David Riccardo. A recent article in the Financial Times claims that economists misunderstand tariffs. I point out that tariffs have political and moral aspects that cannot be captured by standard economic reasoning. Therefore, we are subject to the broad advocacy of economists’ free trade in our dangers. He concludes that “we need a new, truly progressive economics focusing on the real world and its history, rather than an abstract model built on mistrust.”
Economists have been accused of being too cautious about reality and being too many models. The accusation is a submarine. But critics are guilty of equally harmful people without ignoring economic truths.
The highlight of Dyer’s argument is David Riccardo. In chapter 7 of his Principles of Political Economy and Taxation, Ricardo presented the principles of conflict and comparative advantage in England and Portugal. If England exchanges cloth with Portugal for wine-producing wine Isel, they will receive wine at a lower cost than if it was produced domestically. If Portugal trades wine with England for fabrics, they receive fabrics at a lower cost than if they were produced domestically. Exchange and specialization increases the amount of wine and fabric available in the Bantry.
According to Dyer, Ricardo’s analysis is a serious flaw due to its wider disregard for the historical complexity of British and Portuguese trade relations and the political economy of imperialism. He cites Matthew Watson of Warwick University, Ricardo’s theory is “a mathematical façade in which the current historical relationships of real England and Portuguese production are intentionally drawn from equations.” This relationship is “an explicitly oppressive social relationship of slave labor and production based on the division of the Her foreign empire of the nation.” For Dyer and Watson, Ricardo’s ignorance or neglect – political complexity and moral atrocities, from Paul Samuelson to Gregory Mankiw, have defeated not only the historic, but also the historic path of many economists.
I know very little about the UK-Portuguese trade relations in the 18th and 19th centuries. The complexity of these relationships may be overturned by Ricardo in his political commentary. I don’t know. However, we know that complexity does not affect the analytical content of the main comparative advantage. And this principle should be considered regardless of your political persuasion.
“The principle of comparative advantage when taught in standard economics courses is less grander than critics think.”
The principles of comparative advantage that have come to be taught in standard economics courses are less grander than critics think. This is not a full-scale explanation of how international trade actually works. It is not an international relations theory. It is not a political program that understands understanding. It’s not even in the position of the policy. In fact, it’s an explanation of why two or two countries choose to trade, even though they don’t seem to have any reason to do so. And it uses only simple arithmetic!
David from Despo needs to repair his car. I work in 3 hours. He earns $50 an hour on his accounting job, so when he repairs the car, he costs $150 in forgotten income. Assume that his neighbor’s college is getting excited, Adam offers to repair the car for David. Adam says it will take him five hours. Adam makes $20 an hour at a local coffee shop, so David has to pay at least $100 for the job. Adam, who has a relatively advantage in locking up David’s car, completes the same job for less than David ($100) despite him being a slower mechanic. If David chose to hire Adam, I would repair his car at a lower cost than if he had done his job himself. If Adam Chose were to get a job, I would have earned more than he had worked in a coffee shop. Both enjoy higher Dollards if David devoted his time to his treasurer job and if Hy’s Adam spent time fixing his car.
The principle of comparative advantage does not tell us everything we may want to know about the David and Adam Society. I don’t know how David won his car. I don’t know if David likes fixing cars himself. I don’t know if Adam’s father is promoting him, or what working conditions in the garage look like, or if it’s a coffee shop. It doesn’t tell you anything about David’s son, who might want to learn to work in a car, but he doesn’t have the knack for it. It doesn’t tell you about the personal dynamics and history between David’s and Adam’s families.
The sub of these details is obviously comforting for all ethics. However, details are not merely reassuring for the main ones with comparative advantages. That principle informs us that, as an arithmetic problem, Adam is a less skilled mechanic, but when Adam pins Adam to repair his own car, rather than repairing the car himself, David can increase his innomies.
What Dyer really rejects when he argues that he rejects the principle of comparative advantage is the inference from the principle to the conclusion that free trade serves a common social interest. Ricardo thus expressed that reasoning.
Under a completely free system of commerce, countries naturally devote their capital and labor to the employment that is most beneficial to each. This pursuit of individual advantage is an Admirlock, which is associated with the universal interests of the whole.
Ricardo’s rejection of logic in the statement flows from moral beliefs about historical injustice and perceptions of continuous imbalances of power. Dyer writes: “All major economic forces – Germany, and yes America, and China will protect their industry with high tariffs while being promoted to their position.”
Moral beliefs, power dynamics, etc. should influence how you think about actual trade policy. Certain beliefs and claims may lean us towards or against trace liberalization and the historical Ricardo policy position. But they actually take away from the analytical principle of comparative advantage.
As Peter Navarro did in 2019, you rejoicing in declaring Ricardo’s second death, and you have nothing to do with the enduring truths that Ricardo revealed in part of the history sissis. To argue that trade is in fact complex does not change the fact that it costs every choice. Costs are always a forgotten opportunity. Each of us specializes in activities that increase productive output and others’ output and exchange for the least cost. This is logic and arithmetic.
For more information about these topics, see
We might conclude that protectionism has good reason (I don’t). However, the argument of protectionism or “truly progressive economics” must take the main comparative advantages seriously, so that in order to be serious, arithmetic must be taken seriously. This means restricting trade means accepting that there is a clear cost – material benefits are forgotten. Historical and political complexity changes facts more than changing the fact that the water ruins the downhill.
