The Labor Mobility aspect of the Free Trade issue is actually much, much more significant than even I'd imagined. I'll provide a follow-up to this on Tuesday that will be informative in this regard.
Happy to see Vox taking on the ‘Free trade’ question. I mentioned in my On Tariffs post that Ricardo was worshipped in the Berkeley Economics department. It took me a long time to peel back the onion but now I consider him one of the primary traitors to economic theory… I will return to this topic and talk about who I consider the other traitors in good time!
It's at best a toy model with many simplifying assumptions. And even on its own terms, Ricardo's model is egregiously misused. Michael Pettis just had a great post on this (https://x.com/michaelxpettis/status/1895695917682229471), pasted and formatted here for clarity:
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Dan Hannan says that free trade is an IQ test. He may well be right, but not in the way he thinks (and what is more, he would score poorly). For example, he doesn't understand the very model he cites as fundamental. He makes the astonishing claim that "More than 200 years have passed since David Ricardo proved, as a matter of mathematics, that free trade always benefits the weaker and the stronger participants."
This simply isn't true, and for reasons that should be fairly obvious. First, Ricardo "proved" that under the right set of conditions free trade maximizes global output, but nothing in Ricardo's model suggests that this benefits both the weaker and the stronger participants. His model says nothing about the distribution of these benefits. Second, comparative advantage isn't static, and can be altered by trade intervention or industrial policy (and there is no meaningful difference between the two). There is in fact a vast history of countries that have forced changes in their comparative production advantages.
Nearly every advanced industrial nation, including the UK and the US, has done precisely this, and the latest to do so in a major way is China, whose comparative advantage in EVs, for example, only recently emerged as a result of aggressive trade and industrial policies. This isn't exactly a secret. Non-anglophone economists, for example, especially in Asia and Latin America, have written extensively about how "free trade" can lock countries into suboptimal growth. Nothing in Ricardo suggests, let alone "proves", they are wrong.
But Hanna's [sic] most egregious mistake is that he doesn't understand the arithmetic underlying Ricardo's model. For Ricardian comparative advantage to result in higher total output, it is necessary that countries specialize in areas in which they have a comparative production advantage and export part of this in order to import products in which they have a comparative production disadvantage. Comparative advantage exists in the exchange of goods, and not in their production. Balanced trade is a fundamental assumption of Ricardo's model.
Economists are not notoriously [sic] good at understanding the assumptions needed to make their models work, but it is surprising that there is so little understanding of the assumptions underlying one of the simplest and most famous models in economics.
Language and cultural barriers can't be fully appreciated until you've done enough international business. The IQ gap is noticeable. Even just between Mainland and Puerto Rico (US Territory) there's a noticeable difference.
In regards to SSH, each country may have different distributions of Deltas vs Bravos making managers more difficult to find compounded with IQ gap. I'm guessing cultural, conflict-avoidance in SE Asian countries tend to artificially create larger percent of Deltas. Individualistic, high IQ countries more suited to find Alphas and Bravos.
In "Cities and the wealth of nations" Jane Jacobs present historical based evidence that in zones (nations) with homogenous (economic) rules wealth tends to aggregate in at best a few, often just a single city.
One can only assume that if all the world were one economic zone all the wealth would concentrate in just a few places. All other areas would become subservient (nations) to these wealth accumulation city/zones
This might not be entirely unwanted by the globalist and their economists.
The Labor Mobility aspect of the Free Trade issue is actually much, much more significant than even I'd imagined. I'll provide a follow-up to this on Tuesday that will be informative in this regard.
Happy to see Vox taking on the ‘Free trade’ question. I mentioned in my On Tariffs post that Ricardo was worshipped in the Berkeley Economics department. It took me a long time to peel back the onion but now I consider him one of the primary traitors to economic theory… I will return to this topic and talk about who I consider the other traitors in good time!
It's at best a toy model with many simplifying assumptions. And even on its own terms, Ricardo's model is egregiously misused. Michael Pettis just had a great post on this (https://x.com/michaelxpettis/status/1895695917682229471), pasted and formatted here for clarity:
___
Dan Hannan says that free trade is an IQ test. He may well be right, but not in the way he thinks (and what is more, he would score poorly). For example, he doesn't understand the very model he cites as fundamental. He makes the astonishing claim that "More than 200 years have passed since David Ricardo proved, as a matter of mathematics, that free trade always benefits the weaker and the stronger participants."
This simply isn't true, and for reasons that should be fairly obvious. First, Ricardo "proved" that under the right set of conditions free trade maximizes global output, but nothing in Ricardo's model suggests that this benefits both the weaker and the stronger participants. His model says nothing about the distribution of these benefits. Second, comparative advantage isn't static, and can be altered by trade intervention or industrial policy (and there is no meaningful difference between the two). There is in fact a vast history of countries that have forced changes in their comparative production advantages.
Nearly every advanced industrial nation, including the UK and the US, has done precisely this, and the latest to do so in a major way is China, whose comparative advantage in EVs, for example, only recently emerged as a result of aggressive trade and industrial policies. This isn't exactly a secret. Non-anglophone economists, for example, especially in Asia and Latin America, have written extensively about how "free trade" can lock countries into suboptimal growth. Nothing in Ricardo suggests, let alone "proves", they are wrong.
But Hanna's [sic] most egregious mistake is that he doesn't understand the arithmetic underlying Ricardo's model. For Ricardian comparative advantage to result in higher total output, it is necessary that countries specialize in areas in which they have a comparative production advantage and export part of this in order to import products in which they have a comparative production disadvantage. Comparative advantage exists in the exchange of goods, and not in their production. Balanced trade is a fundamental assumption of Ricardo's model.
Economists are not notoriously [sic] good at understanding the assumptions needed to make their models work, but it is surprising that there is so little understanding of the assumptions underlying one of the simplest and most famous models in economics.
fwiw, Grok agrees -- https://x.com/i/grok/share/79yLaOdPfDZsaK7q4oyJBgoXH
Language and cultural barriers can't be fully appreciated until you've done enough international business. The IQ gap is noticeable. Even just between Mainland and Puerto Rico (US Territory) there's a noticeable difference.
In regards to SSH, each country may have different distributions of Deltas vs Bravos making managers more difficult to find compounded with IQ gap. I'm guessing cultural, conflict-avoidance in SE Asian countries tend to artificially create larger percent of Deltas. Individualistic, high IQ countries more suited to find Alphas and Bravos.
There's the classic joke:
"Heaven is where the police are British, the cooks are French, the mechanics German, the lovers Italian and it's all organized by the Swiss.
Hell is where the chefs are British, the mechanics French, the lover's Swiss, the police German and it's all organized by the Italians."
In "Cities and the wealth of nations" Jane Jacobs present historical based evidence that in zones (nations) with homogenous (economic) rules wealth tends to aggregate in at best a few, often just a single city.
One can only assume that if all the world were one economic zone all the wealth would concentrate in just a few places. All other areas would become subservient (nations) to these wealth accumulation city/zones
This might not be entirely unwanted by the globalist and their economists.
The income inequality point is solid for the reason that everyone in a country can't work in the winning industry.
Is it just too bad if you don't get into the wine industry in Portugal?