Re: The Economy IS The Colateral Damage of War on Terrorism.

[Bruce McFarling <ecbm@xxxxxxxxxxxxxxxxxxx>]

On Mon, 10 Dec 2001 17:58:48 -0500, "Henry C.K. Liu"
<hliu@xxxxxxxxxxxxxx> hits the nail on the head when he
says:

>To begin with, unrestricted and unregulated capital flow distorts
>the meaning of trade, free or not.

THIS is, I think, where people are talking at cross purposes.

One way to use the term is *as* presumed in Ricardian theory,
as permitting an equal increase in value of exports and
imports without restriction on the types of goods imported
(or exported, I guess, though this is less common 8-)#

The other is *as* used in the business press, where it refers
to freedom to export, without necessarily involving a "trade"
at all in the sense of a swap of goods/services.

For the former, I agree with Barkley ... but that is not what
is normally on offer.  For the latter, it can quite easily
involve almost any collection of financial transactions *other*
than trade in the situation Henry refers to.

But of course, this gets straight back to what Barkley said
at the beginning of this, that it is not trade _per se_ that
is the issue, but other international financial flows.  If
"free trade" were restricted to be free "trade _per se_",
there would be far leeway for radical departure from the
Ricardian argument.  Indeed, that is why I found Rakesh's
argument so interesting, since it applied even to trade
_per se_, even though I am still skeptical whether it applies
to many industries outside of agriculture.


Virtually,

Bruce McFarling, Shortland, NSW
ecbm@xxxxxxxxxxxxxxxxxxx