Roberts Replies Again
The point Mr. Boudreaux is that comparative advantage depends on the differing internal opportunity costs of producing tradable goods. Those ratios depend on factor endowments. If the factors can leave, they do not specialize within the country where they have comparative advantage. They can move abroad where there is absolute advantage.
Don Lloyd is confused about the purpose of Ricardo's example. Perhaps my reply above to Mr. Boudreaux will be of help. The absolute advantage today is cheap Asian labor which exists in such excess supply that its price cannot be rapidly bid up. There is a difference between trade between countries based on capitalists allocating factors of production to where their respective countries have comparative advantage and the different case of a country's capitalists producing for their domestic markets offshore, as Mr. Lloyd comes close to realizing.
Mr. Palkovsky would benefit from comparing two kinds of capital mobility. One goes abroad to produce for markets there. The other goes abroad to use cheap labor there to produce for its home markets. Offshore production is a new form of capital mobility, one with definite implications for the domestic labor force.
Mr. Boyer: International income redistribution might be a product of free trade, but it is not the product of the CASE FOR FREE TRADE. The case for free trade is not, and has never been, that it increases world welfare at the expense of individual countries. We do still live in countries. To be indifferent to one's country's fate is to place oneself outside the community and its interests, a difficult position from which to debate.
Posted by Paul Craig Roberts
Comments (1)
According to Paul Craig Roberts, international trade theory informs us that under conditions of free trade and mobile capital, it is possible for there to be a net flow of capital and wealth out of the geographical boundaries of a nation. Very well. A perfectly analogous "interstate trade theory" would yield the same implications regarding trade that flows across state borders within the US. Indeed, it is not difficult to imagine constructing an analogous "interracial trade theory" or "interlingual trade theory" that would reveal a similar (almost surely temporary) possibility of negative wealth flow in the case of a particular race or language community.
So what? People are people, wherever they live, whatever the color of their skin or language they speak. Trade benefits the individuals who engage in it. The case for free trade has always (for libertarians, anyway) rested broadly on such considerations as the immorality of coercion, the tendency of free trade to promote general prosperity and international peace, and the inevitable tendency for government intervention to spawn further government intervention. The most that Roberts has shown (which may be valuable) is that we have to be careful about using a certain convenient demonstration of the self-defeating nature of nationalist protectionism, because the preconditions of that demonstration do not always hold.
I find it remarkable that Roberts speaks of "an insular and isolated libertarianism" when it is libertarians who are standing up for universal free trade. Meanwhile, he makes common cause with politicians who would have Americans hunkering behind protectionist walls.
Roberts writes, "If libertarians favor the international redistribution of income, why do they oppose the domestic redistribution of income?" Missing the crucial element of coercion, he reveals an ignorance of libertarian philosophy at least as profound as any libertarian's ignorance of economic theory.
Published: January 21, 2004 3:14 PM