Comparative Advantage

[Paul Davidson <pdavidson@xxxxxxx>]

	In addition to the earlier cited articles regarding the irrelevance of
comparative advantage in the real world global economy, I should call
attention to the exchange between Massimo deAngelis and myself  in the
Winter 1999-2000 issue of the JOURNAL OF POST KEYNESIAN ECONOMICS.

despite de Angelis's apparent Marxian perspective(I do not know that
deAngelis is a Marxist, I only presume so since he argues that  capitalism
MUST "simultaneously create wealth and poverty".), deAngelis accepts the
classical doctrine that  trade deficits are always due to the presence of
inefficient industries -- and that the law of comparative advantage
promotes efficiency (just like any free market process in a closed economy)
and therefore governments have no role in rescuing deficit nations.  See my
response to this on pages203-205 of this issue of the JPKE.

Like Keynes I believe that the major flaws of the entrepreneurial system,
i.e., the failure to produce full employment and the inequality of income
and wealth, can be cured via intelligent policies without destroying what
Keynes called "the Manchester System"" i.e., entrepreneurial activity --
while either leaving the system to an unfettered market place or to a fully
planned  economy  may produce measured equality and even measured full
employment -- the goods produced (if any) may not be those most desired by
the population.

As Keynes noted on pp. 377-379 of the GT establishing central controls
regarding liquidity
and
therefore promoting full employment effective demand will promote "the
consilience between private and public advantage  in conditions of perfect
and imperfect competition".


Paul