ALL BLOG POSTS AND COMMENTS COPYRIGHT (C) 2003-2016 VOX DAY. ALL RIGHTS RESERVED. REPRODUCTION WITHOUT WRITTEN PERMISSION IS EXPRESSLY PROHIBITED.

Sunday, August 02, 2015

In defense of Ricardo

Clark responds to my critique of his endorsement of David Ricardo and Comparative Advantage. I will respond to it in detail soon, although the chief defects of his defense should be readily apparent to those with the eyes to see it.

Vox and I got in a disagreement on twitter about economics when I told someone "Read David Ricardo". Vox replied that Ricardo was wrong on many things, and wrong about comparative advantage - at least when we take into account flows of population and capital.

Vox lays out his objections here

It's true that I literally wrote the words "read Ricardo", but the context makes it clear that I was using "Ricardo" as a metonym for the theory of comparative advantage.  Vox objected to several aspects of Ricardo's writings, so let me take a quick detour and address some of Vox's points.

Let's set out the areas where Vox and I agree (or, at least, where I think we agree):

I do not back the labor theory of value.

I've considered labor theory of value a horrific joke since I first read Das Kapital decades ago. I disagree with Vox that Ricardo endorsed such a thing; I suggest that Ricardo merely said that a commodity will never be sold for less than its cost of production, which is absolutely true (if we talk only of steady states of markets in equilibrium, like corn being grown in England, and not weird cases like warehouses full of remaindered Apple Newtons).  Is there really anything objectionable in Ricardo's sentence fragment "But suppose corn to rise in price because more labour is necessary to produce it"? I suggest not.  Additionally, it's unfair to paint Ricardo, by lack of context, as some proto-Marxist, when in fact he was actually writing after Adam Smith, and in the same vein, helping to move us from a state of ignorance of the laws that govern the market to one of better understanding.  Do we criticize Newton for getting the rules of force and momentum mostly right, but failing to include a relativistic component in his equations?

I do not assert that unlimited immigration is a good idea.

Unlike the conservative stereotype of libertarians and free market economics as pie-in-the-sky dreamers who ignore cultural issues, I most certainly do NOT ignore such issues, and often debate such people, asking them "what do you think an America of 900 million people, 600 million of them being new immigrants, would be like?  How would it vote?".

On what do Vox and I disagree?  I assert merely that comparative advantage is a real phenomena, and persists in being a real phenomena even in a world of mobile capital and mobile labor.  I'm not even 100% sure that Vox disagrees with this, because his post seems to conflate knock on effects of immigration with the core point of comparative advantage.

But assuming that we do disagree on the thesis "comparative advantage is a real phenomena, and persists in being a real phenomena even in a world of mobile capital and mobile labor", I proceed.

Let us define our terms.  The law of comparative advantage is this:

1) various producers are variously capable of producing different outputs at different costs.

2) therefore, in pure economic terms, it is to each producer's advantage to concentrate his effort in what he's best at and trade for much else...even, in many cases, if the producer of X is better at Y in absolute terms than the person that they choose to engage to do that task for them.

Examples often include lawn mowing, for whatever reason.  E.g.:
Take a model who makes $10,000 a day modeling but who is also very efficient at mowing her large yard around her mansion. If she cuts her grass herself, she can do it in one day. Or she can hire a lawn service that takes 2 days to mow the lawn and charges $400. Thus, the model has an absolute advantage in both working as a model and mowing her own lawn, but, she would, nonetheless, still hire the lawn service, because if she mowed her own lawn, she would have to give up a day of modeling, which means her earnings would be $10,000 less. By hiring the lawn service, she earns $10,000 a day as a model and pays the lawn service $400, for a net gain of $9,600.

Let us look at Ricardo's original quote in context. First he defines the sorts of things that influence the productivity of a given population: natural resources and distribution of skills:
    But in different stages of society, the proportions of the whole
    produce of the earth which will be allotted... depend[s] mainly on the
    actual fertility of the soil, on the accumulation of capital and
    population, and on the skill, ingenuity, and instruments employed in
    agriculture.

Note that Ricardo is speaking here of the case within a given nation: imagine a world without trade between nations.  Given a high-IQ, high-conscientiousness, high-technology Japan, we would expect that a relatively small proportion of its population would be devoted to fishing.  The "skill, ingenuity, and instruments" and the Japanese people ensure that: there is no need for a million Japanese to stand in bamboo junks and throw lines into the water.  Instead, we'd expect a few thousand clever Japanese engineers to build massive ships, nets, etc.

On the other hand, in this theoretical world without foreign trade, we'd expect that a larger percentage of the population of Kenya, would be devoted to fishing, because the "skill, ingenuity, and instruments" of the Kenyan nation would require more labor to achieve a similar result.

Ricardo also notes that the natural resources of a country play into the calculation: a country blessed with relevant abundant resources is ahead of the game, and can generate more outputs with the same labor:
The same remark may be made respecting two or more countries. In America and Poland, on the land last taken into cultivation, a year’s labour of any given number of men, will produce much more corn than on land similarly circumstanced in England.

I see nothing objectionable here: Spain, with its sunny climate, is naturally better suited to making wine than is England.  North America is better suited to making beef than is Japan.  Etc.

Ricardo takes these two points and derives the concept of specialization:
Under a system of perfectly free commerce, each country naturally devotes its capital and labour to such employments as are most beneficial to each. This pursuit of individual advantage is admirably connected with the universal good of the whole. By stimulating industry, by regarding ingenuity, and by using most efficaciously the peculiar powers bestowed by nature, it distributes labour most effectively and most economically

As we look around the actual world, this is largely what we see. Japan, blessed with an intelligent population and hampered by a lack of oil, specializes in exporting electronics and buys oil with the proceeds.  Saudi Arabia, blessed with oil, and not much else, exports oil and purchases electronics.

So, this, then, is Ricardo's concept of comparative advantage.

Vox raises two objections: mobile capital and mobile labor.

Let us inject mobile capital into our model first. Picture Saudi Arabia in 1950.  It is oil-rich, but technology- and dollar-poor.  It learns that there is oil underneath its sands, but has neither the technology nor the wealth to build the infrastructure to get it out.

Who has the comparative advantage in both lending money and in building oil refineries?  The West.  And we see that it is the West that, indeed, lent the capital and the technology to get the oil out.

(By the way, there's a line of attack on this argument that I sadly predict: "yeah, well, how did making Saudi Arabia an exporter of oil work out for us? Remember 9/11 !".  And perhaps my hypothetical interlocutor is correct - perhaps we'd be better off in a world of less available oil and also a poorer Saudi Arabia - but that debate has absolutely nothing to do with comparative advantage.  In fact, I chose Saudi Arabia as the example here specifically to trigger and
then discard this objection).

Anyway, what does the addition of mobile capital do to concept of comparative advantage?  It acts only as a lubricant, to allow the gears to turn a little more freely, and make the inevitable - and mutually beneficial - specialization happen more quickly.  Saudi Arabia could have husbanded its resources in 1950, invested in one early well and refinery, used the profits from that too bootstrap a second well, and so forth, but there is no difference in the inevitable outcome.

Q.E.D.: comparative advantage exists, even with mobile capital.

Now let us look at Vox's second objection: mobile labor.

Let us picture a Japanese sushi chef.  In Japan, he creates more value per unit of labor by making sushi than he does by, say, driving a bus. If he immigrates to the United States, it is likely that he continues to create more value per unit of labor by making sushi than he does by driving a bus.  In Japan his smart strategy is to sell his sushi-making labor and buy his transportation.  After immigrating to the US his strategy is likely still the same.

Let us consider a second example: a Mexican farmer.  Let us posit that he has skills tied to the particular climate of Mexican farms (agave cactus farming, let us say).  This his smart strategy is to work as a farmer, and hire relatively unskilled labor to mow his lawn or take out his garbage.

If the farmer immigrates to the US, perhaps, North Dakota, the utility of his agave expertise diminishes, and his comparative advantage is now perhaps in unskilled labor.  Perhaps the former farmer now carries trash for others, and uses the proceeds to buy agave, in an exact reversal of his former situation.

Q.E.D.: comparative advantage exists, even with mobile labor.

Because so many people who discuss Ricardo also carry water for legal and social policies that are repugnant to the alt-right, it's easy to conflate the two, so let me by clear:

In this essay I have not demonstrated, not have I claimed, that:
  1. unchecked immigration is a good thing for the culture of the receiving country
  2. unchecked immigration is a good thing for the economy of the receiving country
  3. immigration of unskilled labor benefits unskilled natives
  4. unchecked importation of capital is good for the governance of the receiving country
  5. unchecked importation of capital is good for the economy of the receiving country
I believe that I have, however, demonstrated :
  1. that the law of comparative advantage exists
  2. that the law of comparative advantage continues to exist even with mobile capital
  3. that the law of comparative advantage continues to exist even with mobile labor
If Vox's objection is only to one or more of the first five items, we have no quarrel.

If Vox's objection is to one or more of the latter three items, I'd like to hear him explain - not how populations flows interact poorly with the modern anarcho-tyranical welfare states of the West - but how the law of comparative advantage qua the law of comparative advantage does not exist.

Labels: ,

123 Comments:

Blogger SciVo August 02, 2015 4:02 AM  

Well, I only studied economics to the college junior level, but that sounds good to me.

Anonymous Wyrd August 02, 2015 4:04 AM  

Crom!

Blogger ScuzzaMan August 02, 2015 4:19 AM  

The problem reduces to one of who enjoys a comparative advantage in baby production?

Blogger SciVo August 02, 2015 4:57 AM  

ScuzzaMan @3:

Comparative advantage = works better for you. If by "problem" you mean cultural survival/propagation, then the more babies are better. And the society that is more focused on self-actualization will produce less babies because of course.

Anonymous Fp August 02, 2015 5:14 AM  

The above reminds me of this video. Vox probably has a scathing critique in store.

Blogger The Original Hermit August 02, 2015 5:16 AM  

If I'm not mistaken, the problem is not that comparative advantage "exists even with mobile capital/labor", it's that it *requires* mobile labor. It will lead to unchecked immigration sooner or later, whether you like it or not.

Anonymous BB August 02, 2015 5:38 AM  

Clark confuses the micro and the macro. Up until now, discussion had been about comp. advantage between economies under conditions of mobility of goods, capital and labour (though exclusion of transportation costs iirc).

Now Clark introduces a micro example when defending comp. advantage under mobility of labour. Basically says that if worker has skills A & B, where country C pays more for A and country D more for B, he will change his trade accordingly upon relocation.

This is almost tautological, certainly true on the micro level, but does not explain why England turns to wool and leaves the wine Portugal(as per the original example), ie. the macro.

Blogger Joshua Sinistar August 02, 2015 5:54 AM  

If unlimited immigration is such a good thing, then where is the Roman Empire? The barbarian invasions should have created unlimited value in this retard's mind instead of causing the collapse. The idea that people are interchangeable is demonstrably untrue. When Constantinople fell to the Ottomans it didn't remain Christian did it?
Culture is merely a phenotype that is based on the genotype of Race, and anyone who denies that may as well be a Witch Doctor practicing HooDoo with magic dust and funny dances. The idea that value is constant at all is also ridiculous. Production notwithstanding, the society will only value goods with the usefulness it has to the society. Irregardless of how much it costs to produce Milk for instance, a society of people who are lactose intolerant will find it completely worthless.
These experts are so full of shit, they are merely regurgitating the platitudes their professors instilled into them, without ever having put much thought into actual real world applications. Theoretical principles are worthless without real world applications, and that is why most of these degrees such as Economics are worthless.

Anonymous Statists are so dull August 02, 2015 6:00 AM  

Is this what passes for economics? Abstracted ciphers all working at peak efficiency, all the time? A component child could model something better in Excel.

No wonder the global economy is in the toilet if this is what they use. And where is gubbmint's very visible hand interfering at every stage?

And no wonder the rich are accumulating all the wealth - they are outside of the model, above the laws of economics. It's like the global warming models that ignore the effects of the sun to work.

Anonymous Clark August 02, 2015 6:01 AM  

@Joshua Sinistar:
_If unlimited immigration is such a good thing_

Did you read a different essay than I wrote? Because not only did I not defend unlimited immigration, I made an explicit note saying that I was not defending unlimited immigration.

Anonymous grey enlightenment August 02, 2015 6:18 AM  

The problem is not immigration, it's low-quality immigrants who clog up public services without giving anything in return. High-IQ immigration can make America more economically competitive and productive , increasing profits and technological progress.

Blogger Eraser August 02, 2015 6:50 AM  

I find the discussion about comparative advantage to be a bit beside the point, because Vox' s critique didn't really present an argument against comparative advantage. It's all about immigration.

What Vox did was make up a scenario that results in mass migration from Portugal to England. The scenario is obviously flawed and would never happen in the real world, but it fits perfectly with his ideas on immigration. The argument boils down to "If there is free trade, then rich countries will be invaded by low-IQ migrants". But I've never seen an argument that proves free trade necessarily leads to unlimited immigration.

Anonymous Clark August 02, 2015 6:52 AM  

@Eraser:

_I find the discussion about comparative advantage to be a bit beside the point, because Vox' s critique didn't really present an argument against comparative advantage. It's all about immigration._

Yes. Exactly.

Anonymous Stilicho August 02, 2015 7:04 AM  

Comparative advantage is not static. Japan used to specialize in cheap labor and cheap junk. That changed. China is attempting the same thing. Moreover, you cannot divorce such a one sided flow of technology from the results that flow from it. See,e.g., the exportation of terrorism enabled by western technology and money flowing to the ME. Finally, this doesn't mean trade is bad, it means that you don't trade away your seed corn and you don't give foreigners open access to your granaries. Alas, "free trade" as practiced does both.

Blogger Rantor August 02, 2015 7:09 AM  

@11 grey enlightenment, at the surface a mass immigration of High IQ people sounds good. But remember yesterday's discussion of Freud. If those people do not share a societies traditions, values and goals, they will work, perhaps effectively to change the society to meet their vision. If that vision is not one of a free market economy that respects individual rights, then even the smart immigrants are damaging our vision of a nation.

If they are not Christian in their beliefs and behaviors, then we are contending with high IQ invaders contributing to the pagan transformation of America.

Blogger James Dixon August 02, 2015 7:16 AM  

> I suggest that Ricardo merely said that a commodity will never be sold for less than its cost of production, which is absolutely true...

No, it's not. People are not rational creatures, and we don't make decisions on a purely economic basis. Companies, countries, and individuals sell products at less than their cost of production all the time.

He tries to hand wave this away by limiting it to the case of "states of markets in equilibrium", but no such creature exists in today's world. Their is no equilibrium in the markets. They are in a continual state of change.

Blogger James Dixon August 02, 2015 7:18 AM  

And yes, BB, his examples are all micro when we're discussing a macro problem.

Anonymous Statists are so dull August 02, 2015 7:45 AM  

Simple economic model: government steals half of all productive people's wealth and gives it to their family and friends in exchange for monopoly contracts on unnecessary things or things that would have been done anyway.

When they fuck it up, embezzle it or sniff it up their nose, create more money backed by the money to be stolen from future generations of productive people.

Repeat until people armed with guillotines, lampposts or whatever intervene

Anonymous daddynichol August 02, 2015 8:04 AM  

I suggest that Ricardo merely said that a commodity will never be sold for less than its cost of production, which is absolutely true (if we talk only of steady states of markets in equilibrium, like corn being grown in England, and not weird cases like warehouses full of remaindered Apple Newtons).

The writer doesn't understand the economics of farming at all. Farmers don't set commodity prices, the market does (Chicago Board of Trade anyone?). The production costs for commodities, like corn, many times exceeded the what the market will pay. Such is the case this year. The investment for seed, fuel, equipment (large production tractors cost $250,000, combines $450,000, planters, field applicators, support equipment), services, chemicals, etc are substantial. Due to those costs and the variability of weather, farmers find themselves in the red even with various support programs.

Anonymous MrGreenMan August 02, 2015 8:06 AM  

If every time a theory is pursued to its logical ends, and it creates bad policy, it is a bad theory.

As usual there are abstractions that make this meaningless. Abolish the welfare state and create a global family of philosopher king cousins that rule every nation the same and then this may become not overly simplified.

Anonymous grey enlightenment August 02, 2015 8:13 AM  

@Rantor

Yeah, the economic argument is often incompatible with the nationalistic one

Anonymous al August 02, 2015 8:16 AM  

Actually, the model would have an advantage of $19,600, earning $10,000/day for the 2 days the lawn service requires to mow the lawn for $400

In an argument, it helps to use accurate numbers

Blogger Steveo #238 August 02, 2015 8:30 AM  

At first glance, several touched on the symptoms here in the comments, but what Clark has actually proven (and as others have touched on) is that the Ricardian Vice exists.

Anonymous old man in a villa August 02, 2015 8:43 AM  

And while the model is off on her shoot the Mexican lawn guy scopes out the house for a later home invasion/gang rape.

No value is assigned to what it means on a personal level to clean up after oneself; scrub your own toilet, rake your own leaves, grow your own vegetables, prepare your own meal. 8 hours of responding to someone's demands to "look up towards the lights, smile baby, show us your tits..." is in many ways as demeaning as having to mow someone else's yard so you can buy your daily allotment of tortillas and Fanta.

There is an entire world of economics that cannot be quantified because it cannot be represented in dollars and cents. Economists need money in the same way novelists need the alphabet, but just as a novelist is only capturing a version of the human experience, economists are only looking at the tools of finance as they impact the human experience, not the value of it.

Blogger Salt August 02, 2015 8:44 AM  

"But what consequence-blind Ricardians stubbornly refuse to understand is that Comparative Advantage simply does not work on a macroeconomic level." - VD

Vox has discussed this quite a bit. The individual is not the Economy nor the Country. Applying CA on a macro scale breaks down; much as large-scale physics does when examining the micro level, thus requiring quantum mechanics which is totally unsuited at the macro. The two don't mix well if at all.

So it's apparent Clark has a problem, utilizing the micro in support of his macro to achieve his across the board defense of CA.

For instance, he mentions Saudi Arabia on the macro and then retreats to the individual Mexican farmer, the micro. Let's choose one. One cannot capably use the individual Mexican to extract to the macro level, being all Mexican immigrants. Immigration cannot be ignored at the macro level.

Let's look at Saudi Arabia and one thing Clark said -

"(By the way, there's a line of attack on this argument that I sadly predict: "yeah, well, how did making Saudi Arabia an exporter of oil work out for us? Remember 9/11 !". And perhaps my hypothetical interlocutor is correct - perhaps we'd be better off in a world of less available oil and also a poorer Saudi Arabia - but that debate has absolutely nothing to do with comparative advantage.

That's a macro look and Clark is unknowingly correct - "but that ... has absolutely nothing to do with comparative advantage."

Blogger Nate August 02, 2015 8:51 AM  

/facepalm

I can make up a hypothetical scenario that demonstrates the positive effects of a claim that I am attempting to defend.

Therefore...

Law.

Anonymous trev006 August 02, 2015 8:51 AM  

Clark, you've set out an able defense of comparative advantage. If it survived contact with reality, the United States would focus on high-capital farming that was less labor-intensive, while Mexico would use low-productivity methods that took advantage of its labor surplus.

(BB asked why England would leave wine production to Portugal: I would respond that climate and arable soil are not mobile. In the same vein, the United States has a vast surplus of useful land, so of course they will still have some amount of farming.)

We all know, of course, that a primary driver of illegal immigration is bringing Mexicans into farming and related industries, because they are jobs Americans allegedly wouldn't do. We see this further when Asian labor is imported under the H-1B rules, which erodes American competitive advantage in higher-level service professions. So as a practical matter, corporations and governments choose to implement a de facto customs union to reduce the comparative advantage. From a utilitarian metric, the greatest good to the combined population of the USA and Mexico is a customs union where Mexicans and elite Americans do very well indeed.

Of course, that metric disregards tens of millions of Americans that are losing catastrophically under such a deal. Which, to most people against free trade, is a primary argument against free trade, if not the core principle.

Blogger Nate August 02, 2015 8:53 AM  

also... Double Plus Bonus Points to Clark...

This the first time I've seen Ricardian Vice used to defend Ricardo.

Blogger Nate August 02, 2015 9:00 AM  

Russia went from an energy importer to an energy exporter and has Europe, if not the world, by the balls because of it.

But they shouldn't have done that.

Because Ricardo.

****BZZT****

Wrong.

That's not a law. Its tautology.

Anonymous Bz August 02, 2015 9:07 AM  

Some comments in the spirit of inquiry.

First, is the Ricardian model appropriate when one removes the borders (ie, no limits to mobility of capital or labour)? What differentiates the two countries to require Ricardian reasoning rather than just viewing them as a single point or a single market?

Second, it seems one point of the opposition is that the Ricardian model is too simplistic. I suppose the recent jargon is that 'externalities' are unaccounted for, in essence that costs are dumped onto other actors instead of recognized by those involved in the model. This still seems unanswered.

Third, I don't see how the story of the sushi chef validates comparative advantage. As far as I can tell, while the sushi chef as an individual still may have a competitive advantage (not the same thing) and might make more money, the Ricardian model as I understand it would say the chef should stay in Japan, where there is comparative advantage, but as described the chef moving to the USA (which has less advantage) instead increases output. That seems contradictory to the theory.

Blogger Corvinus August 02, 2015 9:08 AM  

The idea of comparative advantage and free trade leads a nation's economy into overspecialization in a few fields, causing it to actually weaken, become poorer, and drive up unemployment.

After all, one of the major weaknesses of oil exporters like Saudi Arabia is that they have "all their eggs in one basket", so to speak... export oil, and not much else. After all, that's where their biggest comparative advantage is.

Anonymous old man in a villa August 02, 2015 9:25 AM  

"We all know, of course, that a primary driver of illegal immigration is bringing Mexicans into farming..."

They aren't farming, they are cogs in industrialized agriculture which is not the same thing as farming, not by a long shot. I would also posit that this is a secondary factor since the huge number of non-working immigrants living on the dole were imported specifically to bolster the ranks of the political establishment for purposes of dispossessing the founder's posterity. Demographics indicate that this strategy has been implemented to better effect than the cheap Ag labor argument, i.e the number of recent immigrants who are enrolled in government programs/vote democrat as opposed to pick strawberries and tomatoes.

Anonymous zen0 August 02, 2015 9:30 AM  

British wine sucks.

Blogger Cail Corishev August 02, 2015 9:33 AM  

The writer doesn't understand the economics of farming at all. Farmers don't set commodity prices, the market does (Chicago Board of Trade anyone?).

Right. The corn price is set by commodities traders who trade contracts without ever seeing a bushel of corn, and by dozens of government programs which provide various price supports. When the corn is ready to harvest, the farmer sells it for the market price....or he doesn't. Those are his choices. If he has the bins to store it all (which no one does today, when they're farming thousands of acres), he could store it and hope for a better price in a few months, but that's about it. (If it's Roundup Ready, which most of it is now, he's even legally prevented from saving it for next year's seed.) He can't haggle or go looking for a better customer.

No farmer currently gets enough for his corn to pay the full price of growing it, let alone make a profit. It's all grown for subsidies.

Anonymous old man in a villa August 02, 2015 9:33 AM  

It would appear that the model also ignores the value of Nations in the same way as it does individuals, i.e. they are interchangeable widgets rather than vessels of cultural significance. If all the best of India, for example, were to move to the US to bolster it's economic strategies, what then becomes of India? It's a form of rape where only the part which is desired is mined off and that which has little or no value is left behind like a tailings mound of human potential.

Economics, like industrialization is a completely man-made creation of theory based on utility rather than value. It fails to take into account Nature and the cycles of natural systems, forcing them into mechanical compliance in order to extract short term (in Nature's calendar) gain for immediate profitability regardless of long term consequences.

Anonymous FP August 02, 2015 9:35 AM  

@16

"Companies, countries, and individuals sell products at less than their cost of production all the time."

Indeed. First example to pop into my head being Intel taking a $4 billion loss last year in the mobile chip market to grow market share due to fears of losing out completely to ARM/android running chips. The market got $100 windows running tablets.

Anonymous Trimegistus August 02, 2015 9:39 AM  

Wow, an actual discussion between grown men on the Internet, using logical argument and verifiable data. This is wonderful!

Blogger Joshua Sinistar August 02, 2015 9:39 AM  

There is no comparative advantage at all. The United States of America was rich and prosperous when it was exporting and is now approaching collapse as it becomes the World's sucker for cheap imports. High IQ immigrants are even worse than low IQ immigrants. Just ask all the programmers that are now unemployed due to the H-1B invasion from the Indian subcontinent.
These academics are all for cheap labor because they're not losing jobs to immigrants, yet. Their tune will magically change when they get their pink slip and a foreigner gets their job. Job losses don't seem important until your boss tells you to train a cheap labor foreigner to take over your position for half the salary. At that point I imagine their commitment to this policy will magically disappear.
The idea that just anyone can make a good citizen is BullShit. Patriotism is not based on location. Mexicans who have lived in the USA for 30 years still consider themselves Mexican. Yes, its a matter of Race, retard. America is a White country built by White people. A non-White majority will not share the values or beliefs of the America you remember. I imagine they find the idea of stripping the Rich of all their assets and giving it to themselves will appeal to them immensely, MORON.

Blogger Nate August 02, 2015 9:42 AM  

"We all know, of course, that a primary driver of illegal immigration is bringing Mexicans into farming..."

No.

The primary driver of illegal immigration is american entitlements.

Blogger James Dixon August 02, 2015 9:43 AM  

> First, is the Ricardian model appropriate when one removes the borders

No. Because when you remove borders (i.e., unlimited migration of capital and labor), the only thing left is geography. And while geography can shape economics, by itself it's not enough to shape them to the degree the Ricardian model supposes.

> They aren't farming, they are cogs in industrialized agriculture which is not the same thing as farming, not by a long shot.

You got that right. And we're going to pay a heavy price when we that's finally demonstrated to us in terms the average person can understand (you'd think things like the recent bird flu and the resultant rise in egg prices might give people some idea, but apparently not).

Blogger James Dixon August 02, 2015 9:48 AM  

> The primary driver of illegal immigration is american entitlements.

You're correct now, Nate. But as little as 30 years ago, trev006's statement was still largely true. He simply hasn't kept up with the current situation.

Blogger Bluntobj Winz August 02, 2015 9:50 AM  

So this response tries to bring up mobility of capital, which I do not find in the Dark Master's original discussion (which appears to solely focus on labor, and ricardo's postulation of the immobility of such as one of the foundational principles of his economic theory), and then attempts to prove comparative advantage by postulating the mobility of such labor from one to another country, completely annihilating one of the fundamental givens that ricardo is using to prove comparative advantage?

Blogger Nate August 02, 2015 9:53 AM  

" But as little as 30 years ago, trev006's statement was still largely true. He simply hasn't kept up with the current situation."

It was false then to. The hardworking illegal mexican just trying to find work has always been mythology.

Blogger James Dixon August 02, 2015 10:10 AM  

> It was false then to.

We'll have to disagree about that point, Nate. The migrant farm worker did exist. Now, whether he was "hard working" or "just trying to find work" is another matter. I didn't say either was the case.

Anonymous The other robot August 02, 2015 10:10 AM  

We see this further when Asian labor is imported under the H-1B rules, which erodes American competitive advantage in higher-level service professions.

Which service professions are you referring to?

Pumping gas? Cleaning houses? Leading tours? Tax planning?

Anonymous The other robot August 02, 2015 10:14 AM  

We'll have to disagree about that point, Nate. The migrant farm worker did exist. Now, whether he was "hard working" or "just trying to find work" is another matter. I didn't say either was the case.

It seems likely that these "migrant farm workers" did not have the ability to get across the border by themselves and were helped by facilitators who also "advised" them on how to obtain entitlements they were not legally entitled to.

OpenID mattse001 August 02, 2015 10:18 AM  

All academic: robots will take all the low-skilled jobs first, and their productivity will be almost identical worldwide. Still, they will be far more productive than humans. Eventually, if machine learning advances, the robots will take high-skilled jobs as well.

At that point, countries will have two choices: become neo-Luddites or become neo-socialists. They will all become neo-socialists eventually because of the huge advantages in productivity from automation. 1% of the population will be taxed at 90+% rate, but they will be so wildly productive that it will be enough to support the rest of society and the capital owners will still be fantastically rich.

The social effects of having 99% unemployment will not be so sanguine.

Anonymous Roundtine August 02, 2015 10:20 AM  

Intel taking a $4 billion loss last year in the mobile chip market to grow market share

In capital intensive high tech especially, if you can knock out the competition and create monopoly conditions, you can increase your R&D and accelerate advancements. If the government gave Micron, Intel and AMD tax breaks for building factories and research centers in America, and gave them big breaks on capital and income taxes, they could flood the world with cheap chips and bankrupt competitors. This wouldn't eliminate competition, but it would move competition from say, $5-$10 billion behind, to $25-$50 billion behind. With a window of less competition, they could up R&D and extend their lead on the competition, all while creating lots of high wage STEM jobs in America. The companies wouldn't have to bear any loss because the cost was socialized by the government, and in the long-run it also comes out ahead due to having lots of high wage jobs and very profitable export companies.

Anonymous old man in a villa August 02, 2015 10:24 AM  

I hate anecdotes, but here's one anyway:

Neighbor of mine, one of the wealthiest men in America- old money- has numerous estates including the one adjoin my land. Hires a hard working, White American alpha with five kids and a wife to run it. Insists on Central American labor force. Labor force does not speak English, ten years on not one speaks a word of it (at least in the open). Every job, no matter what- spreading mulch, planting trees, splitting firewood, etc requires a minimum of two men, sometimes as many as four or five, one to do the work as slowly as is humanly possible, the others to stand there and gibber on their I-phones to Qxecotl for six or seven hours a day. Every job must be done at a minimum two times to get it right. Alpha manager frequently ends up correcting deficiencies himself after spending an inordinate amount of time repeating the same phrases in English over and over at an increasing pitch and volume to five or six sets of uncomprehending eyes who nod repeatedly before going back to whatever it was they weren't doing at half the speed and twice the dismissive attitude as before hand. Billionaire neighbor holds White American alpha responsible for all cost overruns, delays, etc. while strictly forbidding the dismissal of any alien worker for any infraction whatsoever. Creew seems to replicate itself over the years as the staff increases in size with corresponding slowdown in performance. Alpha Manager finally breaks down and learns Spanish in secret to listen in on orcs conversations, learns of their hatred of everything American, their boss (him) their employer (billionaire) and their plans for numerous thefts and overbillings, etc.

I have watched this with my own eyes over the years, listened to the stories of the manager and his wife (whose home was robbed by one of these men who then slipped back across the border with the family's possessions) and seen for myself the alleged 'hardworking immigrants doing the jobs Americans won't'.

I'm sure this is the only case.

Blogger Nate August 02, 2015 10:27 AM  

"The migrant farm worker did exist."

No one said he didn't exist. What I said... was the farm work wasn't his primary motivation.

Anonymous Difster VFM #109 August 02, 2015 10:28 AM  

Comparative advantage can be summed up as: Water finds its own level.

I'll leave it to you to determine why that's not always a desirable state.

Blogger automatthew August 02, 2015 10:34 AM  

Nate @50, No one said he didn't exist. What I said... was the farm work wasn't his primary motivation.

I believe the other guy is less interested in the motivations of the immigrant and more interested in the motivations of those encouraging immigration.

Blogger automatthew August 02, 2015 10:35 AM  

Difster @51: Water finds its own level

Punch holes in all the locks! For freedom!

Anonymous old man in a villa August 02, 2015 10:37 AM  

Prediction: After the collapse of this Rube Goldberg complex global economic system there will be precious little discussion, even less employment opportunity for those who profess knowledge of said system.

If ever there were a modern day version of Martin Luther's 'how many angels can dance on the head of a pin?' question, this is it.

Blogger VFM #0202 August 02, 2015 10:39 AM  

@9: OT definitely not really typo policing. More serendipity appreciation.

My brane had a splattergasm at "component child". So thanks, I needed some dark laughter this morning. Coffee too.

{Cleese}The topic this week is child components. Component children are down the hall, in the Matrix department.{/Cleese}

Blogger Joshua Sinistar August 02, 2015 10:46 AM  

If all this labor can be done by robots cheaper and better then why the el cheapo labor force? Could it be that they are not here to work at all? I don't remember any labor shortages in the past before the border was erased do you?
If robots are the new workforce then Mexicans and third world migrants are superfluous. There is no more need for low skilled migrants if robots do the work. Robots need a high skilled mechanically inclined maintenance staff and that's it. You could have an all-White labor force with this couldn't you/
Provided that this is the future. What if the robots are never built because slaves are cheaper? Can even robots beat slave labor for cost? What is the incentive to upgrade to robots if el cheapo third worlder costs little or nothing to feed or clothe due to welfare picking up the cost?

Anonymous The other robot August 02, 2015 10:51 AM  

Provided that this is the future. What if the robots are never built because slaves are cheaper? Can even robots beat slave labor for cost? What is the incentive to upgrade to robots if el cheapo third worlder costs little or nothing to feed or clothe due to welfare picking up the cost?

Minimum wage laws are interesting. I suggest voting for $25/hour as the minimum.

OpenID simplytimothy August 02, 2015 10:57 AM  

First, a hearty harrumph for Mr. Clark showing up in his own defense.

Clark's model, while interesting is self defeating given the orginal premises in The Illusion of Knowledge.

Note that Clark invokes Ricardo in response to this:

James Thompson @JamesPsychol
Immigrants only benefit locals if they are better than the local average in ability and character, & make greater contributions


In the original post, Vox expands Thompson's observation to include 'quality' immigrants:

immigrants in sufficient numbers present a significant problem if even they are "better than the local average in ability and character". Consider the British in India, for example. If immigrants are inferior, they drag the invaded nation down. If they are superior, they tend to set themselves up to rule over the natives in their own interest and at the natives' expense


Mr Clark then shoots is own argument dead with

In this essay I have not demonstrated, not (sic) have I claimed, that:
....
1. unchecked immigration is a good thing for the culture of the receiving country
2. unchecked immigration is a good thing for the economy of the receiving country
3. immigration of unskilled labor benefits unskilled natives
4. unchecked importation of capital is good for the governance of the receiving country
5. unchecked importation of capital is good for the economy of the receiving country



So, while Mr. Clark's demonstration of his model of Ricardo (of which I am only an uneducated spectator) is impressive, it invalidates his original claim.














Blogger Cail Corishev August 02, 2015 11:08 AM  

By the way, anyone who's not already tired of hearing about corn should watch the film King Corn. It's a fun little documentary made by two guys who grew a single acre of corn in the middle of Iowa one year, as a hook for studying what's happened to farming. It's a very Iowan show; kinda makes me homesick for the years I lived there.

Related to the topic here, they talk about how, in 1973 (man, that was a bad year!), government policy shifted from trying to keep farm prices high and stable to keep the farm sector strong, to trying to drive prices down to increase exports and compete globally. Basically, they went with the Walmart strategy: produce as much as possible and undercut the competition on price to drive them out of business and monopolize the market. (Except it didn't work, because you can't undercut the Second/Third World on price.) But you can't produce a massive surplus if your farmers all go bankrupt, so where they had been paying farmers not to grow crops to keep production down, they started paying farmers to grow more. Of course, they still pay farmers not to grow too, because you can't ever get rid of a government program, but that's now about erosion and nature.

They use fancy language like "loan deficiency payments," but that's what it comes down to: if you plant corn, the government sends you a check. The government pays you to grow corn. The more acres, the more you get. If the price of corn happens to be good when you harvest, that's like a Christmas bonus, but you don't count on it to pay the bills.

Post-1973 US farming is an entire industry selling below cost. It's the freaking poster child for how globalist government policies, which include labor movement, overrule rational market forces.

Anonymous Max August 02, 2015 11:12 AM  

https://bloodyshovel.wordpress.com/2015/07/27/trade-and-peace/

People used to ask me if there’s any libertarian movement in East Asia. And there really isn’t. Nothing. The very concept is very foreign to them. It hardly registers at all. Try to explain it to a random native and odds are they won’t even get what you’re trying to say.

The whole concept is so bizarre that I promptly forgot about the whole thing after living her for some time. I used to be a Mises.org reading teenager, and I have to thank my Asian hosts for making it so hard to parse the ideology that I also lost interest myself.

Now I guess there’s many theories about why is that the case; besides the obvious one that libertarianism is retarded, and the burden of proof is in Westerners to explain why they came up with that strange idea that the people would be free without the state. Whatever that means. I guess I’ll put up my own theory: Asians are not into theology. They’re into history. These are exceptions of course (the weird shenanigans of Neoconfucianism), but in general the study of history has been much more prestigious and pervasive than arcane discussions about social metaphysics.

And of course history is but a compendium of anecdotes about why libertarianism makes no sense. So let me show a very short and illustrative one.

Gengis Khan founded the Mongol Empire, and its Chinese branch, what became the Yuan Dynasty, left a lot of historical records about the great Mongol enterprise. These dynastic histories, especially when they concern the story of a newly risen tribe, tend to start by detailing the foundation myth of the tribe.

Tribal foundation myths often have a common theme, about the tribe having a single common ancestor, or sometimes a couple, this ancestor being some supernatural being who just came down the sky. The Mongols, claimed that Gengis’ 10th degree ancestor, Bodonchar Munkhag, was their great founder.

The story of this Bodonchar guy is very interesting. Let’s start by the name, which Wikipedia translates as “misbegotten simpleton”. Or in other words “stupid bastard”. This stupid bastard was born of Dobun Mergen and Alan Gua. Dobun Mergen was a fine lad, second of two sons, and was fooling around with his elder brother. His elder brother being blind of one eye, compensated by having eagle-vision with his one eye, and he saw a carriage of people on the distance. Among them was a very fine girl, who appeared single. So big brother said to Dobun Mergen, his dear brother, “hey this girl is single, I’ll go ask them to give her to you”.

And so the half-blind older brother with game, got this beautiful girl for his healthy yet gameless young brother, and they were married. Dobun Mergen and Alan Gua had two healthy sons, Belgunudei and Bugunudei. Years passed and their father Dobun Mergen died, leaving Alan Gua alone with her two sons, and one bondservant they had acquired some time ago.

As time passed Alan Gua had three more sons. Her two elder sons by his husband obviously started to suspect. ”Hey Mom hasn’t remarried and she’s bore three sons. The only guy around is this slave dude, they must be his”. So they wen’t to confront their mother, who completely denied the facts and said that some yellow light in the form of a man came to visit her at night, touched her belly, and that’s how she got pregnant. My young sons are sons of Heaven, you see, so don’t be bigots and be nice to them.

Eventually Alan Gua died, and her 5 sons had to decide what to do with the inheritance. They decided to divide the property in 4, and give a part to each of the elder sons. The youngest son, that is Bodonchar Munkhag, was given a flint stone, some rope, and a horse, and that’s it. On his protests of unequal treatment he was told that he was stupid so no inheritance for him. That’s the moment where I guess he got his name. Stupid bastard, go take a hike.

Anonymous Max August 02, 2015 11:13 AM  

And a hike he took; he got his horse and left his tribe, finding a good hunting place and building a grass tent to live by himself. He then saw a hawk hunting small game, and seeing that he could use some of that, caught the hawk and domesticated it. This led him to became a pretty proficient hunter. Eventually he cought more game than he could eat, and found a nearby tribe living around, the Uriankhai. So he went by, and exchanged some game for mare milk, which he dearly missed. They never asked him where he was from nor treated him badly; he came every day, traded game for milk, and went back to wherever he lived.

Awesome, right? That’s individual grit and the free market working its magic. Lonely teenager must fend for himself, so he learns useful skills; then uses the product of his labor to trade for things he can’t make for himself with his neighbors. And nobody bothered to ask who he was, what he was doing living there by himself. This was a commercial transaction were both sides profited. Beautiful story. This stupid bastard should be made the patron saint of the economics profession.

But the story goes on. After some time one of his older brothers (also a son of the light, not of her mother’s husband, of course)felt sorry about his little brother and went looking for him. He then stumbled upon the milk-providing tribe, who told him they knew of his brother. He’s out there hunting with a black hawk; if you see a black hawk in the sky, your brother can’t be far.

So the brothers met, they hugged, cried, “sorry bro for sending you away”, “it’s ok man so glad to see you”, you get the picture. Big bro tells little bro to come back home, and so they pack up their stuff and get moving. But on the way little brother Bodonchar was kinda restless. After a while he told his brother:

“You know, this tribe I got the milk from. They have no leader, no man above all of them. They would be very easy to conquer, we could grab their stuff and have an easy life”.

Big brother approved of the suggestion, and just on getting back home, he recruited a bunch of able bodied men, put Bodonchar on command of them, and rode forward to conquer the tribe of the Uriankhai. They stole their livestock and their women, killed the men and enslaved the children to work for them. Bodonchar was a great hero, he had tens of sons born from the concubines he captured, who went on to found the various tribes of the Mongol people, among them the great Gengis Khan, who looked up on his ancestor Bodonchar, the great hero who destroyed the tribe that had been giving him milk when he was needy. He admired him so much he was especially written on the first page of all dynastic histories!

So that’s what free trade does to you. If the Uriankhai had grabbed this Bodonchar kid, cut his head off and got his hawk for themselves, they’d still be alive, and would have a game-hunting hawk as well. Because they didn’t, and let a stranger into their midst, they were all killed, their women raped, and their children enslaved for eternity.

Trade is mutually beneficial. But some things are much more beneficial.

Anonymous The other robot August 02, 2015 11:27 AM  

By the way, anyone who's not already tired of hearing about corn should watch the film King Corn.

I suspect that Ricardo, when using the term 'corn', is referring to something different. Corn was originally a general term for grain, I believe and is likely what Ricardo was referring to.

Anonymous Eric the Red August 02, 2015 11:29 AM  

His basic assumptions are false, even on the micro level. He arbitrarily (theoretically) separates individual work ethic and concomitant expertise from their cultural underpinning. In reality the two are never orthogonal, and transplantation from the originating culture to another will result in, shall we say, unintended consequences.

Anonymous LES August 02, 2015 11:49 AM  

Illegal immigrants take menial jobs because they are not citizens.
Who will do those jobs that Americans won't do when they become Americans?

Anonymous The other robot August 02, 2015 12:07 PM  

While the Mongol myths about their people's provenance are colorful and interesting, Peter Turchin has more interesting theories about state formation in that part of the world.

Blogger Joshua Sinistar August 02, 2015 12:16 PM  

Raising the minimum wage won't save you. It assumes the welfare colonists are here to work, which is probably not true. Putting more people out of work helps the socialists because it makes more voters dependent on Government.
If robots and computers take service jobs it won't bother these academics because their jobs are not threatened by robots. Robots don't play favorites, and favoring the right kind of scum is what these Leftist organizations are all about.

Blogger Cail Corishev August 02, 2015 12:19 PM  

Corn was originally a general term for grain, I believe and is likely what Ricardo was referring to.

Corn isn't the only grain they subsidize; it's just the biggest because it's used for so many things, including sweetener because their policies drove the price so low. But the same dynamic of subsidies driving everything else happens all through US agriculture.

I'm not trying to divert the discussion to ag. My point is just that, if someone's trying to sell me on the benefits of free trade and the way the market corrects everything, and he brings up modern farming in any way, I know it's time to start laughing.

Blogger Giuseppe August 02, 2015 12:26 PM  

I seriously don't know why people even talk about economic theory. It's like a guy who plays roulette at a casino, where he knows for a fact the roulette is rigged so it pops out whatever number the casino owner wants on command, arguing about the odds of the ball landing on red or black after x number of tries. I mean, it would make sense if you were actually trying to game the casino owners, but discussing it as though the whole game is not rigged is just...as I say...I see no point in it. Then again, I don't play fantasy football either. I suppose people have different hobbies.

Anonymous trev006 August 02, 2015 12:50 PM  

The primary driver of illegal immigration is american entitlements.

You're partly right, but the driver behind CORPORATE support of illegal immigration would be cheap labor in a variety of fields.

Let's face it, multinationals are a major reason that illegal immigration hasn't been dealt with effectively.

Anonymous dirt farmer August 02, 2015 12:51 PM  

A writter who thinks that corn sells above cost and the price of labor rising will affect that is an idiot. Even after subsidies corn almost always sells below cost. Frankly commodity economics pretty much dictates that. This is true across the board on all at crops with only temporary exceptions at the peak of the market.

Blogger James Dixon August 02, 2015 12:52 PM  

> What I said... was the farm work wasn't his primary motivation.

Ah, now on that point we probably agree.

> Can even robots beat slave labor for cost?

Yes. But as you so sagely note, there are other reasons people might prefer slaves to robots.

Blogger Nate August 02, 2015 12:55 PM  

"You're partly right, but the driver behind CORPORATE support of illegal immigration would be cheap labor in a variety of fields.

Let's face it, multinationals are a major reason that illegal immigration hasn't been dealt with effectively."

Except that you blame the corporations when it comes straight back to government.

its not the wages that make employees expensive. Its all the bullshit the government has created around employment... such as disability and workmans comp and payroll taxes.

Blogger Nate August 02, 2015 12:55 PM  

"> Can even robots beat slave labor for cost? "

Slave labor is not cheap. Its very very expensive.

Anonymous The other robot August 02, 2015 12:55 PM  

The myth of the peaceful savage seems relevant to this discussion.

The following relates to something in the previous posting on this:

Ceremonial cannibalism of the vanquished was customary.

This was in the 1800s.

Also, the most intelligent people in the world (according to Jared Diamond) used to engage in cannibalism ... did they not.

Anonymous BGS August 02, 2015 12:56 PM  

Better comparative advantage example, a king can live better on welfare in Virginia than in his homeland. Living on welfare/dole is better than whatever many of the best from these nations can achieve by merit. Almost none contribute more than they receive.
http://reason.com/24-7/2013/04/03/former-rwandan-king-living-on-public-ass That's an awkward link.

By hiring the lawn service, she earns $10,000 a day as a model and pays the lawn service $400, for a net gain of $9,600.

Am I the only one that spotted the math error? He forgot the existence of taxes the model pays for income. I have run into many people who ended up paying more in childcare than the wife earned after taxes , after I heard them complain about costs and brought up the tax question. In what girl power universe does a model do $400 worth of 2 day lawn service in one day?

Picture Saudi Arabia in 1950. It is oil-rich, but technology- and dollar-poor.

Its still IQ poor they have to import people for any job requiring counting above their fingers. But Kuwait sent a male traveler nurse to jail for drinking bottled water during a 100+ degree day during Ramadan who wouldn't be in jail if he was a moslem & said he needed it. Female traveler nurses could get away with it because they cant leave the employee housing compound without the body trash bag.

Blogger Nate August 02, 2015 1:04 PM  

The fact is I can pay an off-the-books worker 20 bucks an hour... but that same worker is on the books... I likely can't afford him at all.

Anonymous 11B August 02, 2015 1:05 PM  

therefore, in pure economic terms, it is to each producer's advantage to concentrate his effort in what he's best at and trade for much else...even, in many cases, if the producer of X is better at Y in absolute terms than the person that they choose to engage to do that task for them.

How'd that work out for the Confederacy?

Blogger Danby August 02, 2015 1:06 PM  

This comment has been removed by the author.

Blogger Danby August 02, 2015 1:08 PM  

RE: supermodel,
The model is incomplete, because the supermodel had kids, about 500 of them. 25 or so are mentally retarded or mentally ill, 10 are physically disabled and 100 or so are just lazy. Should she still hire out her lawn work?Should she still spend every day in a photo shoot despite the fact that she hates the work, however profitable?Should she raise her own children or hire a nanny?

What does Ricardo say bout that?

Blogger Danby August 02, 2015 1:17 PM  

Even after subsidies corn almost always sells below cost. Frankly commodity economics pretty much dictates that. This is true across the board on all at crops with only temporary exceptions at the peak of the market.

Protip,
The only farmers I know who make a real profit are the ones who entirely avoid commodity markets. Organic used to be that niche, but USDA ruined that.If there's a subsidy for your crop,you're losing money.

Blogger Salt August 02, 2015 1:40 PM  

Raising the minimum wage won't save you.

No, but it can provide some great comedy. CEO Hikes Minimum Wage To $70K, Capitalist Tragicomedy Ensues

Anonymous trev006 August 02, 2015 1:41 PM  

The fact is I can pay an off-the-books worker 20 bucks an hour... but that same worker is on the books... I likely can't afford him at all.

I think multinational corporations and both factions of American government are generally part of a single ouroboros, but never mind that right now.

How much money do you think illegals are actually paid? Because I can guarantee corporations aren't going to pay them greater than minimum wage out of sheer niceness.

http://www.urbaneconomy.org/sites/default/files/undoc_wages_working_64.pdf

Anonymous BGS August 02, 2015 1:53 PM  

Actually, the model would have an advantage of $19,600, earning $10,000/day for the 2 days the lawn service requires to mow the lawn for $400. In an argument, it helps to use accurate numbers

If we are building strawmen economics. The model on the cusp of the next tax bracket is in Sarcozy's France & earning the extra money puts her in the 75% of income taken tax bracket, so by hiring the $400 team instead of mowing her lawn she actually loses hundreds of thousands.

"The migrant farm worker did exist." Now he is farming welfare. James OKeefe did a hidden camera coverage of a van full of illegals applying/getting food stamps. Also Asians and whites built the majority of current LA's infrastructure with shovels, picks, & mules in one year but todays affirmative action hires need multiple years with the latest power equipment just to fix a single water main. Faster breeding is not greater than IQ unless you want the 3rd world, 20 Mexicans with latest tools cant out produce white guy with shovel.
+ @49 example

It's like a guy who plays roulette at a casino, where he knows for a fact the roulette is rigged

Roulette is there so people can lose money slowly. Card counters would play roulette when people started to get suspicious of their luck.

No, but it can provide some great comedy. CEO Hikes Minimum Wage To $70K, Capitalist Tragicomedy Ensues

I have been told Ayn Rand's 2 dimensional villains don't exist in real life.

How much money do you think illegals are actually paid? Working min wage off the books in the US for 6 months lets them go back to mexico to live for a year with servants. That's why some US retirees go to Mexico.

Blogger Joshua Sinistar August 02, 2015 1:54 PM  

Nate making a distinction between corporations and the Government is moot at this point. This is an Oligarchy now. Welcome to the Dark Cyberpunk Future.
Slave labor can be costly if you pay for it yourself, but is incredibly cheap if your slaves are fed and taken care of by Government subsidies.

Blogger Danby August 02, 2015 2:15 PM  

How much money do you think illegals are actually paid? Because I can guarantee corporations aren't going to pay them greater than minimum wage out of sheer niceness.
Minimum wage has nothing, literally nothing to do with how much illegals are paid. By keeping someone off the books, you can give them a take home easily 3x what a legal worker is paid, and still come out ahead. And publicly traded corps don't typically hire illegals, it's roofers, farmers, contractors, restaurants, homeowners, etc that do.

Blogger Cail Corishev August 02, 2015 2:15 PM  

How much money do you think illegals are actually paid?

Nate's point is that a $10/hour on-the-books worker will cost a lot more than a $20/hour off-the-books guy. Most Americans want/need to be on the books, because they're already in the tax system and don't want the IRS knocking on their door, they need insurance, etc. Foreigners, on the other hand -- especially illegals, but even legal ones to the extent they can get away with it -- want to work off the books, so they'll cooperate with the employer to keep it under wraps.

No, the employer isn't going to pay anyone extra out of the kindness of his heart. But since he has some extra cash from avoiding all the regs, he may spend some of it to get better guys than average, rather than go get the last guys waiting outside Home Depot in the morning. I've heard employers say that if you pay a little extra, they'll replace themselves whenever they go back home for a while, and they'll be more likely not to snitch.

There's also a perception issue. Many employers, including small businessmen and family farmers, have fully bought into the myth of the Great Immigrant Worker. You could prove to them on paper that they'd get more productivity per dollar from American workers, even with all the extra costs, and they might still hire illegals. They're so convinced that American workers in their fields just aren't available, or that when they are they suck, and foreigners are just better and deserve the jobs more. That's what they tell themselves, anyway.

Blogger Nate August 02, 2015 2:25 PM  

"How much money do you think illegals are actually paid? Because I can guarantee corporations aren't going to pay them greater than minimum wage out of sheer niceness. "

You guys thinking illegals work cheap are out of your minds. Sorry kids.. but I've been there on the pecan orchard when they came rolling up in the truck. There were about 10 of them... the driver got out and flatly stated "they don't get off the truck for less than 15 bucks an hour". That was in 2005. Its $20 now.

Supply and Demand. The demand for undocumented workers is still extremely high. So the price of those undocumented workers is continually driven up.

You guys have to get the notion of low wages out of your heads. Wages are one small part of the cost of an employee... and they aren't even close to the largest part.

Blogger Nate August 02, 2015 2:44 PM  


"No, the employer isn't going to pay anyone extra out of the kindness of his heart. But since he has some extra cash from avoiding all the regs, he may spend some of it to get better guys than average, rather than go get the last guys waiting outside Home Depot in the morning. "

This. This exactly.

Blogger Nate August 02, 2015 2:45 PM  

"Nate making a distinction between corporations and the Government is moot at this point. This is an Oligarchy now. Welcome to the Dark Cyberpunk Future."

Fascism isn't new.

Anonymous EH August 02, 2015 2:46 PM  

I see Vox interviewed Ian Fletcher, (interview 1.1 linked on the sidebar).
It's worth mentioning Ian Fletcher's article from 2008 Fatal Flaws in the Theory of Comparative Advantage. It's a short read, but here are his main points:
"Free traders tell us that David Ricardo’s famous theory of comparative advantage proves that free trade always benefits both trading partners and only ever harms special interests. But as its inventor knew perfectly well, his theory is not a blank check for free trade, but a conditional theory that depends upon certain assumptions that may or may not hold.


Assumption #1: There are no externalities.
....
Assumption #2: Nations trade only goods and services, not debt and assets.
....
Assumption #3: Factors of production are domestically mobile.
....
Assumption #4: Factors of production are not internationally mobile.
....
Assumption #5: Long-term growth is caused by short-term efficiency.
....
Assumption # 6: There are no economies of scale. ....
Assumption # 7: There is no cross-border investment

Having observed that capital mobility would undo his theory, Ricardo then argues why capital will not, in fact, be mobile:

'Experience, however, shows that the fancied or real insecurity of capital, when not under the immediate control of its owner, together with the natural disinclination which every man has to quit the country of his birth and connections, and entrust himself, with all his habits fixed, to a strange government and new laws, check the emigration of capital. These feelings, which I should be sorry to see weakened, [emphasis added] induce most men of property to be satisfied with a low rate of profits in their own country, rather than seek a more advantageous employment for their wealth in foreign nations.'

Yet this assumption has been wholly invalidated by the recent tendency for global capital flows to exceed global trade flows by orders of magnitude.
....
Conclusion

The dissection of the foregoing list of assumptions should make clear that while the theory of comparative advantage is a valid and useful tool of economic analysis, it is not the only point that economics has to make about who wins and who loses in international trade. It is simply not valid, even according to the theory itself, to use it as a rubber stamp to “prove” that 100% free trade 100% of the time with 100% of the world’s nations is good for America. That would only be true if all of the above assumptions were satisfied in reality, and they don’t even come close. ...."

Blogger Joshua Sinistar August 02, 2015 2:59 PM  

You're not getting the math. Even if they pay $20 an hour it is cheap labor. No benefits or insurance. No worries about workers' comp or unions. If you pay them cash, it doesn't matter, they don't exist in the system. No paperwork, no taxes, no lengthy filing requirements. You don't need an HR department to comply with the hundreds of regulations that legal workers make you live up to.
But, they don't pay taxes. Your taxes go up, because they and their giant families eat welfare and don't pay into the system. They put Americans out of work and suck them dry by causing Government to raise taxes to support them.

Blogger Nate August 02, 2015 3:07 PM  

"But, they don't pay taxes. Your taxes go up, because they and their giant families eat welfare and don't pay into the system. They put Americans out of work and suck them dry by causing Government to raise taxes to support them."

No one is saying its a good idea dude. No one is arguing that its a positive.

I'm trying to get you to understand the motivation behind the workers and the guys hiring them.

If you want to stop this shit... you have to change the system radically. You have to get the hell out of the way and level the playing field between the american worker and the illegal worker.

Then you have to rip away all entitlements that illegals currently access.

Those two things will de-incentivize the whole process.

Blogger Joshua Sinistar August 02, 2015 3:11 PM  

There is only one real way to stop this. Stop supporting this system that is destroying you. Two can play at this game. Unplug from the system. Work off the books yourself and stop buying from the corporations that use cheap labor. It can be done. Remove your part from this enemy state by trading directly with non-system merchants. Don't buy their goods and services. Barter and trade with other Americans. They can't tax anything not in the system. The only way to fight the system is to starve it of your support. Without all of you this system is TOAST.

OpenID simplytimothy August 02, 2015 3:22 PM  

@90. EH Very informative, thanks.

.







Anonymous Tom August 02, 2015 3:37 PM  

There is much more to a nation's assessment of the value of something than just the dollar amount of the product involved.

For example, speaking of Saudi Arabia, what about a commodity or product that is essential to the functioning of the rest of the economy? Why would a nation allow a potential enemy to be its only supplier if it could supply itself, although more expensively?

That is sooo much more to the question when looking at nations that there is when considering individuals cutting lawns, etc.

Blogger Nate August 02, 2015 3:45 PM  

"There is only one real way to stop this. Stop supporting this system that is destroying you."

Oh bullshit.

We don't have to do anything to stop this. The system is killing itself right now. Its well into the process of collapsing under its own weight.

We don't have to kill it.

We just have to survive the explosion and rebuild after.

Anonymous BG August 02, 2015 4:19 PM  

Why would a nation allow a potential enemy to be its only supplier if it could supply itself, although more expensively?

Saudi Arabia doesn't have enough of its own people smart enough to operate its oil fields. Its easier to hire foreigners that are capable than throw money at trying to educate their own people. They are basically cargo cultists with a diamond mine that needs 90+ IQ workers to produce diamonds

"There is only one real way to stop this. Stop supporting this system that is destroying you."

http://www.amazon.com/Ragnars-Guide-The-Underground-Economy/dp/1581600119 of course I would only do such things if the economy collapsed, & buy the book with cash.
""Taxes are the price we pay for a civilized society."--The IRS

"I have seen taxes more than double during my relatively short time on Earth. A corresponding doubling of civility has not occurred." - Ragnar"

Anonymous patrick kelly August 02, 2015 4:29 PM  

"The migrant farm worker did exist...."

Still does....drug cartels work a lot of agriculture.....

Blogger Groot August 02, 2015 4:43 PM  

@60. Max:

That is a heartwarming myth celebrating betrayal, slavery and mass murder. The moral seems a bit off though: how beneficial it was.

I guess it shows how often having a decent IQ and being an idiot go together. I know many Obama voters who are otherwise intelligent.

MPAI is such an easy and effective adage that one can get lazy and overapply it. Africans vote in (or accept) corrupt, kleptocratic, crony clans? MPAI. Latin Americans vote in (or accept) CKCC, but in less virulent forms? Higher IQ, but MPAI. But high IQ orientals vote in (or accept) CKCC? That's where the culture and history are perhaps dominated by some ovine genetic tendencies which overrule IQ.

You say they are incapable of studying history, but always idealize myths of violent monsters who enslave their people, ensuring countless generations of further poverty and dehumanization? Now that sounds like most history, but from the perspective of fish in water. They step in and strap the yoke on themselves and scream of oppression (to switch metaphors).

Anonymous Forrest Bishop VFM #0167 August 02, 2015 5:32 PM  

79. Danby
RE: supermodel,
The model is incomplete, because the supermodel had kids, about 500 of them. 25 or so are mentally retarded or mentally ill, 10 are physically disabled and 100 or so are just lazy. Should she still hire out her lawn work?Should she still spend every day in a photo shoot despite the fact that she hates the work, however profitable?Should she raise her own children or hire a nanny?


She should hire a ghostwriter to write her autobiography, How to Mother 500 Kids and Still Look Like a Supermodel, then sell it for a $billion.


Anonymous Amok Time August 02, 2015 6:36 PM  

I would mow that model's bush for say $350.00. She saves $50 and i have a smile on my face!

Anonymous Rusty Fife August 02, 2015 7:07 PM  

@97 BGS

Actually, Saudi Arabia would be interesting to compare to Brazil.

Similar IQ population and, contrary to popular knowledge, the majority of engineering can be performed on the back of an envelope using math no higher than trigonometry. The major difference is Brazil's oil is very complex to extract and Saudi's is easy. Simplified system design sometimes costs a little more; but they still have some really bright guys to get them over the worst hurdles.

SA has followed the Ricardo ideal and paid foreigners to do all their work. They haven't got anything to show for it. Brazil has used their indigenous talent to develop their manufacturing and refining industries. All their work is done in house. They now have Taurus and for a long time built Volkswagen bugs. It has cost more for Brazil to get the oil out of the ground; but they have gotten more for it.

Nigeria has been trying to follow the same path and hasn't gotten much to show for it yet.

Oil companies generally don't mind a small amount of local content bootstrapping; but they are very project oriented and the country itself needs to have a plan for lasting impact, rather than squandering the opportunity.

Rusty Fife

Blogger VFM bot #188 August 02, 2015 8:20 PM  

Kudos to Clark for penning the response, and kudos to Vox for putting it up here for our review and consideration. Good on both of 'em.

Blogger bethyada August 02, 2015 10:00 PM  

I haven't read the comments (just the post). While economics isn't my strong point, and the above post seems reasonable; I would not necessarily think that one can conflate individual comparative advantage for collective (say population or country) comparative advantage.

That is, even if one could show what Clark claims for the model, the sushi chef, and the Mexican farmer is correct (and it seems reasonable, other than sometimes we are time rich and do both the modelling and the mowing because there is only 3 days of modelling on offer per week); it is not certain that this translates into comparative advantage for the nation. And if we allow for mobile labour I think the comparative advantage for the nation needs to be proven.

Blogger James Dixon August 02, 2015 10:00 PM  

> Good on both of 'em.

Yeah, disagree with his points though I might, he at least bothers to make an argument. That's more than we can say about a lot of people.

Anonymous Rhys August 03, 2015 12:30 AM  

@ Nate: Or you could introduce mandatory gaol time for hiring an illegal plus asset forfeiture for first offence, no warning given. Fingerprint/Dna test all illegals before deporting and gaol them if found in America again plus tell Mexico for every illegal found again after deportation you'll cut 1000 from the aid budget permanently.

Anonymous BGS August 03, 2015 8:59 AM  

@102 rustySimilar IQ population and, contrary to popular knowledge, the majority of engineering can be performed on the back of an envelope using math no higher than trigonometry.

Yea about arabs and spatial orientation needed for geometry & trig, have you meet any in real life? I have seen arabs in their natural environment.

Values researcher Michael Minkov:

Harder for Arabs to think abstractly?

Consider the following problem given to 4th grade children in their native languages.

"Al wanted to find how much his cat weighed. He weighed himself and noted that the scale read 57 kg. He then stepped on the scale holding his cat and found that it read 62 kg. What was the weight of the cat in kilograms?"

How can we explain the fact that 95% of the students in Taiwan answered correctly, versus 12% in Kuwait and 9% in Qatar? ... What stops the fabulously rich countries in the Gulf from providing high-quality instruction to their children? (4)

Rural Afghan classroom
Minkov had similar questions about Afghanis:

During a training session with Afghani high school graduates, I was asked to explain what an IQ test represents. I drew the following on the white board:
Then I invited the students to guess how the next arrow would be positioned. No matter how I paraphrased my question, the result was a row of blank faces. By that time, I had established a very good rapport with my students ... The blank faces could not be explained by shyness or a lack of interest.

I explained that the arrow had been turned (I avoided words like "rotated") always in the same direction and by the same angle, and used a whiteboard marker to illustrate the rotation. Then, once again, I asked how the next arrow would look. After a long pause, I had one volunteer. He came to the blackboard and drew a circle. (4)
http://thosewhocansee.blogspot.com/2015/05/why-re-colonization-future-orientation.html#more

Blogger Nate August 03, 2015 9:57 AM  

"Or you could introduce mandatory gaol time for hiring an illegal plus asset forfeiture for first offence, no warning given. Fingerprint/Dna test all illegals before deporting and gaol them if found in America again plus tell Mexico for every illegal found again after deportation you'll cut 1000 from the aid budget permanently."

I have a much simpler solution.

You pass a bill that creates a foreign legion. Instead of deporting illegals... they go to the legion... where they will be shipped off to fight in some third world shit hole.

If they survive for 5 years... then they get to go home.

Watch the illegals flee.

Anonymous trev006 August 03, 2015 10:14 AM  

Government benefits are clearly important in the calculus, yes: but learning illegals have wages which are that good, which legal workers have "programs" of questionable value, is outright crazy.

I'm sorry for implying that you didn't know the stats behind wages for illegals, Nate. I thought finding any reliable statistics on illegal immigrants was a great find at the time. Of course my mistake was trusting media outlets running sob stories about illegals, or academic papers which are clearly out of date.

Anonymous Jack Amok August 03, 2015 12:30 PM  

If you want to stop this shit... you have to change the system radically. You have to get the hell out of the way and level the playing field between the american worker and the illegal worker.

Yes, but there's a deeper rot at work.

Another way to say what Nate siad is that you have to get rid of the difference between employees with and without paper trails. Official paper trails for employment right now create a bunch of large immediate costs (taxes, health insurance, HR departments, etc.) as well as potential huge future costs (lawsuits, discrimiation claims, worker's comp, etc.).

The real difference between prosperous and poor societies is trust. High trust societies are rich because all the time and effort needed to deal with untrustworthy behavior is minimized and can be devoted to productive activity. The fact that we can no longer trust others in our society not to abuse the exitence of a paper trail is a bad, bad sign.

Of course, the greater the number of immigrants, the worse the trust problem becomes, even if the immigrants are fine, upstanding gentlemen, because human nature makes it hard to trust someone who a) looks different than you and b) grew up somewhere with customs strange to you.

Blogger Dewave August 03, 2015 5:01 PM  

"I suggest that Ricardo merely said that a commodity will never be sold for less than its cost of production, which is absolutely true (if we talk only of steady states of markets in equilibrium, like corn being grown in England, and not weird cases like warehouses full of remaindered Apple Newtons). "

Completely false. Look at everything from game consoles to cell phones to perishables to sales.

Items are routinely sold for less than they are worth - doing so is often a deliberate strategy to lock in a consumer. Has Clark never heard of the term loss leader?

Blogger Dewave August 03, 2015 5:02 PM  

"I suggest that Ricardo merely said that a commodity will never be sold for less than its cost of production, which is absolutely true (if we talk only of steady states of markets in equilibrium, like corn being grown in England, and not weird cases like warehouses full of remaindered Apple Newtons). "

Completely false. Look at everything from game consoles to cell phones to perishables to sales.

Items are routinely sold for less than they are worth - doing so is often a deliberate strategy to lock in a consumer. Has Clark never heard of the term loss leader?

Blogger Dewave August 03, 2015 5:02 PM  

"I suggest that Ricardo merely said that a commodity will never be sold for less than its cost of production, which is absolutely true (if we talk only of steady states of markets in equilibrium, like corn being grown in England, and not weird cases like warehouses full of remaindered Apple Newtons). "

Completely false. Look at everything from game consoles to cell phones to perishables to sales.

Items are routinely sold for less than they are worth - doing so is often a deliberate strategy to lock in a consumer. Has Clark never heard of the term loss leader?

Blogger Joshua Sinistar August 03, 2015 10:21 PM  

Ricardo like most economists don't really understand Capitalism. Its not the same as business at all. Capitalism is about money and the business is secondary. Profit is maximized by creating a Monopoly, which maximizes profit although it hurts the market, the business and the customers. By flooding the market with cheaper alternatives, called in the trades as Dumping, big businesses eliminate their rivals and keep new competitors out by making the market unfavorable to startups. Big business can afford to lose money if it gets market share. They have the option of refinancing and getting money by selling shares to make up losses that small businesses can't afford. It kills innovation and ruins customer satisfaction, but makes money which is all Capitalists really care about.

Blogger Groot August 04, 2015 1:25 AM  

@114. Joshua Sinistar:

Um, no, actually. I cannot overemphasize the importance of government in the dynamics of your topic, and you elide it entirely. Nothing wrong with monopolies, which do attract outsized profits, as you note, but also attract fervid competition for those outsized profits. This renders monopolies evanescent, absent government collusion.

Monopolies cannot flood the market with cheaper alternatives, as they would be alternatives for their own products. They don't lose money on each product but make it up in volume. That is the punch line of a famous joke, not economics. They already have all the market share, hence their monopoly status.

But in mercantilism, or crony capitalism, or public-private partnerships, or social democracy, or fascism, or highly-regulated government-granted monopolies, or whatever term you use to dub a system of legally granted permanent monopolies then indeed you see a system that makes a lot of money for a well-connected few, but kills innovation and is deleterious to the many.

Capitalism, or the free market, is the opposite of this.

Anonymous Rusty Fife August 04, 2015 8:07 AM  

@107 BGS
Other than Desert Storm, I have only dealt with Arabs in their unnatural environment. I work in Africa from Congo to Eqypt and use local nationals and African ex-pats regularly.

There is a reason I compared them to Brazil and not Norway. The industry I'm in can afford to pay well enough to hoover up the top 25% of any country's talent.

You don't need that many median quality engineers to do anything. It just takes more time

Blogger LP 999/Eliza August 04, 2015 10:23 AM  

I'm impressed to read a another objective econo debate, carry on.

Blogger Joshua Sinistar August 04, 2015 6:43 PM  

I'll say again that Government and Big Business is a distinction no longer worth making. America is corrupt and all the political whores sell out to the highest bidder. Government can help maintain a monopoly but isn't necessary to make one. All you need is a shitload of cash and the ability to corner the market by freezing out competition. Monopolies are anathema to business because it crushes innovation and keeps outdated and crappy products on the market. Without alternatives the customer and end-users have little or no choice to use an inferior product if they can't get it due to insider deals that derail new competitors and drive innovative new products off the market. History is full of inferior products beating better competition. The Betamax VCR was head-and-shoulders better than VHS with better resolution and smaller more compact tapes, but JVC convinced Hollywood to give them a lock on their movies and ran a better product out of business. Better product would win on a level playing field and that is why the market is rigged by backroom deals and underhanded chicanery to help unscrupulous companies foist crap on unwilling customers who are denied better products by these scumbag Capitalists.

Anonymous Eric the Red August 04, 2015 10:44 PM  

@118
Monopolies don't start out that way. They can only become such with the participation of government, either actively or of the 'benign neglect' variety.

That you refuse to make distinctions between the two does not mean that they do not exist. Your attitude simply helps to perpetuate an anti-business milieu and associated memes amongst the populace, and inevitably aids and abets rabid leftists. Instead, a truthful reading of history and a straightforward but not simplistic description of the current corporatist situation can lead to better understanding by everyone, a more accurate assessment of the real problem, and therefore subsequent action by one or more people who have the creativity and guts to apply a solution.

Blogger Groot August 05, 2015 12:08 AM  

You are using the term "Capitalist" to denote "crony capitalist" or "corrupt business in cahoots with government." Crony capitalist is to capitalist what politically correct is to correct, or junk science is to science, or social justice is to justice: the modifier transforms it into perhaps not always the opposite, but a version that is at least skewed or broken. If you insist on using a term to mean something other people don't use it for, you're gunking up the discussion, sowing confusion where clarity is sought. "Government and Big Business are the same thing, and I call them Canadians" is just a silly rant.

Yes, monopolies can form without government collusion, but they disappear quickly. They only persist with government regulation.

Betamax and VHS both had almost indistinguishable video quality: crappy. The major difference was that Betamax needed two tapes for a movie, while VHS needed only one. VHS was more convenient, both to carry and because you didn't have to get up halfway through the movie to change tapes.

Yes, insofar as the regulatory state has ballooned, the state can pick and choose winners, and corruption has ballooned with it. To blame this on Capitalists (or Canadians), rather than the metastasized regulatory state, is muddying the water. At least use the term Crony Capitalist.

Blogger Groot August 05, 2015 12:12 AM  

Hi, Eric the Red, I should have refreshed before spouting off. You make excellent points. My @120 was directed @118, of course.

Blogger Blume August 05, 2015 12:45 PM  

This comment has been removed by the author.

Blogger Anna Wailliam August 11, 2015 10:36 AM  

You completed various good points there. I did a search on the subject and found most folks will go along with with your blog Alpha XTRM .It was a pleasure looking through the details you provided. Thank you very much for taking the time to create the information site. I definitely will revisit very soon.http://www.healthcaresups.com/alpha-xtrm/

Post a Comment

Rules of the blog
Please do not comment as "Anonymous". Comments by "Anonymous" will be spammed.

<< Home

Newer Posts Older Posts