06:46 Boblion wrote:
The problem is that in real world apples and bananas, like sweat shops and high tech firms don't lead to the same profit margins.
So Bob who is a noob ananas farmer but a smart guy might want to borrow some money and make his own automatic pruning shears thus gaining a lot of productivity and making more ananas and profit than the poor and corny Jim.
But Bob is even smarter. He knows that he can make even more if he sells this gear to his pathetic neighbours. So he chops down all his ananas trees and build a pruning shears factory instead.
Then he teachs the notion of competitive advantage to his dear Jim. And when Jim finally understand that he can make more money making pruning shears, Bob is already producing his own farm tractor robots each with twelve automatic pruning shears.
That's how real world works.
Again, Boblion, that's why IMF and Development banks exist. The examples here are meant to describe a simple principle in the Ricardian model, one that has yet to be proven wrong even though the Ricardian model is now viewed as somewhat too simplistic to describe the proper nuances of International Trade. The point driven at here is that no matter who profits more, at least the two are both better than the non-trade state, that one person can ramp a higher I than another and resulting in overall higher A is another matter completely. At that, I fail to see how that deals with the principles behind the support of free trade at all.
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i was dead serious.
isnt that comparative advantage? the could grow wheat to feed themselves, but opium makes much much more money. so they grow opuim for lots of money, they can buy all the wheat they want, and other things too. i think it was the taliban that really started this.. but the fact that they get more Value from the opium, isnt that comparative advantage?
seriously.
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"depleted uranium"
lol. its less harmfull cause its depleted.
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Again, Boblion, that's why IMF and Development banks exist. Some would argue that the IMF and Development banks have been incredibly disruptive and have proliferated Boblion's scenario.
There are elements at play, like elements of real and percieved power, elements that you conceed that make the ricardian model 'too simplistic' for ignoring them. These last few pages have largely been an attack against a strawman. No one's stated that trade is bad. Trade is fine. Even cursor's shitty ability to debate has brought up a bunch of valid questions: Is 100% 0 barrier trade the BEST option for developing countries? Why? You've admitted his fundamental premise in acknowledging Bob's argument that there's a need for institutional regulation of trade.
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On March 04 2009 06:35 Piretes wrote:Show nested quote +On March 04 2009 06:07 Boblion wrote:I think that sweat shops will last forever so Private investors won't come and say '"I'm gonna build an university, an hi-tech research centre, a bank and an airport " Those things are really profitable for a country and its people ( higher profit margins :p ) whereas the profits made by sweat shops will mostly benefits the foreign firms. Of course the workers of the sweat shop will get paid but on the long term the state should definitly helps its growing industries. Especially if it is clearly evident that with of productivity/tech progress those industries will be competitive enough to flood the foreign countries markets. That the very strategy of Japan and the tigers/dragons. Well sir you think wrong. Just look at Shenzen, China. It is a Special Economic Zone, and first started as a bunch of sweatshops using cheap Chinese labour close to the financial centre of Hong Kong. These days, Shenzen rivals Hong Kong in new high-tech and financial developement, and sure as hell has a good airport (by the way, in what country do private investors build universities and airports?). This process is working in all of China's free trade zones - high economic growth and hightech investments. Sweatshops are moving on further into China, to places which without doubt will soon see the boon of increased wages and education.
You neglect two things:
- China has an endless pool of candidates for sweat shops and the governement don't really care that much of their fate. ( or at least can't really do a lot for them ).
- But this government is smart and favors joint venture between foreign firms and his own ( or even constrain ). And they want technology transferts each time we sell them a nuclear plant or planes. They even want to build the planes themselves. And i don't even talk about commercial intelligence/spying or forgeries.
http://www.china.org.cn/english/features/investment/36752.htm
Listen. They don't have the same standarts than us and they probably can't have the same standart of living for 1+ billion people atm.
So some have to work in sweatshops to buy their everyday meal, but you miss the big picture. Their governement is trying hard to get educated citizens and high tech firms, because they know they will gain waaaaaaaaaaayyyyyyyy more if they can sell cars and planes instead of shirts.
edit: i talked about universities and airports because a large city needs it for business and education and again it can only be built by and with state's money. A really poor country won't have enough money to pay foreign firms in order to get a perfect modern airport so it will get a third rate airport built by his own civil servants or a local firm. It is not really China's situation though :p.
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On March 04 2009 07:01 L wrote: Some would argue that the IMF and Development banks have been incredibly disruptive and have proliferated Boblion's scenario. There are elements at play, like elements of real and percieved power, elements that you conceed that make the ricardian model 'too simplistic' for ignoring them. These last few pages have largely been an attack against a strawman. No one's stated that trade is bad. Trade is fine. Even cursor's shitty ability to debate has brought up a bunch of valid questions: Is 100% 0 barrier trade the BEST option for developing countries? Why? You've admitted his fundamental premise in acknowledging Bob's argument that there's a need for institutional regulation of trade.
Wrong target, it might've got lost somewhere, but I also stated that protectionism isn't a complete evil and could be highly useful. At that, I don't think anyone has written off protectionism wholly either.
As for the value of IMF and such though, well, it is really all still questionable, though at the moment I'd have to say the overall impact isn't great. Here though, I look at them as having been a relative success in the role of a capital pump into the countries that need them. There are, as I've also mentioned, other factors to be considered on top of that.
Boblion/Piretes, one of you mind highlighting what you are arguing here, I am getting increasingly confused as to what that train of discussion is getting to.
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On March 04 2009 06:50 Ecael wrote:Show nested quote +On March 04 2009 06:46 Boblion wrote:
The problem is that in real world apples and bananas, like sweat shops and high tech firms don't lead to the same profit margins.
So Bob who is a noob ananas farmer but a smart guy might want to borrow some money and make his own automatic pruning shears thus gaining a lot of productivity and making more ananas and profit than the poor and corny Jim.
But Bob is even smarter. He knows that he can make even more if he sells this gear to his pathetic neighbours. So he chops down all his ananas trees and build a pruning shears factory instead.
Then he teachs the notion of competitive advantage to his dear Jim. And when Jim finally understand that he can make more money making pruning shears, Bob is already producing his own farm tractor robots each with twelve automatic pruning shears.
That's how real world works. Again, Boblion, that's why IMF and Development banks exist. The examples here are meant to describe a simple principle in the Ricardian model, one that has yet to be proven wrong even though the Ricardian model is now viewed as somewhat too simplistic to describe the proper nuances of International Trade. The point driven at here is that no matter who profits more, at least the two are both better than the non-trade state, that one person can ramp a higher I than another and resulting in overall higher A is another matter completely. At that, I fail to see how that deals with the principles behind the support of free trade at all.
I agree with the Ricardian model too. But on long term i don't think it is really accurate
It is a simplification.
oh and IMF assessments in many countries are kinda bad. Especially because of their "conditionalities" ( hi Structural Adjustment Programs ).
Oh and they also support military dictatorships ( free-trade people can be evil sometimes )
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Cayman Islands24199 Posts
don't diss depleted uranium
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This is a wonderful thread 
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United States22883 Posts
On March 04 2009 06:50 Ecael wrote:Show nested quote +On March 04 2009 06:46 Boblion wrote:
The problem is that in real world apples and bananas, like sweat shops and high tech firms don't lead to the same profit margins.
So Bob who is a noob ananas farmer but a smart guy might want to borrow some money and make his own automatic pruning shears thus gaining a lot of productivity and making more ananas and profit than the poor and corny Jim.
But Bob is even smarter. He knows that he can make even more if he sells this gear to his pathetic neighbours. So he chops down all his ananas trees and build a pruning shears factory instead.
Then he teachs the notion of competitive advantage to his dear Jim. And when Jim finally understand that he can make more money making pruning shears, Bob is already producing his own farm tractor robots each with twelve automatic pruning shears.
That's how real world works. Again, Boblion, that's why IMF and Development banks exist. The examples here are meant to describe a simple principle in the Ricardian model, one that has yet to be proven wrong even though the Ricardian model is now viewed as somewhat too simplistic to describe the proper nuances of International Trade. The point driven at here is that no matter who profits more, at least the two are both better than the non-trade state, that one person can ramp a higher I than another and resulting in overall higher A is another matter completely. At that, I fail to see how that deals with the principles behind the support of free trade at all.
Uh... the Ricardo model is seen as nothing but a theory in the development community, since it's usually not applicable in real economics. Capital liquidity is extremely high and from a rational choice perspective, it simply doesn't play out that they will or can develop a comparative advantage. When it is developed, it is only temporary and is often not sustained long enough to stimulate full industrial growth. Again, I beg of you, stop looking at it in terms of economics theory (which as Moltke pointed out is not as much of a hard science as it would like to believe) but in terms of public policy from the US and other countries involved. Theoretically, if every country engages in free trade it should be beneficial for all, but the first country that puts a protectionist policy in place is immediately going to become richer than its counterparts. Thus we have a giant fucking game theory model in which free trade cannot exist, and every single country uses modified levels of "strategic trade policy" to outdo eachother.
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EPT
