The problem with the other review here is that was written by someone who took Econ 101. He should have stuck around for Econ 102.
The arguments for 'Free Trade', or uncontrolled trade, are based on a model built by Ricardo in 1817. His model was of a barter economy with the assumption that capital can not flow across borders. He came up with the idea of comparative advantage, and showed, in his artificially constrained world, that countries benefit because of trade.
So why does Ricardo's model not apply to the actual world? Because of financial instruments! We have trading partners who are willing to run perpetual trade surpluses with us. They send us goods, we send them money. So the equation doesn't balance, and there can be a net loss of jobs. In addition, capital migrates - factories close here and open in China and elsewhere because they have an absolute cost advantage. You could fix this problem with deregulation, but we'd have to compete directly with their wages (productivity adjusted), and we'd have to be willing to foul our water and air.
The economics taught in the vast majority of schools today is useless (I earned my MBA from U Chicago). The worst part is that Econ 101 students learn simplistic models and then actually believe that they apply to the real world.
The arguments for 'Free Trade', or uncontrolled trade, are based on a model built by Ricardo in 1817. His model was of a barter economy with the assumption that capital can not flow across borders. He came up with the idea of comparative advantage, and showed, in his artificially constrained world, that countries benefit because of trade.
So why does Ricardo's model not apply to the actual world? Because of financial instruments! We have trading partners who are willing to run perpetual trade surpluses with us. They send us goods, we send them money. So the equation doesn't balance, and there can be a net loss of jobs. In addition, capital migrates - factories close here and open in China and elsewhere because they have an absolute cost advantage. You could fix this problem with deregulation, but we'd have to compete directly with their wages (productivity adjusted), and we'd have to be willing to foul our water and air.
The economics taught in the vast majority of schools today is useless (I earned my MBA from U Chicago). The worst part is that Econ 101 students learn simplistic models and then actually believe that they apply to the real world.
