From: Alejandro Valle Baeza (avalleb@prodigy.net.mx)
Date: Fri Feb 14 2003 - 02:39:31 EST
> Quoting Alejandro Valle Baeza <avalleb@prodigy.net.mx>: > > > Jerry, perhaps this is a response for your question: > > " > > Re: Comparative advantage discussion > > a.. Messages sorted by: [ date ][ thread ][ subject ][ author ] > > b.. Next message: John M. Legge: "Capital controls" > > c.. Previous message: =?iso-8859-1?Q?G._Sebasti=E1n_Menescaldi?=: "(no > > subject)" > > d.. In reply to: aldo balardini: "Comparative advantage discussion" > > Fri, 13 Nov 1998 13:23:14 -0800 > > Jim Devine (jdevine@popmail.lmu.edu) > > > > >Now, if we assume a different theory of money, like that found in > > >CAPITAL or in THE GENERAL THEORY, Ricardo's outcome will be > > >completely different. As gold flows out of England, bank reserves > > >decline, interest rate increase, investment declines and output > > >declines. England experiences a chronical trade account deficit. > > Why should this lead to a chronic trade deficit. > A decline in output of domestic industry will lead to > a decline in demand for imported raw materials which > will tend to reduce the trade deficit. > > I think you are right. However, this is Shaikh's assertion. I believe Shaik's assertion is plausible because is a description of third world countries trade deficits. > > >Portugal on the other hand receives gold, which makes bank reserves > > >increase, lowering interest rates, increasing investment and output. > > >Portugal experiences a chronical trade account surplus and a capital > > >account deficit as capital flows into England attracted by the higher > > >interest rate. > > This is confused. On the one level a deficit on the current > account is necessarily reflected on the capital account, but > that is all this is saying. One can not deduce from this that > the deficit will be persistent in the absence of other > factors holding the interest rate up in the long term. I agree again. My response is the same that previous commentary. > > England, ironically, becomes the chronically indebted > > >country and Portugal the chronically creditor country. > > >A different theory of money therefore destroys the happy ending of > > >Ricardo's model, and absolute rather than comparative advantage > > >determines the direction of trade benefits. > > > Shaik's critics to comparative advantages is unsatisfactory in my view. However, there are not other Marxist critics to such theory until I know.
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