reply to Professor Rosser

["William B. Ryan" <william_b_ryan@xxxxxxxxx>]

No, the second country will have a comparative
advantage in something, even if it has lost it in
autos, which it may or may not have.
-----------
Not so fast!  No need to scrap your investment in the
factory.  Get out the blackjacks.  Beat your
workforce into submission and you've instantly
regained "comparative advantage" over your foreign
"competitor."  Perhaps this time it will be you who
will take over his market.  And while you're at it,
pull the plug on all the anti-pollution crap that
drags down your "productivity."  And if the king
objects, send your thugs over and surround the
palace.
--

Iowa is the number one producing state in the country
for corn, and Kansas is the number one producing
state in the country for wheat.  Does anyone remotely
think that anything is to be gained by Kansas
engaging in protectionism against Illinois soybeans?
-----------
And this example of trade between states under the
United States Constitution where trade evolved
gradually under a common culture and system of laws
and standards is irrelevant to the anarchic situation
prevailing between nations in world trade under GATT
etc.  Let's say that Kansas is a slave state and
Illinois has a free workforce.  Kansas is allowed to
export anything at all to Illinois at whatever price
it wants to sell it in whatever quantities it can
compel its slaves to produce.  How in the world would
this have anything to do with "comparative advantage"
except in smokescreen to justify pure exploitation
Would you say those who actually opposed such a
situation prior to 1861 were ignoramuses that Mankiw
would have sneered at?
--

The solution to the trade issue is really serious
assistance to workers laid off by import competition
(or outsourcing), including if need be government
employment along the lines proposed by the folks at
UMKC.
-----------
Yes indeed.  They certainly will need government
assistance.  For there are not enough jobs flipping
burgers.  Haven't you heard?  Macdonalds is
"downsizing" the "supersize."  And you will pay for
that assistance by printing "state money."  God
forbid!  You can't pay for it through tariffs.  That
would be in violation of law--the law of comparative
advantage.

A pinheaded response from the folks at UMKC.


---original message---
Date:  	Mon, 8 Mar 2004 16:40:54 -0500
From:  	"Barkley Rosser" <rosserjb@xxxxxxx>
Subject: Re: Outsourcing a plus for the US economy.?

     No, the second country will have a comparative
advantage in something, even if it has lost it in
autos, which it may or may not have.
     My favorite real world example of comparative
advantage is in agriculture within the free trade
zone of the US, for the three largest crops produced,
corn (maize for non-Americans), wheat (corn for Brits),
and soybeans.  Compare Illinois, Iowa, and Kansas.
Illinois has an absolute advantage in all three crops
over the other two, and Iowa has an absolute advantage
over Kansas in all three.  However, yields decline most
rapidly for soybeans and least rapidly for wheat as one
heads west.  Illinois is the number one producing state
in the country for soybeans, Iowa is the number one
producing state in the country for corn, and Kansas is
the number one producing state in the country for wheat.
Does anyone remotely think that anything is to be gained
by Kansas engaging in protectionism against Illinois
soybeans?
       The solution to the trade issue is really serious
assistance to workers laid off by import competition
(or outsourcing), including if need be government
employment along the lines proposed by the folks at
UMKC.  Despite some vague moves in that direction
recently in the US, we do not do it seriously (and Bush
has just proposed eliminating such aid for workers
laid off due to NAFTA).  The example to keep in mind
is very open economy Sweden.  They have at times
spent as much as 2 % of their GDP on such programs,
a much more worthwhile way to go than protectionism.

Barkley Rosser





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