Reply To: David Ricardo criticisms


Here is another criticism of Ricardo and Comparative Advantage that is a very popular argument in the anti-free-trade right, especially the pro-Trump wing:

Ricardo’s Vice and the Virtues of Industrial Diversity

This is a confusion of monetary capital (which Ricardo, as a stockbroker by trade, knew intimately) with the physical machinery in factories (about which he knew very little). Yes, monetary capital moves easily in search of a profit—today, even internationally. But machinery is specific to each industry, and the crucial machines in one industry cannot simply “move” to another without loss of productivity.

The archetypal machines for cloth and wine manufacturing in Ricardo’s time included the spinning jenny and the wine press. It is stating the obvious that one cannot be turned into the other, but stating the obvious is necessary, because the easy conversion of one into the other was assumed by Ricardo, and has been assumed ever since by mainstream economic theory.

In fact, the relative mobility which Ricardo assumed for his ubiquitous concept of “capital” is the opposite of what applies to machinery. Machinery designed for one industry simply cannot move to any other, even in the same country; but machinery in one industry can (and frequently is) shipped between countries.

So capital immobility from one industry to another sinks the whole thing? I wouldn’t think so but I don’t have the technical understanding to answer these protectionists on the right. Since Trump though I see them growing. Prominent blogger and writer Vox Day, who Bob Murphy debated on Tom’s podcast, uses this argument frequently.