> On Tue, 23 May 2000, Max Sawicky wrote:
>
> > [mbs] I don't see that the quote contradicts what I said.
>
> Now I'm confused. This
>
> > > Foreign's lower wage rate is, however, *irrelevant*
> > > to the question of whether Home gains from trade.
>
> isn't the opposite of what you said? In the model you summarize, both
>
I don't think so. I said it was relative costs, as in the cost of X/the cost of Y in country A, relative to the cost of X/cost of Y in country B. NOT the cost of X in country A relative to the cost of X in country B.
> sides gain even though EPI would presumably denounce Home for exporting
> cheese jobs.
> I of course accept that this model may have simplified away everything of
> significance. Is that the EPI view?
yes.
> That comparative advantage only
> works on paper and has nothing to do with the real world?
I would say it's a powerful idea, in and of itself, but it assumes away lots of important things.
> Are you saying
> that's the mainstream view as well nowadays, so that there is no need to
> refute it? In that case, could you nudge someone to dig up a cite
> explaining why it all doesn't work anymore if it ever did? I would be
> much obliged. Michael
The mainstream view -- insofar as it goes to policy -- is that the idea is so powerful one ought, for all practical purposes, to ignore everything else.
mbs