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View Diary: Econ 101: How Free Traders Distort "Comparative Advantage" (65 comments)

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  •  Comparative Advantage: Theory vs. Reality (3+ / 0-)
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    superscalar, BobOak, esquimaux

    Like all theories, "comparative advantage" is based on assumptions.

    When Ricardo developed his theory, money and investors pretty much stayed local.  His theory did not allow for the possibility that investors in one country would just go overseas and invest in cheaper labor elswehere.

    In today's world, Ricardo's assumptions are violated.  Therefore, as any mathematician or logician can tell you, the conclusions based on those assumptions are worthless.

    So, any claim that "comparative advantage" helps the American people is not supported by logic or good theory.

    This is yet another example of how mainstream economists take a theory, ignore its assumptions, and derive false conclusions.

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