- Jake If you only spend 20 minutes of the rest of your life on economics, go spend them here.
Whenever you construct toy models, you reach back to the first- and second-year textbooks. Because that's where you learned to build toy models. So if you teach people nonsensical toy models in the first- and second-year textbooks, they will come away with a nonsensical conventional wisdom.
You can teach more sophisticated models later to your heart's content, but the qualitative, intuitive understanding - their bullshit detector, if you will - will still be based on their conventional wisdom.
Those advanced models "replace" the simple first-year models, "in the same sense that quantum theory replaced classical mechanics." And since the undergraduate-level stuff has been supplanted, it doesn't need to be revisited. After all, you don't revisit the classical physics textbooks much either.
The difference that this physics envy conceals is that the relative importance of the simplifications that go into physics models does not change over time. The three assumptions that were most constraining on a model of the motion of the gyroscope two hundred years ago (air resistance, contact point friction and rigidity) are still the three assumptions that are most constraining today.
The same cannot, alas, be said for economic models. So you have a toy model that stipulates liquid, competitive markets as the three most important assumptions, and doesn't even bother to mention capital immobility. Which was not a bad way to prioritise the assumptions two hundred years ago. Unfortunately, today competitive markets is an afterthought compared to the enormity of assuming that capital is immobile. But toy-model trade theory is Settled Science, so there's no need to revisit those models. Right?
Because the benefits of such forms of trade are not based upon transferring wealth from owners of factors -- labor or capital -- to each other they may result in higher wealth for all workers and capitalists in both countries, alike.
There is no doubt that the rise of global corporations - with hugely expanded access to global markets, levels of capital, and scope for applying technological innovation has hugely expanded their total wealth, productivity, value added etc. But what evidence do we have that this incremental wealth is spread to all workers and capitalists in all countries ALIKE? notes from no w here
So if 5 tons of raw materials are shipped from country A to country B that keeps 4 tons within their borders and sell 1 ton (with labor added) to country C for more then 5 times the value/ton of the original raw materials most of the trade will be between B and C? A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!
Because the benefits of such forms of trade are not based upon transferring wealth from owners of factors -- labor or capital -- to each other they may result in higher wealth for all workers and capitalists in both countries, alike. (My bold)
Unfortunately, social science is so badly taught in the USA that a majority of those who would benefit personally from such a more equitable distribution of wealth think that this would be wrong. I do not believe this is an accident. As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
