Now that's a big unusual
The usual political discourse during an election is along these lines:
My opponent is a wimp!
My opponent is dumb!
So I was quite surprised to see a 19th century economic discussion at a political website. Apparently citation of 19th century economists is not an FEC campaign violation. Here's what Cynthia Matthews has to say:
Getting Ricardo Wrong
David Dreier and Comparative Advantage
David Dreier keeps referring to the theory of "comparative advantage" as justification for giving our jobs to foreigners. He says that he is helping us. We just do not understand the big picture.
The theory of Comparative Advantage was developed in the early part of the 19th century by British economist David Ricardo....Here is the simple version:
Using his example of two nations (Portugal and England) and two commodities (wine and cloth), Ricardo argued that trade would be beneficial even if Portugal held an absolute cost advantage over England in both commodities. Ricardo's argument was that there are gains from trade if each nation specializes completely in the production of the good in which it has a "comparative" cost advantage in producing, and then trades with the other nation for the other good. The main effect, Ricardo noted, is that overall income levels would rise in both nations.
Free Trade Agreements (NAFTA, CAFTA, FTAA), H1-B, and support of amnesty (guest worker) for illegal aliens are to David Dreier implementations of Comparative Advantage.
But overall incomes are not rising. They are declining. These job give aways get Ricardo wrong in the following ways:
- Ricardo assumes labor is always fully employed. David Dreier is a job killer.
- Comparative advantage is undermined if the factors of production can relocate to wherever they are most productive: in today's case, to a relatively few countries with abundant cheap labor. In this situation, there are no longer shared gains - some countries win and others lose.
- Ricardo does not have a country give its absolute/comparative to another country at the expense of its citizens.
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