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The Forum > Article Comments > 1,000,000 economists can be wrong: The free trade fallacies > Comments

1,000,000 economists can be wrong: The free trade fallacies : Comments

By Steve Keen, published 30/9/2011

The Neoclassical model that dominates economics today is riven with logical and empirical fallacies.

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Its not all your claimed gloom and doom, Bazz. Yergin's book makes
for interesting reading. He explains how they used to pump only
30% or so of a well, now with technology, that is moving up and up
and up. So oil will continue to be available, just not at bargain
basement prices of the past. Then we have shale oil, tight oil,
shale gas, etc. An interesting point which he raised. Around 10
million barrels a day of oil, comes as condensate from gas production.
Given that Australia is about to triple its natural gas production,
sounds to me like alone the condensate from that would supply our
own requirements.

World trade is not about to end either. For if countries can't afford
the shipping, no grain would be transported, so people would starve.
They are already looking at sails and nuclear ships. So don't
put all your eggs in one basket, or you will be proven wrong.

Freight moved around the world before oil and without modern
technology
Posted by Yabby, Saturday, 8 October 2011 1:34:16 PM
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You are right Yabby, it will not happen overnight but it will happen.
As far as Yergin is concerned he never got any predictions of price
etc right and probably won't start to soon.

It will come on gradually, but then something will become unobtainable
and it will trigger the complex systems collapse.
It would only need something that was necessary for a power station
and you could imagine the result as an example.

Yes, they are getting more out of existing wells but as usual there is
a catch 22. They stopped using those wells because it was too
expensive to get the last bit. So at some expense they have gone
from, say 40% to say 30% because of the higher price available.
However they are just scrambling for the last drop and it does not
keep up with demand. It just stretches out the plateau.

Read Jeff Rubin's "Your World is About to get a Whole Lot Smaller".
Read Richard Heinberg's "End of Growth"
Google them, they are on Utube and they have web sites.

Anyway it is interesting, no one can be certain just when we will see
the first real signs if you don't believe that the current financial
crash was caused by the $147 oil price in 2008.
Posted by Bazz, Saturday, 8 October 2011 3:05:27 PM
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Bazz, nobody has ever been accurate about prediting the price of
oil. Hubbert, who came up with the theory, was out by a factor or 4. I remind you that after it hit 147$, it also dropped back into
the 30 $ price realm for a while. What caused it is once again
explained, alot of politics in the third world etc affecting
supplies.

I remind you that when the West spends more on oil, oil producers
are busy living it up, buying more from places like Australia.

So IMHO, unlike your posts encouraging panic, there is indeed no
need. What will happen in 100 years, none of us will know. Perhaps
all that CO2 from burning carbon will thin down the population,
so be it, if what we did was unsustainable.
Posted by Yabby, Saturday, 8 October 2011 4:06:01 PM
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Keen writes:
<<Since capital is destroyed when trade is liberalised, the watertight argument that trade necessarily improves material welfare springs a leak. If economics were a real science, this real-world complication to Ricardo's argument would be considered, but it has never been seriously addressed.>>

Keen’s assertion is patently false and highlights why he is ignored by serious economists and people interested in real solutions.

To test this just google “free trade with adjustment costs” or “general equilibrium with adjustment/transactions costs” and you’ll find plenty of serious scholarly works within the neoclassical tradition that allow for adjustment costs impacting on the owners of industry-specific capital and skills.

Here are 2 examples:

Trade liberalisation with costly adjustment, Alvaro Forteza and Rossana Patrón*
http://decon.edu.uy/~alvarof/TradeGov10.pdf
Evaluating Labour Adjustment Costs from Trade Shocks: Ramon L. Clarete, Irene Trela, John Whalley
http://www.nber.org/papers/w4628
Posted by grateful, Saturday, 8 October 2011 4:09:48 PM
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Peter,
history shows that whatever the mode, capitalism is a rapacious and utterly dysfunctional economic system, prone to inequities, recurrent crises and incongruously dependent on endless growth in a closed system (thereby defying the second law of thermodynamics), yet you want me to offer a better "alternative"--as though the current one is working just fine!

As it happens I have suggested alternatives; a wealth and assets cap and society pegged sustainable replacement and husbandry.
The big problem of course is that any alternative necessarily takes over from the dog's breakfast left by capitalism. Not only must it offer an alternative to capitalism, but it must also address the unsustainable practices and collateral damage done by it.

But it's all gone too far and imo nothing can save us from an overall collapse, or in your terminology, a "rationalisation" of human populations and systems.
But I'm bored with this subject, so cheerio.
Posted by Squeers, Saturday, 8 October 2011 4:16:14 PM
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*As it happens I have suggested alternatives; a wealth and assets cap*

What a foolish idea, Squeers. You clearly have not thought it through.

I remind you that JP Morgan bankrolled Edison to invent the lightbulb
and a heap of other things. IIRC it was Rockefellar foundation
money which bankrolled the development of penicillin, after Govt
had no funds. Steve Jobs would have stopped at 30, when his best
work came at the end of his life. Fact is that innovative people
need money to innovate and if you are going to limit their wealth,
they won't take the risks that they do now. Thus you sit in the
light, due to venture capital.

I'm really not sure why you are so obsessed with rich people. They
die just like you and I and their money is recycled, taken in tax
or whatever. But the innovation and knowledge which some of them
achieved, stays with us. Philanthropy is a huge issue amongst the
mega rich. For some reason you'd rather that everyone was poor.

Fact is that its only innovation which can dig humanity out of
its overpopulation hole, not poverty.

Next time you switch on a light globe, thank a banker.
Posted by Yabby, Saturday, 8 October 2011 8:38:40 PM
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