Dubious Assumption #3: Productive resources move easily between industries.

[tangent4ronpaul]

As noted in my original article, the theory of comparative advantage is about switching productive resources from less-valuable to more-valuable uses. It's about putting our economy to its own best use.

But this assumes that the productive resources used to produce one product can switch to producing another. Because if they can't, then imports won't push our economy into industries better suited to its comparative advantage. Imports will just kill off our existing industries and leave nothing in their place.

When workers, for example, can't move between industries--usually because they don't have the right skills or don't live in the right place--shifts in an economy's comparative advantage won't move them into a more appropriate industry, but into unemployment.

In the United States, because of our relatively low minimum wage and hire-and-fire labor laws, this problem tends to take the form of underemployment, rather than unemployment per se. So $28 an hour ex-autoworkers go work at the video rental store for eight dollars an hour.

The same goes for other inflexible factors of production, like real estate. That's why the shuttered factory rivals the unemployment line as a visual image of trade problems.

http://www.ronpaulforums.com/showthr...92#post3202492

[axiomata]

The inhomogeneity of capital is a key component of Austrian economics.

The shuttered factory is not an visual image of trade problems, it is a visual image of misallocation of capital and uncompetitive regulations.