Monday, November 16, 2015

Comparative Advantage and Capitalism

From CAPITALISM the documentary by Ilan Ziv. In this short clip a discussion of comparative advantage and its limitations, with Pascal Lamy, Robert Boyer and yours truly (many others in this chapter, including Geoff Hodgson and Ha-Joon Chang).

The Mexican secretary of finance that appears in the video is actually NOT talking about the Ricardian model of trade, which at least given its assumptions is logically correct, but about the neoclassical or Heckscher-Ohlin-Samuelson (HOS) model that has significant problems (see here).

I should note also that in my view Ricardo should not be seen as Robert Boyer suggests (not shown in the video above) as a precursor of mainstream neoclassical economics for his role in the development of formal models. Formal models can be marginalist or not, and actually Ricardo's ideas led to Marx. As I noted in my interview (in parts that do not appear in he documentary), Ricardo was the first economist to formalize the idea of a distributive conflict between capital and labor, once the Smithian notion of the adding up theory was criticized. I joke that contrary to Samuelson's view according to which Marx was a minor Ricardian, one should think of him as a major Ricardian. And in many other ways Ricardo's legacy has been misunderstood (without even discussing  Barro's Ricardian Equivalence).

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