Re: Critique of Comparative Advantage Please-Suggestions

The Cambridge Journal of Economics 2001 has a critical review
article on trade theory and policy. I sent some highlights of the article to
the Post-Keynesian Thought (pkt) forum on 09mar02. Here they are.

Gert Kohler

REFERENCE:
Sonali Deraniyagala and Ben Fine, "New trade theory versus old trade policy:
a continuing enigma" Cambridge Journal of Economics 2001, 25, 809-825

My EXCERPTS ------------------------------------
p809 "As reported in Prasch (1996), support for free trade amongst academic
economists in the USA is astonishingly high at 97%!"

STATIC GAINS
p810 "Static, once-and-for-all gains arise as the misallocation of resources
under protection and import substitution is corrected, . . . empirical
estimates of the welfare costs of these relative price distortions rarely
exceed 2 or 3 percentage points of GDP . . . negligible welfare gains . . ."

"DYNAMIC, LONG-TERM GAINS FROM LIBERALISATION"
The authors examine rent seeking, X-efficiency, IRS, and long-term
productivity arguments and find that

p810 arguments for those are "lacking both theoretical consistency and
empirical validity"

NEW TRADE THEORY
p.812 "established in the 1980s (Ethier, 1982; Krugman, 1984, 1986; Brander
and Spencer, 1985; Eaton and Grossman, 1986; Grossman and Horn, 1988;
Grossman and Helpman, 1991)."

p812 "incorporating a fuller range of factors. However, they provide few, if
any, unambiguous conclusions."

LINKS WITH NEW GROWTH THEORY
p814 "Models linking trade and endogenous growth . . . provide few
generalisable conclusions."

EMPIRICAL EVIDENCE from Cross-Country Research
p817 "many of these studies suggest that the effects of liberalisation on
growth are ambiguous and complex"

p818 Greenaway et al 1998 - "use panel data across liberalisers and
non-liberalisers (with/without and before/after) to come to a negative
conclusion on the effect of trade reform on growth . . ."

p820 "liberalisation beyond trade, to capital markets, has not been
favourable to industrial performance" - The authors mention the influence of
other factors, including exhange rates, interest rates, demand.

CONCLUSIONS
p821 "the thrust of the theoretical and empirical literature is far from
supportive of such postures" [sc for "free trade"]

p821 "it is totally inappropriate to address trade theory and policy
separately from other aspects of industrial policy and performance and
macroeconomic considerations."

in reply to:
-----------------------
Milo Jones wrote:  Other than the Asia Times article
highlighted on the list recently, can anyone point me towards some rigorous
economic critiques of "Comparative Advantage" in World Systems or other
economic literature? I am looking for "quantitative" and/or "practical"
rather than normative criticism of the doctrine, and am not having too much
luck in "mainstream" textbooks and articles...
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