17 ноября, 21:37

Taking Comparative Advantage Seriously, by Contributing Guest

by Pierre Lemieux Some geographical conditions can be changed by human entrepreneurship or government intervention. If hothouses have been built with a government subsidy and their cost is sunk, don't they now represent a comparative advantage? A recent Wall Street Journal story reports that the longer growing season of Mexican farmers is seen as a cause of dumping and that a renegotiated North American Free Trade Agreement may have to compensate for this comparative advantage of Mexico: American farmers, however, complain that their Mexican rivals enjoy unfair advantages, including low-cost farm labor, state subsidies and a year-round growing season that lets them dump cheap berries on the U.S. market when the two countries' growing seasons overlap in the late spring. Perhaps the reporter's or editor's interpretation was a bit loose (the reporter did not respond to my inquiry regarding whom exactly he was citing). But note how, in a similar way, French farmers complain against the unfair weather advantage of their Spanish competitors: French farmers and winegrowers dumped some two tons of peaches and nectarines in front of the Spanish consulate ... in order to denounce Spanish competition, deemed "unfair." ... For [a fruit growers' spokesman], "a European solution is needed." It is difficult to believe if you haven't seen it with your own eyes, but economic savvy is even less common in France than in America. This is a bit distressing nearly two centuries after French economist Frédéric Bastiat wrote his petition of candle makers disadvantaged by the competition of the sun. "If an orange from Lisbon sells for half the price of an orange from Paris, it is because the natural heat of the sun," Bastiat noted. In The Wealth of Nations, Adam Smith defended the importation of wine even if "[b]y means of glasses, hotbeds, and hot walls, very good grapes can be raised in Scotland, and very good wine too can be made of them." As he explained, domestic production would cost "about thirty times the expence for which at least equally good can be brought from foreign countries." Or, to borrow an example from William Taussig, very good pineapples could be grown in Maine with similar means. Geography, weather, and other natural conditions create justifiable comparative advantage in trade. Except if one is an ascetic, it is not rational to produce by oneself what somebody else can produce more cheaply in another climate. However - and here is a little challenge - the distinction between "natural" and "artificial" conditions is not as neat as one might think. Some geographical conditions can be changed by human entrepreneurship or government intervention. If hothouses have been built with a government subsidy and their cost is sunk, don't they now represent a comparative advantage? Ski resorts can be built and artificial snow made, possibly with government subsidies. Ignorant people can be instructed, even in government schools. Moreover, some phenomena straddle the distinction between the natural and the artificial, that is, phenomena like language, culture, and morals (see chapter 1 of Friedrich Hayek's vol. 1 of Law, Legislation and Liberty). The question is which features of the world count in comparative advantage? Swiss producers' strong work ethic and Canadians' use of English help determine their comparative advantage. Economies of scale benefit producers who have come to serve a larger market. Market institutions and a political system favorable to enterprise also help determine comparative advantage. But don't the Chinese government's subsidies and other assistance to Chinese businesses also help determine the latter's comparative advantage? Similarly, aren't the subsidies that aircraft maker Bombardier got from the Canadian and Québec governments now part of the company's comparative advantage? Such interrogations are related to an important argument made by Paul Krugman in an article later published in the Journal of Economic Literature ("What Should Trade Negotiators Negotiate About?" 35-3: 113-120). Krugman argued that government regulations and taxes are part of the comparative advantage landscape; they do change relative prices, but trade proceeds - and should be left to proceed - from that point on. This comprehensive concept of comparative advantage does not invalidate arguments against inefficient or immoral regulations, taxes, or subsidies. We may wish (often contra Krugman) that these measures do not exist in our own country, and try to persuade foreigners that they should not be subjected to them either. But they do not extinguish comparative advantage and negate all benefits from trade. Except perhaps in extreme cases (for example, trading in stolen goods, such as goods made with slave labor), a foreign governments' interventions do not justify another government prohibiting its own residents from trading with the regulated or subsidized foreigners. One can wish that one's trading partners were freer and thus more productive and wealthy, but it remains beneficial to trade with them, even if not as much as it would be in an ideal world where everybody were perfectly free. As Krugman suggests, this wide view of comparative advantage reconciles free trade and political decentralization at the world level. It is beneficial and possible to have both. On the one hand, political decentralization is necessary to preserve liberty and experimentation, as opposed to a world government. Different peoples can have different sets of regulations, including less regulation. There is no need to impose standards or regulatory harmonization in "free trade" agreements. On the other hand, the benefits of free trade are preserved because comparative advantage continues to exist under intervention, although with some distortions. The distortions introduced by a world government monopoly would certainly be worse. This line of argument supports the idea that unilateral free trade is beneficial: it is in the interest of (most of) a country's residents to be free to import at will whatever obstacles other national governments impose on their own citizens or subjects. Pierre Lemieux is an economist affiliated with the Department of Management Sciences of the Université du Québec en Outaouais. His forthcoming book, to be published by the Mercatus Center at George Mason University, will aim at answering common objections to free trade. Email: [email protected] (3 COMMENTS)

16 ноября, 15:00

Важность образования в новом мире

Пролистывая сентябрьский номер журнала Finance & Development, издаваемый МВФ, наткнулся на интересную информацию. Вернее не интересную, а пугающую. В этом году в американской прессе широко обсуждается кризис в ритейле, и триумфальное восхождение компании AMAZON благодаря автоматизации. Однако, по данным МВФ эта проблема не только в США, а почти во всех развитых странах. Доля труда в […]

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16 ноября, 00:16

Bombardier plans hiring spree for business jet program: sources

MONTREAL (Reuters) - Bombardier Inc expects to hire around 1,000 workers in Montreal over 18 months, as the Canadian plane and train maker ramps up production of its new Global 7000 business jet, three sources familiar with the matter said on Wednesday.

15 ноября, 01:06

EgyptAir signs $1.1 billion deal for 12 Bombardier CSeries jets

DUBAI/MONTREAL (Reuters) - State-owned EgyptAir signed an initial order for 12 Bombardier Inc CSeries jets on Tuesday, marking the Canadian planemaker's second deal for the aircraft this month after a 1-1/2-year-long sales drought. The agreements are expected to generate momentum for the narrowbody jets and follow an October decision by European planemaker Airbus SE to take a majority stake in the CSeries program, throwing its marketing and purchasing power behind the aircraft. "We anticipate both of them by year end," Fred Cromer, who heads Bombardier's commercial aircraft division, told reporters of the new sales deals.

14 ноября, 17:26

Boeing Issues 20-Year View for Jetliner Demand in Middle East

Despite political disorder and recent ongoing troubles affecting the three big Gulf carriers, Boeing (BA) forecasts strong demand for jetliners.

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14 ноября, 17:11

Bombardier clinches C series order from EgyptAir

Canadian group’s struggling aircraft is given vote of support by flag carrier

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14 ноября, 16:29

EgyptAir in deal to buy 24 Bombardier C-Series planes

C-Series wings are made at Bombardier's Belfast operation, providing employment for about 1,000 people.

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14 ноября, 16:27

Египет Air планирует купить у канадской Bombardier до 24 самолетов на $2,2 млрд

Предполагается, что новые самолеты будут обслуживать рейсы регионального подразделения Egypt Air Express

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13 ноября, 03:00

Bombardier defiant over US tariffs

Bombardier is challenging the US's high tariffs on imports of its new C-Series passenger jets.

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13 ноября, 03:00

Dubai Airshow: Bombardier says Airbus deal means more UK work

The Canadian planemaker's sales head says an Airbus alliance means more wings will be made in Belfast.

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11 ноября, 06:00

В Великобритании самолет приземлился без переднего шасси

Борт британской авиакомпании Flybe успешно приземлился, несмотря на отсутствие переднего шасси. «Инцидент произошел с одним из двух наших самолетов Bombardier Q-400, выполнявшим рейс из Белфаста в шотландский город Инвернесс», - приводит сообщение авиакомпании «Российская газета». В этот момент в самолете находилось 52 человека. К счастью, борт удалось посадить. В результате ЧП пострадал один пассажир - он получил травму головы. Сообщается, что техническая неполадка обнаружилась сразу после взлета. После этого самолету пришлось кружить в небе над Ирландским морем для выработки топлива на протяжении двух часов. Ранее «Свободная пресса» сообщала, что в Благовещенске Амурской области экстренно сел самолет из-за проблем с кондиционером. «В полете возникла неисправность в работе системы кондиционирования. Экипажем принято решение совершить посадку в аэропорту Благовещенска», - сообщали тогда в минтрансе области.

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11 ноября, 04:54

В аэропорту Белфаста самолет приземлился без передней стойки шасси

В результате аварийной посадки пострадал один пассажир

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10 ноября, 21:10

Fitch подтвердило рейтинг Bombardier на уровне "B", прогноз негативный

Fitch подтвердило рейтинг Bombardier на уровне "B", прогноз негативный

10 ноября, 19:29

Пассажирский самолет приземлился без переднего шасси в Великобритании

В аэропорту Белфаста в Северной Ирландии совершил посадку пассажирский самолет авиакомпании Flybe без переднего шасси.

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10 ноября, 18:34

Самолет в Белфасте приземлился без переднего шасси

Авиалайнер Bombardier DHC-8 британской авиакомпании Flybe, вылетевший из аэропорта из аэропорта Джорджа Беста в Белфасте, вынужден был вернуться обратно и приземляться без переднего шасси. После вылета рейса BE331, направлявшегося в шотландский Инвернесс, экипаж получил сигнал о возникшей проблеме с передним шасси. В течение двух часов самолет кружил в окрестностях воздушной гавани. Поняв, что проблему решить не удастся, командир принял решение совершить посадку. Приземление прошло успешно. На борту находилось 52 пассажира и четыре члена экипажа, никто из них серьезно не пострадал, передает Daily Mail. Bombardier DHC-8 (Q серия) - канадский двухмоторный турбовинтовой ближнемагистральный пассажирский самолет.

10 ноября, 06:40

Airbus раскрыл подробности нового истребителя для Евросоюза

Корпорация Airbus Defense and Space в Берлине на конференции International Fighter 2017 рассказала о подробностях нового истребителя для Евросоюза.

09 ноября, 22:00

2:00PM Water Cooler 11/9/2017

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Today's Water Cooler: TPP - 1, NAFTA, opioids and 2016, Virginia, gerrymandering, wholesale trade, JOLTS, bubbles, poor whites, Mosler on MMT

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07 ноября, 17:05

Дополнительные рейсы в Москву появились в расписании воронежского аэропорта

Дополнительные рейсы из Воронежа в Москву появились в расписании аэропорта города.

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06 ноября, 20:21

Bombardier: US trade allies 'have to play by the rules'

Wilbur Ross says even the US' "best friends have to play by the rules" in the Bombardier-Boeing row.

18 апреля 2015, 09:10

5 самых быстрых поездов в мире

Современные поезда быстрее машин. Но насколько быстрее? На самом деле, даже суперкарам за составами, получившими статус bullet-train, не угнаться. Соревнуются они между собой. И ради победы готовы даже взлететь.