tangent4ronpaul
04-10-2011, 09:06 PM
Doing something weird with this post - I'm going to take each of his 7 dubious Assumptions and do a separate thread for each in economics and sound money - just because there is so much here.
http://www.huffingtonpost.com/ian-fletcher/the-theory-thats-killing-_b_846452.html
The Theory That's Killing America's Economy -- and Why It's Wrong
I wrote in a previous article how America's disastrous embrace of free trade is ultimately based on a false theory of how the global economy works: the so-called Theory of Comparative Advantage. This is what economists, from the government on down, believe in. This matters.
But I didn't explain why the theory is wrong -- which it is. Understanding its flaws is the price of admission to serious criticism of free trade, so it's well worth getting a grasp on them. Economic theory can be a tough chew, but it's worth the effort, if only to gain the intellectual confidence not to be intimidated by the so-called experts. So... let's take a look at some of that machinery behind the wizard's curtain, shall we?
The theory's flaws, which are fairly well known to economists but mostly ignored, consist of a number of dubious assumptions upon which the theory depends. To wit:
Dubious Assumption #1: Trade is sustainable.
http://www.ronpaulforums.com/showthread.php?287141-Dubious-Assumption-1-Trade-is-sustainable.&p=3202476#post3202476
Dubious Assumption #2: There are no externalities.
http://www.ronpaulforums.com/showthread.php?287142-Dubious-Assumption-2-There-are-no-externalities.&p=3202477#post3202477
Dubious Assumption #3: Productive resources move easily between industries.
http://www.ronpaulforums.com/showthread.php?287143-Dubious-Assumption-3-Productive-resources-move-easily-between-industries.&p=3202479#post3202479
Dubious Assumption #4: Trade does not raise income inequality
http://www.ronpaulforums.com/showthread.php?287144-Dubious-Assumption-4-Trade-does-not-raise-income-inequality.&p=3202482#post3202482
Dubious Assumption #5: Capital is not internationally mobile.
http://www.ronpaulforums.com/showthread.php?287145-Dubious-Assumption-5-Capital-is-not-internationally-mobile.
Dubious Assumption #6: Short-term efficiency causes long-term growth.
http://www.ronpaulforums.com/showthread.php?287146-Dubious-Assumption-6-Short-term-efficiency-causes-long-term-growth.&p=3202488#post3202488
Dubious Assumption #7: Trade does not induce adverse productivity growth abroad.
http://www.ronpaulforums.com/showthread.php?287147-Dubious-Assumption-7-Trade-does-not-induce-adverse-productivity-growth-abroad.&p=3202490#post3202490
I don't expect most readers to get all the above analysis the first time through. But I do hope that everyone who's read this far now understands that there is no good reason -- regardless of what most economists say -- to assume that free trade is necessarily best. The economic logic of those who say it is, is riddled with enough holes to sink a container ship.
This blogger has a book: Free Trade Doesn't Work: What Should Replace it and Why
by Ian Fletcher
http://www.amazon.com/Free-Trade-Doesnt-Work-Replace/dp/0578048205%3FSubscriptionId%3D0JJEH4PKQM4ZHS8QY102 %26tag%3Dthehuffingtop-20%26linkCode%3Dxm2%26camp%3D2025%26creative%3D165 953%26creativeASIN%3D0578048205
http://www.huffingtonpost.com/ian-fletcher/the-theory-thats-killing-_b_846452.html
The Theory That's Killing America's Economy -- and Why It's Wrong
I wrote in a previous article how America's disastrous embrace of free trade is ultimately based on a false theory of how the global economy works: the so-called Theory of Comparative Advantage. This is what economists, from the government on down, believe in. This matters.
But I didn't explain why the theory is wrong -- which it is. Understanding its flaws is the price of admission to serious criticism of free trade, so it's well worth getting a grasp on them. Economic theory can be a tough chew, but it's worth the effort, if only to gain the intellectual confidence not to be intimidated by the so-called experts. So... let's take a look at some of that machinery behind the wizard's curtain, shall we?
The theory's flaws, which are fairly well known to economists but mostly ignored, consist of a number of dubious assumptions upon which the theory depends. To wit:
Dubious Assumption #1: Trade is sustainable.
http://www.ronpaulforums.com/showthread.php?287141-Dubious-Assumption-1-Trade-is-sustainable.&p=3202476#post3202476
Dubious Assumption #2: There are no externalities.
http://www.ronpaulforums.com/showthread.php?287142-Dubious-Assumption-2-There-are-no-externalities.&p=3202477#post3202477
Dubious Assumption #3: Productive resources move easily between industries.
http://www.ronpaulforums.com/showthread.php?287143-Dubious-Assumption-3-Productive-resources-move-easily-between-industries.&p=3202479#post3202479
Dubious Assumption #4: Trade does not raise income inequality
http://www.ronpaulforums.com/showthread.php?287144-Dubious-Assumption-4-Trade-does-not-raise-income-inequality.&p=3202482#post3202482
Dubious Assumption #5: Capital is not internationally mobile.
http://www.ronpaulforums.com/showthread.php?287145-Dubious-Assumption-5-Capital-is-not-internationally-mobile.
Dubious Assumption #6: Short-term efficiency causes long-term growth.
http://www.ronpaulforums.com/showthread.php?287146-Dubious-Assumption-6-Short-term-efficiency-causes-long-term-growth.&p=3202488#post3202488
Dubious Assumption #7: Trade does not induce adverse productivity growth abroad.
http://www.ronpaulforums.com/showthread.php?287147-Dubious-Assumption-7-Trade-does-not-induce-adverse-productivity-growth-abroad.&p=3202490#post3202490
I don't expect most readers to get all the above analysis the first time through. But I do hope that everyone who's read this far now understands that there is no good reason -- regardless of what most economists say -- to assume that free trade is necessarily best. The economic logic of those who say it is, is riddled with enough holes to sink a container ship.
This blogger has a book: Free Trade Doesn't Work: What Should Replace it and Why
by Ian Fletcher
http://www.amazon.com/Free-Trade-Doesnt-Work-Replace/dp/0578048205%3FSubscriptionId%3D0JJEH4PKQM4ZHS8QY102 %26tag%3Dthehuffingtop-20%26linkCode%3Dxm2%26camp%3D2025%26creative%3D165 953%26creativeASIN%3D0578048205