Hi Pericles,

"a single currency is unworkable. And will continue to be, until the people of the world are united under a single parliament."

Actually I think that you are basically right on this one. Effective global governance will be necessary to effectively administer a global economic system. Personally I am in favour of a directly democratic, decentralized system of government that can be tiered upward from the small neighbourhood to the global scale. So within that context, I am in favour of world government.

I would certainly rather see us working toward instilling democracy into our global institutions instead of slowly ceding our sovereignty to secretive organizations like the WTO and the IMF, with their particularly questionable agenda.

Hello Peter,

"How could the “balance” between free trade and intervention that you seek, boil down to anything other than your arbitrary opinion of what should be allowed or disallowed?"

I am an advocate of a balanced position between policies that move us toward free trade and policies that encourage the purchase of locally produced goods/services. My opinion is no more 'arbitrary' than yours.

"What is your mathematical disproof of Ricardo’s mathematical proof?"

I believe that the maths of Ricardo's theory are correct. The theory is only applicable under certain circumstances, however, and is therefore not an effective argument that free trade should be applied universally, (as much as free market extremists would like it to be).

Hello Examinator,

"what we most often have on OLO is two idealised, theoretical sides equally arguing with evidence that suits their personal scientifically unsupportable theories while ignoring the equally valid opposite."

Personally I think that the middle, balanced position is the most legitimate. The moderate position is not some kind of half-arsed compromise between mutually exclusive extremes, but takes the good from both sides and blends them into something that is bigger than both.

examinator
How do you square your concept of ‘absolute’ or ‘extreme’ views with the concepts of logic and science? There would be no possibility of a scientific explanation of anything, if anyone insisting on a mathematical or logical proof had to be ruled out because to do so is ‘extreme’ or ‘absolute’.

Take Pythagoras’s theorem. This is not empirical or contingent knowledge. We don’t figure out whether it’s true by doing a statistical probability analysis of what percentage of right-angled triangles comply with it. Why not? Because we already know it applies to all right-angled triangles before we even check them out. If it doesn’t apply, it means it’s not a right-angled triangle.

But how do we know this? Well that’s a good question, and I am not going into that here. But it’s similar to how we know that 7 x 7 = 49. This is also not empirical or contingent knowledge. We don’t test whether it’s true by continuing to try multiplying seven oranges with seven oranges and see whether the result will be 49, and then again with grasshoppers, and then bottles, and so on. We already know what the answer must be.

Ultimately the truths of geometry and mathematics rely on truths from pure logic.

Now pure logic is obviously of limited application in explaining human behaviour. And science has not succeeded in explaining the connection between mind and matter. People act differently to the same stimuli, and even the same person acts differently to the same stimuli at different times. The same method that is used to explain planets, and rocks, and atoms, cannot be used to describe human action.

But that does not mean that physical laws, and logic, do not apply to human action.

They do. And it means we can derive ‘laws’ – universally valid propositions. So long as the premises are factually true or axiomatic, and the logical operations are valid, then the conclusion will be just as sound as 7 x 7 = 49, while ever the assumed conditions apply.

For an example of a universally valid proposition in economics, you can only increase a field’s productivity so much by adding fertilizer. After that, adding more won’t increase it. It is not ‘absolute’ or ‘extreme’ to say so. It follows logically from certain physical facts. We can't just create any economic reality we fancy.

If we reject the use of logic as it applies to human action, we are essentially saying that everything is a matter of opinion, and truth is meaningless. But the truth does not always lie between two extremes. It is possible for one antagonist to be right, and the other wrong. It is possible for proof to be based in logic, and not based in contingent or probabilistic kind of knowledge.
Ricardo has given a mathematical proof of what is in issue: http://economics.org.au/2010/08/population-puzzle-solved/#more-723

He has proved that restrictions on free trade reduce the parties’
(1) total physical productivity and
(2) respective shares
even where one party has the advantage in both goods.

Those who deny this, but are unable to disprove Ricardo, are not equally right. They are just simply wrong.

The case is no different than if they were to deny 7 x 7 = 49, and assert that all knowledge is relative.

The absolutists and extremists are those those who reject reason, and assert that their own arbitrary and illogical opinion justifies them in using force or threats to override the actions of others who, left to themselves, benefit each other and society as a whole.

Pelican
What you have said is simply illogical. If you can’t see why, then what makes you think it’s fair to use force or threats to impose your will on others?

Are you what examinator would call an absolutist or extremist? Are you inflexibly fixed in your opinion? What would make you change your mind?

GH
Sorry, that’s not good enough. You cannot prove that you are balanced by asserting that you are balanced. It's illogical.

You haven’t disproved Ricardo. What circumstances do you say do not apply that Ricardo assumed do apply?

Peter,

I think that your concentration on the numbers here is really restricting your understanding. I might be relatively better at cleaning the poo pit than my brother for example, but do you really think that that means he should never take a turn?

We are not talking about facts here, but judgement.

As for the specific weaknesses of the theory of comparative advantage:

There will be costs associated with each region adapting their economies to producing what they are relatively best at. These costs can be 'measured' in social terms, (for example the sixth generation banana farmers may have to learn, with much pain, how to become poo pit cleaners), but also in economic terms. For example, the costs of retraining, loss of productivity through unemployment, the purchase cost of new tools etc.

None of these costs are included in the theory, yet depending on the circumstances, it is quite possible that these costs could outweigh any benefits achievable. If that is not true, please enlighten us.

Another big problem with the application of the theory of comparative advantage in today's society is actually mentioned on the website that you linked for us. It mentions that the theory only works when movements of capital are prevented. Such is hardly the case under 'free trade', wherein foreign investment, currency speculation, etc are encouraged.

If one trading party is permitted to purchase the productive infrastructure of another trading party, this throws the dubious pure fact of Ricardo's theory right out the window. You, for example, might already own half of what I produce before we begin any trading - in other words, I'm toast.

If you are so keen on scientific fact, perhaps you need remember that one of the cornerstones of science is that we are supposed to continually challenge our theories.

"What you have said is simply illogical. If you can’t see why, then what makes you think it’s fair to use force or threats to impose your will on others? "

To many your view is not only illogical it is highly exploitative and results in concentrations of power to one group. You fail to see the faults in your own ideology.

When did I say I would use force or threats to impose my will? OLO is an opinion site and we all put forward our opinions. Australia is a democracy and I have always argued for the people to decide. How is that threatening?

Imbalances of power and potential to exploit the vulnerable is as equally undesirable as a totalitarian regime. Both have the same outcomes.

Using your logic I could easily ask why you wish to use force or threats to impose your will on others. We could go around in the same circles all day, but that would be pointless.

There's nothing wrong with a bit of idealism, GilbertHolmes.

>>Personally I am in favour of a directly democratic, decentralized system of government that can be tiered upward from the small neighbourhood to the global scale. So within that context, I am in favour of world government.<<

Sadly, human nature will never allow this to come to pass.

Again, I think the European experiment can teach us a great deal about the reality of a supranational government.

Instead of remaining a "tiered upwards" arrangement, it rapidly morphs into a command-and-control structure. Bureaucracy becomes an end in itself, endlessly defining the processes by which the various countries - and factions within countries - can reach an unsteady compromise on their individual wants and needs.

And as more join, the problems become exponentially greater. So much so, that the concept of any form of political union rapidly disappears under the weight of those - necessarily - disparate wants and needs.

Sometimes it is possible to say "this will never happen" without being branded a nay-saying pessimist.