Reply To: David Ricardo criticisms


Actually, Ricardo assumed the immobility of both capital goods and labor across international boundaries. In his model, only produced goods can move from one country to another, not resources.

Here is Bob Murphy discussing this point which was raised as an objection to Ricardo’s argument for free trade by Paul Craig Roberts:

Here is the debate between Vox Day and Bob Murphy:

Ep. 684 Debate on Free Trade, with Bob Murphy and Vox Day

Neither Bob nor Vox discusses the claim that the argument for free trade is negated by the immobility of capital goods. (I listened only to their opening statements, so maybe later on in the debate Vox does claim this.) The only reference to mobility in his opening statement, Vox claims that the same logic applies to free trade in goods as free immigration of persons. Then, he asserts that we see empirically that free immigration impairs the wealth of the country receiving immigrants. He concludes from these two propositions that free trade of goods can also impair the wealth of countries receiving goods. He is wrong to conclude this. Free trade moves more goods into the country (we obtain goods with less sacrifice of other goods) and leaves the population the same. So, per capita standards of living rise. Free immigration increases population. So, per capita standards of living increase only if that of immigrants is above the per capita standard before immigration. The logic of free trade and free immigration is not the same.

In the article replying to Roberts, Bob gives an example of the mobility of capital goods: an American capitalist ships a tractor to Brazil to take advantage of low wages. The only completely immobile factor, then, is land.

The argument you quote above confuses capital specificity with capital mobility. Capital goods are relatively specific, which means they cannot be shifted from one production process to another production process and maintain their productivity. Capital goods, however, can be moved from one location to another in the same line of production as Bob’s example illustrates. Even factories and other structures on particular land sites can be dismantled and reconstructed elsewhere. Of course, it’s typically less costly to invest capital funding in building a new factory in another location and re-allocating the existing factory to a different use. In such cases and in even more extreme ones in which capital improvements on land cannot be dismantled and moved (like a mine shaft), there is a dynamic mobility of capital structures brought about by the mobility of capital funding.