GINS 2010 Lecture Notes - Lecture 4: Corn Laws, Stock Trader, Absolute Advantage
13 Dec 2016
School
Department
Course
Professor
Understanding International Trade 1
September 29th
-It is really cheaper to buy things from abroad?
-yes, productivity is often higher (produce more faster), takes less money and resources to
manufacture product, lower labour costs, labour that is better specialized with that product
-currency can factor in depending on the market
-Or is it that multinational companies have designed it that way and we have no choice?
-multinational corporations can increase and decrease prices
How do we get higher levels of productivity?
-specialize in that product
-invest in greater technologies to improve that sector
-Could we just live as well materially using things produced locally?
-Would’t hae sart phoes util groups speialized i this field
-seasonal produce, and some non-existent because they cannot grow in certain climates
David Ricardo (1777-1823)
-stock trader, very wealthy
-Member of British Parliament
-follower of Adam Smith, advocated for economic liberalism and free markets
-promoted the end of slavery and the Corn Laws, and democratic reforms in the UK
-national economic markets very closed off at this time
-advocated in breaking trade barriers
-one of few who understood advantages of industrial revolution
-did not advocate free movement of labour
Corn Laws
-implemented in England by Kind and nobility
-designed to keep grain prices high to favour domestic producers
-high import tariffs, in turn making it too expensive to import grain from abroad
Theory of comparative advantage
Basic concepts:
-Opportunity cost: what you give up of some good for the opportunity of having or producing another
one, not measured in money but in terms of each good
-Absolute advantage: goes to whom can produce a good with the smaller quantity of inputs, or more
output per unit of input
-Comparative advantage: goes to whom has the smaller opportunity cost of producing a good, that
determines who specializes in which good
-Gains from trade: net total benefit obtained from engaging in international trade, derived from
comparative advantage
Assumptions of David Ricardo
-labour was the only production input, it could not migrate across borders, but was completely mobile
across industries, and there was full employment
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Document Summary
Yes, productivity is often higher (produce more faster), takes less money and resources to manufacture product, lower labour costs, labour that is better specialized with that product. Currency can factor in depending on the market. Would(cid:374)"t ha(cid:448)e s(cid:373)art pho(cid:374)es u(cid:374)til groups spe(cid:272)ialized i(cid:374) this field. Seasonal produce, and some non-existent because they cannot grow in certain climates. Invest in greater technologies to improve that sector. Follower of adam smith, advocated for economic liberalism and free markets. Promoted the end of slavery and the corn laws, and democratic reforms in the uk. National economic markets very closed off at this time. One of few who understood advantages of industrial revolution. Opportunity cost: what you give up of some good for the opportunity of having or producing another one, not measured in money but in terms of each good. Absolute advantage: goes to whom can produce a good with the smaller quantity of inputs, or more output per unit of input.
