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The empirical case of international trade is actually really fascinating.
If you just replace the two individuals in the example with countries, then the global pattern of trade doesn't resemble what you'd expect at all. What we actually see is more like everyone producing everything and trading everything with each other.
There's some specialization, but it's hyper specific rather than being broad (i.e. specialization in steering wheels vs specialization in cars). When looking at broad categories, like vehicles or agricultural goods, approximately the same amount gets sent in each direction.
Back in the mid-twentieth century, an engineer noticed the empirical regularity that trade flows between countries can be very accurately predicted just by the two countries' GDPs and the distance between them. It's literally the gravity equation with GDP as mass and no economist had any idea why that would be the case. It took decades to even come up with plausible models that could fit the pattern and they're still arguing about exactly which explanation is correct.
The cases you're describing are more about economies that have been strangled by bad institutions. They aren't poor because they specialized in trading their resources. They specialized in trading one resource because the rest of the economy was hamstrung.
Wrt bad institutions: this is close to the heart of it. There's many examples of a thing that, within a limited view, is "correct" but when applied to extant ecologies, turns out bad. One argument is that the world is wrong somehow, that if only people were different, than the thing would work and it would be better. Isomorphic to No True Scotsman.
Except the world isn't different, it is as we find it. So broad swathes of arguments are just ... dumb. They don't survive contact and are consequently not worth taking seriously. If your tx doesn't work in humans it's a waste of time to perseverate on how well it works in mice.
Wrt comparative advantage, I may be making the error @SimpleStacker mentioned and assumed the existence of CA meant that all international trade was to be desired in all cases. Or put differently, I may be arguing against a position for CA that nobody actually holds.
My point about the bad institutions is that it isn't clear the counterfactual of not trading the resources is better than the realized outcome.
Bad institutions lead to poverty and corruption. Trading away the resources may not have left anyone any worse off and it pretty obviously left some people grotesquely better off.
That's kind of the thing I had in mind when I made my original comment. Something like:
- Suckistan has vast swathes of granola reserves
- Suckistan elites trade all the granola to California and make mad profits
- from this trade, the elites get super rich
- using their newfound wealth, Suckistan elites do an even better job securing the granola trade and oppressing the rest of the populace
Based on this scenario, a reasonably intelligent person might defensibly say any of these things:
- trade worked out great for the market participants
- the fact that Suckistan is rife with corruption is their own political issue
- at least they got to trade granola, some of them having capital is better than nothing
- if Suckistan doesn't use its granola profits to modernize, that's on them
That seems basically true, but also incomplete. If I was a Suckistan peasant, I don't know that I'd view the granola export industry as a great deal for my future prospects. If I banned together with my fellow countrymen and overthrew the elites, I'm not sure what I'd want our next move to be, either.
I mean, having all of us become enlightened and wise and producing great institutions out of the ashes, and making an equitable division of our nation's granola resources before unleashing flourishing trade would be nice, but again, that's generally not the world we find ourselves in.
Anyway, I've hijacked your post. But that's the context behind my question.
I think it's the starting point that needs more examination.
Why did people live in Suckistan in the first place?
Why were the elites in a position to trade away all the granola?
If they hadn't traded away the granola, what would they have done?
It's not clear to me at which point trade is to blame for the problems in Suckistan.
Also it sounds like Suckistan has no middle class, there are 2 classes, elite vs untouchable
I may be arguing against a position for CA that nobody actually holds.
No, you're not. Plenty of people hold to that simplistic view of trade. If you were a B+ economics major in college, that's probably your point of view. (Even if you were an A+ student you'd probably think that way, unless you're prone to think deeply about your college courses.)
Yep, this is the general position you'd find from almost any libertarian or free market conservative.
The point of the theory / example isn't to say that there are no other considerations, or even that international trade is always good on net. (Though unfortunately, many people with a shallow understanding of economics take it that way.)
The point of the theory is just to illustrate the nature of the gains from trade, and how people can gain from trading even with people who are worse than them at things.
For example, I'm probably a better mathematician than my kids' math teachers at school. But they teach my kids math and not me (though I supplement, on occasion), because of the theory of comparative advantage.
that international trade is always good on net. (Though unfortunately, many people with a shallow understanding of economics take it that way.)
Ah, I am one such. I thought the "official" Econ view was that trade was always beneficial.
Sadly, that's what most people think about economists, which is both fair and unfair.
It's fair because if you go through Econ 101 in college, it's very much oriented to explaining why specialization and trade is good. Which I think is appropriate, because that's the foundation of a strong economy. But because of that, if you just take what the course says at a surface level and don't think too deeply about things, you'll come out with a simplistic understanding of "trade is good", which is where I think most CNBC-type talking heads have landed.
It's unfair because it misunderstands the more nuanced views that people with a deeper understanding of economics hold
I'd say the most fair characterization of most economists would be something like, "Voluntary trade between people/countries is generally welfare improving for both sides. But there are many caveats."
Some of the caveats include:
- Trade produces winners and losers. That can create political issues which could lead to welfare-reducing instability if not handled well.
- The theory of trade doesn't take into account moral considerations or equity considerations.
- The theory of trade doesn't take into account violence as a means of expropriating surplus. (Thus, trade may be rationally restricted if it's in the interest of national defense).
- The theory of trade assumes a consumption-oriented view of human welfare.
Bunch of stuff like that.
Those are really good caveats and seem to get at the heart of the matter. I don't hear them made much, but I'm probably not in the places where they would be made. The level of public discourse is substantially lower, surprise surprise.
Buckle up for caveats:
The standard econ position is that voluntary exchanges are believed to be individually welfare improving by each participant, ex ante.
I'm having buyer's remorse
Tough. You should have been more in touch with your feelings ahead of time.
If everything's functioning correctly, they teach your kids math and get paid less to do so. Not to be gauche.
It occurred to me that you have almost the opposite concern of the classical economists.
Can you provide an example? a real not fake example
which country? which natural resource?
Does this really hold, though, when you take everything into account, in practice?
I'm thinking of countries that sell their natural resources and never develop, and then, some years later, they are despoiled of resources, and a handful of elites live in armed compounds with their harems.
I understand the logical argument. I'm calling into question the empirical results.