>On 31 Aug 2001 18:05:49 GMT, Jim Blair wrote: >> >>Mark, some people are claiming that "free trade" requires the exclusion of >>capital movement, and a stop to immigration. Did Richardo or any other >>"comparative advantage" economist make this claim? Mason Clark wrote: > No. Nor has anyone else. However, the *theory of comparative advantage*, >which is often invoked in free-trade arguments, as Ricardo knew it did not >include capital and people movement in the theory. These movements scramble >the advantages in ways difficult to predict. Hi, Can any economic theory make quantative predictions about anything? But isn't it clear that capital must move to resources? If oil is discovered in the Arabian desert, drilling gear must be moved there to tap it. If copper or tin is found in Bolivia or Peru, mining gear must be moved there if it is to be used, etc. And either capital must be sent to where the labor is, or else the workers must move to where the capital is. >...Simplistic thinking worships >free trade without regard to the details and consequences. The detailed consequences of either trade barriers, or of their removal, cannot be predicted. But isn't it clear that the barriers restrict the efficient use of resources? dlj: >> >I re-read David Ricardo's original paper every year or so. It is a thing >> >of >> >beauty today, as it was at the time it was written. jeb: So did he say anything about labor or capital movement? Robert Vienneau: > >One could always read the book to find out: > > "In one and the same country, profits are, generally speaking, always > on the same level; or differ only as the employment of capital may > be more or less secure and agreeable. It is not so between different > countries. If the profits of capital employed in Yorkshire, should > exceed those of capital employed in London, capital would speedily > move from London to Yorkshire, and an equality of profits would be > effected; but if in consequence of the diminished rate of production > in the lands of England, from the increase of capital and population > wages should rise, and profits fall, it would not follow that > capital and population would necessarily move from England to Holland, > or Spain, or Russia, where profits might be higher..." .... > Experience, however, shews, that the fancied or real insecurity of > capital, when not under the immediate control of its owner, together > with the natural disinclination which every man has to quit the > country of his birth and connexions, and intrust himself with all his > habits fixed, to a strange government and new laws, check the > emigration of capital. These feelings, which I should be sorry to see > weakened, induce most men of property to be satisfied with a low rate > of profits in their own country, rather than seek a more advantageous > employment for their wealth in foreign nations." > -- David Ricardo, where you would expect to see him say so. jeb: So even given the opportunity to invest in a foreign country or in a multinational corporation, investors will not do so? And given the opportunity to immigrate to the USA or Europe to find work at higher wages, people in Mexico or China or the poor countries of the 3rd World will not do so? Maybe that was more true when Ricardo wrote it than it is today? Mason Clark: >....However, free >international trade is extremely rare. One could accurately say that it has never >been tried. .... jeb: Trade is about as old has human history. And so are attempts by some rulers to restrict trade by their subjects. And sure each national (and local) government wants to both promote its exports and also "protect" the local producers who contribute to their campaigns. >And won't be while one Wisconsin farmer still breaths. > > Mason C The reference here is not clear. Wisconsin dairy farmers now generally support "free trade". They are being hurt by various trade restrictions on the sale of milk and cheese, both by foreign goverments (like Canada) and by other US states (like that Northeast Dairy compact and the Eau Claire federal pricing system that favors dairies in Californian and Florida). They say that they can make better and cheaper milk and cheese than ANYONE and want the governments to let them do it and sell it. But Wisconsin just passed some kind of restriction on the sale of "out of state wine". They want to "protect" some local wine makers from competition from California wines. However one local winery (Wollersheim) objected to this restriction saying that other states will likely do the same, and they say that their wines can do well if people everywhere have the option to buy them. (maybe they sell a lot of wine out of state?) Anyway, I say let California wines be sold in Wisconsin and Wisconsin cheese be sold in California, and let the consumers decide which they want. But things seem to be moving the other way. Our local liberal/ "Progressive" paper says our Congressmen should stop trying to kill that NE Dairy compact and pass our own mid-west dairy compact. If the northeast can screw the poor people in Boston and NYC with higher milk prices while keeping Wisconsin products out, we should screw the poor people of Chicago and Milwaukee with higher milk prices. I mean it just isn't democratic to stop politicians from passing laws to reward the various interests that give them money. Finally, I just saw where that French Jose Bove guy (who doesn't like MacDonnalds so he trashes their stores) is now complaining about the US tariff on his Rochfort cheese in response to the French government ban on US beef. So the French government should be able to stop the French people from buying US beef, but it is wrong for the US government to reply with a tax French cheese?? ,,,,,,, _______________ooo___(_O O_)___ooo_______________ (_) jim blair (jeblair@facstaff.wisc.edu) Madison Wisconsin USA. This message was brought to you using biodegradable binary bits, and 100% recycled bandwidth. For a good time call: http://www.geocities.com/capitolhill/4834 AND WHAT IS CAPITAL? Robert Vienneau wrote: >> >1.0 INTRODUCTION > >> > Consider a very simple economy that produces two goods, corn and >> >ale, from inputs of labor, land, and produced corn and ale. Corn >> >and ale are both consumption and capital goods. .... I objected to considering ale and corn as capital goods, which brought this from "David Lloyd-Jones" : >Jim, >Raw materials are commonly called operating capital. Labor these days is >human capital. >If you look on any balance sheet you will see capital on the right balanced >against all of the stuff available for use on the left. That's because they >flow indistinguishably into each other. >The two points above are not my real point, though. My real point is that >capital means anything without limitation that you have spare, as breathing >room, that you can use to produce something useful. Hi, I suppose we could remove terms like beer, ale, wine, rum, corn, barley, wheat, capital goods, and consumer goods, from the language and just call all of them "stuff". But when I took a college economics class during the 1950's the instructor insisted on using different words to mean different things. He claimed that this made it easier to understand reality. Is that thinking now out of fashion? Capital good were goods used to make other goods without themselves being consumed in the process. As opposed to raw materials which are converted into other goods. Capital goods serve to increase the productivity of labor, and a close substitute term would be "tools". The term has since been expended to include the money used to buy the capital goods. Thus people speak of capital markets and venture capital. Human capital was not the same as labor. Human capital was the education and training of workers which had the result of increasing productivity in the same way as money spent on the purchase of capital goods. In accounting, expenses for capital goods were different from expenses for supplies based on how long the item was expected to last. An item had to be expected to be used for over 5 years (as I recall-I was not very interested in this kind of stuff in 1955 ;-). Thus capital, labor, supplies, and raw materials were all considered to be different things and were given different names with different definitions. ,,,,,,, _______________ooo___(_O O_)___ooo_______________ (_) jim blair (jeblair@facstaff.wisc.edu) Madison Wisconsin No animals were harmed during the creation of this post.