James C.W. Ahiakpor wrote:
>But behind such language, the classics had
>individuals in mind. (I do too.) Thus, Ricardo
>illustrates the comparative advantage principle
>in the same chapter by noting that "Two men can
>both make shoes and hats, and one is superior to
>the other in both employments [i.e. absolute
>cost advantage]; but in making hats, he can only
>exceed his competitor by one-fifth or 20 per
>cent., and in making shoes he can excel him by
>one-third or 33 per cent.; -- will it not be
>for the interest of both, that the superior man
>should employ himself exclusively in making
>shoes, and the inferior man in making hats?" (Works, 1: 136n).
But of course, this only makes sense in the
(usual) case that the man could be fully employed
at either profession. But if, on the other hand,
he could only find partial employment at both, he
would pursue both, and pursue them up until the
point that he could find full employment at one
of them. So once again, in this example (as in
all Ricardo's examples) full employment is
implicit. It is only the possibility of full
employment in one trade that even allows the idea
of comparative advantage to arise. What is true
for the lone craftsman is true for the nation. If
Portugal had an absolute advantage in both wine
and cloth, but could only employ half the
population in one or the other, then she would
pursue both up to the point of full employment,
just as in the case of the lone craftsman you cited above.
>And I'd like to note again that, contrary to
>John Medaille's assertion, Ricardo's
>illustration does not require (a) that there be
>full employment of labor or (b) that there be a
>balance of trade between countries for the benefits to accrue.
Do I take it then that we have reached agreement
at least on the third point, that Ricardo assumed
that capital is confined to national boundaries?
As to point (a), I think you will find that all
the examples Ricardo uses are like the one you
just cited; if you re-write them into "partial
employment," they will not work. Hence, full
employment is implicit in all his examples. (By
the way, the term "full employment" applies to
all economic resources, not just labor.) As to
point (b), Ricardo addresses this specifically,
using fluctuations in currency to balance or end
the trade. But this is all somewhat beside the
point. Are you saying that Ricardo is saying that
negative trade balances can be prolonged
indefinitely at an advantage to the negatively
balanced party? But certainly you are not saying
that because nobody would say that so you must be
saying something else and I am just not
understanding what you are saying. So let me ask
directly,"Do you believe that an over-all
negative trade balance can be indefinitely
prolonged without doing harm to the country?"
> And scarcity is not a synonym for "full employment."
I don't recall saying that. I do recall saying
that it is only the particular scarcity of full
employment that allows the pursuit of
comparative, rather than absolute, advantage.
>Instead of dealing with the question whether any
>of the classical principles I listed assumed
>full employment for their validity, Medaille
>responded with: "They are all pieces of the
>over-riding economic theology of liberalism,
>namely the near-mystical belief in a
>self-regulating, self-adjusting utopia that
>required no intervention by the government or
>any other social institution. This was the
>reigning orthodoxy of England from the Reform
>Act of 1832 until the Long Depression of the 1870's and 80's."
>
>No, these principles are relevant to economies
>of today as well, and they derive from David
>Hume (1752), Adam Smith, Jeremy Bentham, J.-B.
>Say, David Ricardo, Henry Thornton, J.S. Mill,
>to list just the major formulators. They were
>carried into the 20th century most
>consistently by Alfred Marshall (Principles,
>1920 and Money, Credit and Commerce,
>1923). There are variations of these principles
>also in the works of R.G. Hawtrey, Irving
>Fisher, and A.C. Pigou (before
>1949). Reference: Chapters 4, 5, 9 and 10 of
>Classical Macroeconomics (Routledge 2003), which
>include direct quotations from these authors.
I have no problem with the list of names, and
could add a dozen more. Nor do I doubt that many
of the ideas are still fashionable, whether or
not they are right or wrong. But I do not see how
the list of names or the currency of the ideas
forms a counter-argument to what I said. In fact,
it is precisely because of the currency of these
antique ideas that you still hear the constant
cry that was heard then: "Get the govmint out of
_____________ (whatever)!" They are expressing
precisely the thought that I (and many others)
identified: the theological belief that the
economic order is independent of the political
and social orders and that it will work perfectly
only if left alone by these other orders. J. B.
Clark was speaking for a long intellectual
tradition when he claimed that the economy was
responding to "deep acting natural law" which
would find its balance only if left alone.
John C. Medaille
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