tag:blogger.com,1999:blog-26706564.post4038844673867855098..comments2024-03-25T07:51:47.758-04:00Comments on Thoughts On Economics: Wages, Employment Not Determined By Supply And DemandRobert Vienneauhttp://www.blogger.com/profile/14748118392842775431noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-26706564.post-79517221086194020392007-12-29T06:14:00.000-05:002007-12-29T06:14:00.000-05:00younotsneaky,Thanks for your answers. It confirms ...younotsneaky,<BR/><BR/>Thanks for your answers. It confirms my intuition on the standard theory, although I'm puzzled how the CGE-models then are able to account for economic costs in the applied models moving from distortionary to free trade. Would you know of a good reference on this topic? <BR/><BR/>A possible complication, which may be my own confusion, for the more than two countries and two goods case, is that what happens if a country has no comparative advantage in production, but would like to buy cheaper from abroad given the arising situation of free trade? <BR/><BR/>Is this scenario forbidden in the neo-Walrasian GE-framework, because the framework begins with the assumption that each country has a set of goods endowments that it produces and consumes? Thus the definition of comparative advantage incorporates both production and consumption possibilities. A country cannot consume in international markets despite cheaper prices if it cannot produce for those markets. <BR/><BR/>Wait hold on... I see now. I realise I've been asking the wrong question presuming autarky as a starting point. Obviously CGE-models analyse a situation of global economic integration with trade distortions as a starting point. In this context it seems that losses are possible, when a country benefitting from trade barriers now loses, when a more efficient producer is able to exploit the new market situation. This can thus lead the less efficient producer to become a country with no comparative advantage within international markets, and therefore it can't trade. This registers as an economic loss. Does this sound right?Blogus Pokushttps://www.blogger.com/profile/04755361609209551237noreply@blogger.comtag:blogger.com,1999:blog-26706564.post-31987507806202011762007-12-27T10:42:00.000-05:002007-12-27T10:42:00.000-05:00Blogus,With more than two countries and more than ...Blogus,<BR/><BR/>With more than two countries and more than two goods, in general the pattern of comparative advantage can become indeterminate. However this does not imply that gains from trade do not exist, nor that there will be loosers from trade. If some country does not have a comparative advantage in anything then, just like in the standard 2x2 model, it will simply not engage in trade.<BR/><BR/>"How does a standard neo-Walrasian CGE (computational general equilibrium) model predict economic losses from trade liberalisation?"<BR/><BR/>It doesn't unless there's distortionary taxes or externalties or monopoly power.YouNotSneaky!https://www.blogger.com/profile/06378267534638281151noreply@blogger.comtag:blogger.com,1999:blog-26706564.post-4694613136308570242007-12-27T07:13:00.000-05:002007-12-27T07:13:00.000-05:00This is an unrelated discussion, but I was hoping ...This is an unrelated discussion, but I was hoping that maybe you (or someone else reading this forum) could help me with a question that may also be of interest to you.<BR/><BR/>How does a standard neo-Walrasian CGE (computational general equilibrium) model predict economic losses from trade liberalisation? <BR/><BR/>I understand the logic behind the two goods and country case where welfare gains can be made through the elimination of trade barriers if there exists a comparative advantage (assuming the standard assumptions of perfect competition, constant returns to scale etc.), but how does the logic work with more than two countries and goods?<BR/><BR/>Is the answer simply that those countries which do not have a comparative advantage (in any or critical goods), experience welfare losses, because they are now importing more (due to lower prices abroad) and exporting less (trade is being diverted to other countries)?<BR/><BR/>Most (if not all) countries when getting the CGE treatment with full liberalisation scenarios, seem to make welfare gains. Is this because most countries have at least some comparative advantage in some goods, and the theory neglects any adjustment and transaction costs?<BR/><BR/>Some background on this question: I'm not an economist by trade, but rather study development studies, for which I'm writing a Master's Thesis. My strategy has been to use the Lakatosian methodological framework for studying the hardcore assumptions behind general equilibrium analysis. This has led me to study for example Keen's work, and Fabio Petri's (on the capital controversies) among others. Since I'm not concentrating on heuristics (and I'm not particularly mathematically inclined), I'm not familiar with all the implications of the standar neo-Walrasian theory (e.g. Arrow-Debreu) that the criticism, quite rightly it seems, is able to destroy by attacking its inconsistent or absurdly narrowed assumptions. To the standard unacquainted reader (for example my supervisor) it is however perhaps not only enough to attack the assumptions, but also be able to reduce the theory via its implications. I'm thinking that for a conclusion, I could write up a kind of characterisation of what the theory implies in the narrow sense and a wish list of what problems a perfect economic theory would be able to cover and account for as a contrast (perhaps a distant dream, but why not?)<BR/><BR/>Any ideas on the above would be appreciated..Blogus Pokushttps://www.blogger.com/profile/04755361609209551237noreply@blogger.comtag:blogger.com,1999:blog-26706564.post-85355419553928082732007-12-27T06:51:00.000-05:002007-12-27T06:51:00.000-05:00I consider graceless the off-topic, question-beggi...I consider graceless the off-topic, question-begging reference to Steve Keen. As far as I know, factor demand curves are derived under the assumption that firms take prices, including the prices of factor services, as given parameters.Robert Vienneauhttps://www.blogger.com/profile/14748118392842775431noreply@blogger.comtag:blogger.com,1999:blog-26706564.post-73533914564209768842007-12-23T04:31:00.000-05:002007-12-23T04:31:00.000-05:00There is also the well known The Impossibility of ...There is also the well known <I>The Impossibility of Reading the Cambridge Journal of Economics for Free or at a Low Price</I> which makes me really scratch my head as to how exactly the author makes the following sentence sensical, in the light of the fact that the supply and demand for labor are two completely different things having nothing to do with each other other than occasionally intersecting: <BR/><BR/>"the labour supply curve to the firm is upward sloping, again causing the labour demand curve to be ill-defined" <BR/><BR/>The labor supply can't do anything to labor demand nor vice versa.<BR/><BR/>Is this Steve Keen type of stuff?YouNotSneaky!https://www.blogger.com/profile/06378267534638281151noreply@blogger.com