Re: investment and unemployment

["ÁÎ×Ó¹â Henry C.K.Liu ¹ù¤l¥ú" <hliu@xxxxxxxxxxxxxx>]

Warren Mosler wrote:

> It is said that every trade makes somebody happy!

The usefulness of economics lies in its alleged ability to identify trades in
whcih all parties leave happy.
When people sell because they think prices will go down, that is not a market.  It
is a panic.  In an operating market, traders sell not to prevent loss, but to lock
in gain.  Most sales on any given day are profit exits to redirect capital toward
better risk/reward ratios.
Trade economics has borrowed much from nuclear strategic arms control scholastics.
  The most misunderstood aspect of the notion of "comparative advantage" is that
all trading parties must have some advantage to trade with.
According to the principle of comparative advantage, countries A and B
still stand to benefit from trading with each other even if A is better
than B at making everything. If A is more superior at making automobiles and only
marginally superior at making bread, then A should still invest resources in what
it does best - producing automobiles - and export the product to B. B should still
invest in what it does best - making bread - and export that product to
A, even if it is not as efficient as A. Both would still benefit from the trade
because trade expanded the market. A country does not have to be best at anything
to gain from trade. That is comparative advantage.

The theory is one of the most widely accepted among trade economists. It
is also one of the most misunderstood among non-economists because it is
confused with absolute advantage. It is often claimed, for example, that
some countries have no comparative advantage in anything. That is
virtually impossible. So argues pro-traders.  Both US labor and Third
World economic nationalists dismiss the theory of comparative advantage
by pointing out that the benefits flow toward polarization rather than
equalization.  That however is not the fault of the theory of comaparative
advantage, but faulty valuation.

Even in equity trading, sophisticated portfolio management often dictates sale of
certain issues not because the trader is shorting them, but the anticipated
restructuring of the portfolio mix enhances its overall value or reduces its value
at risk (VAR).

Economists tend to underestimate the effect of the rule that there is always "a
scheme behind a scheme" in decision making.

Henry C.K. Liu