RE: [Marxism] Letter to C.S. Soon and Sasha Lilley

["Craven, Jim" <jcraven@xxxxxxxxx>]

Response Jim C: Brad de Long's formulation of the doctrine of comparative
advantage only reveals how little of the basic bourgeois economics he touts
that he really knows. Comparative advantage simply says that each nation
"ought" to specialize in production of those commodities for which they have
a comparative advantage--meaning the lowest opportunity cost (quantities of
one commodity given up in lieu of producing something else with the same
basic resources and teachnologies)in production. A nation, according to this
doctrine, may have an absolute advantage over another nation (can produce
all goods and services with less labor inputs than another nation) and yet
will still have a comparative advantage and need to specialize relative to
another nation--and both can "win-win from specialization and trade (can
have an absolute advantage in all goods and service but can never have a
comparative advantage in all goods and services as comparative advantage is
relational).

Here is a simple standard test question: In an eight-hour day, Andy can
produce either 24 loaves of bread or 8 pounds of butter. Bob can produce
either eight loaves of bread or 8 pounds of butter. We know that Andy has a
lower opportunity cost of producing:
A) bread, while Andy and Bob have equal opportunity costs of producing
butter
B) bread, while Bob has a lower opportunity cost of producing butter
C) both bread and butter
D) Butter, while Bob has a lower opportunity cost of producing bread.

Answer: B Andy gives up -24 Bread for 8 lbs of butter or his opportunity
cost of producing butter is -3 Bread per 1 lb of Butter whereas Bob gives up
-8 Bread to produce 8 lbs of butter or -1 Bread per 1 lb of butter. Although
they both have equal absolute advantages in producing butter, Bob has a
comparative advantage--over Andy--in the production of butter. On the other
hand, Andy gives up -8 lbs butter to produce 24 loaves of bread or 1/3 lb of
butter per loaf of bread whereas Bob must give up -8 lbs butter to produce 8
loaves of bread or 1 lb butter for each 1 loaf of bread; Andy has both an
absolute and comparative advantage in the production of bread.

Of course this doctrine says nothing about relative prices of the outputs at
sale, the nature and vulnerabilities of that produced etc.

And De Long is teaching what and where?

Jim C.

-----Original Message-----
From: Louis Proyect [mailto:lnp3@xxxxxxxxx]
Sent: Tuesday, November 25, 2003 12:13 PM
To: livingroomradio@xxxxxxxx; marxism@xxxxxxxxxxxxxxxxxxx
Subject: [Marxism] Letter to C.S. Soon and Sasha Lilley


Dear C.S Soon and Sasha Lilley,

I want to start off by thanking you for your very fine radio show and
would recommend Living Room radio's archives to everyone at:
http://www.livingroomradio.org. Just yesterday I listened to your
fascinating interview with Margaret A. Lindauer on the Frida Kahlo
phenomenon. As Sasha knows, I depended on Lindauer for my own attempt to
get past the mythologizing of this great artist and radical who was
depicted as a moon in Diego Rivera's orbit in standard biographies and
the Selma Hayek film.

 >>The most misunderstood concept in Economics is the concept of
"comparative advantage." First developed early in the nineteenth century
by David Ricardo, "comparative advantage" holds that we should export
not those commodities that we can make more efficiently than people in
other countries can make them, but those commodities that we can make
most efficiently relative to the efficiency with which we make the
average good or service. This principle has a corollary: we should
import not those goods and services that we make less efficiently than
other people make them, but those goods and services that we make less
efficiently than we make goods and services in general.<<

http://econ161.berkeley.edu/movable_type/archives/000129.html

This sounds very nice on paper, but it is deeply flawed. One of the most
high-profile critics was Argentine UN economist Raul Prebisch who put
forward the notion of "import substitution", which Doug seemed to be
alluding to when he spoke of nationalist experiments in the 1940s. The
story here is more complex. Despite being associated with the
"dependency theorists" at MR, Prebisch was hostile to Juan Peron and
backed the regime that overthrew him, an early predecessor to Pinochet's
but with somewhat less brutality.