Does this strategy work for B? Or does this backfire in some way that I did not see? This is the strategy major manufacturing nations (Japan, Germany, US, China) took to develop. Maybe instead of free trade, we should be aiming for reciprocal trade.https://twitter.com/Molson_Hart/status/1184674911920492545 …
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The country who makes the good cheapest is not the only one who makes it. Other countries will still make it even if more expensively in absolute terms because it’s still the most efficient thing they can make. Not sure if you’re getting the comparative vs absolute distinction?
I wasn't, thanks. What are some good examples of this? I can only think of numerous counter examples to the idea that countries make what they can make most efficiently, not what they make most efficiently relative to others.
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Maybe it's true in the short run after an economic shock? But in the long run, I'm just not buying it.
Thanks. Twitter will use this to make your timeline better. UndoUndo
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If you have a bunch of natural resources, the most efficient and worthwhile thing to do might be extracting them, and you’re better off focusing there and buying manufactured goods from elsewhere
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It's tricky. Doing this often does not provide gainful employment for the entire population. Further, when the resources run out, you don't have the ability to compete.
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Comparative advantage just states that you’ll tend towards the activity you’re best at, even if you’re not THE BEST at it. It’s probably more theory as obviously economies produce multiple things. The point is, China may be cheapest but still won’t be only to produce an item.
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This paper might explain the problem with the contraposition of absolute and comparative advantage: https://dx.doi.org/10.2139/ssrn.3095473 …
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