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Book Details
Abstract
‘Ricardo’s Gauntlet’ advances a critique of the mainstream economic case for international free trade. While the core of the case for free trade is David Ricardo’s principle of comparative advantage, the book argues that this case relies on a cluster of interconnected and mutually enforcing ‘economic fictions’ – economic theories or doctrines that pretend to be fact but which upon examination turn out to be mirages. Exposing the layers of fiction nested in the subfields of mainstream economics empties comparative advantage of its persuasiveness, bringing down the case for free trade.
Associate Professor Vishaal Kishore is a Principal Fellow in the Melbourne School of Government, University of Melbourne; a government and policy strategist; and a public service senior executive.
‘“Ricardo’s Gauntlet” is a brilliant tour de force. Mainstream economists unanimously argue that the logic of comparative advantage and national specialization makes a rigid adherence to free trade the best policy for everyone, all the time, everywhere. Kishore devastates the argument. This is a powerful and timely contribution to the growing body of technically excellent alternatives to a stultifying orthodoxy.’ —Duncan Kennedy, Carter Professor of General Jurisprudence at Harvard Law School
Table of Contents
| Section Title | Page | Action | Price |
|---|---|---|---|
| Ricardo’s Gauntlet | i | ||
| Title | iii | ||
| Copyright | iv | ||
| CONTENTS | vii | ||
| ACKNOWLEDGEMENTS | xi | ||
| Chapter 1 INTRODUCTION: RICARDO’S GAUNTLET AND THE CASE FOR FREE TRADE | 1 | ||
| Ricardo’s Gauntlet: Comparative Advantage and the Case for Free Trade | 2 | ||
| Dilettantes and Fools: Deflecting Criticism from Comparative Advantage | 4 | ||
| Picking Up the Gauntlet: Fact, Fiction and Free Trade | 6 | ||
| Methodological Preliminaries | 8 | ||
| The case is a theoretical one | 9 | ||
| The case is one with real-world relevance | 9 | ||
| The case operates as a whole | 10 | ||
| Some Comments Concerning Motivation | 11 | ||
| The Structure of the Investigation | 12 | ||
| Chapter 2 EXPLORING THE CASE FOR FREE TRADE: UNEXPECTED TWISTS IN A SIMPLE STORY | 17 | ||
| Once upon a Time: The Textbook Story | 17 | ||
| Assumptions and Complications of the Model | 21 | ||
| Distilling the Claims | 23 | ||
| Economics and the Advocacy of Free Trade: Optimal Policy, Rebuttable Presumption or Something Else? | 25 | ||
| Chapter 3 THE TALE OF INTERNATIONAL TRADE’S INVISIBLE HAND | 31 | ||
| Invisible Hands and Mechanisms | 32 | ||
| Two (flawed) objections | 34 | ||
| Proposed Mechanisms | 38 | ||
| Ricardo’s mechanism | 39 | ||
| Modern mechanisms and the importance of exchange rates | 40 | ||
| Will the Exchange Rate Mechanism Balance Trade? | 41 | ||
| Do exchange rates adjust in the face of unbalanced trade? | 41 | ||
| Mainstream exchange rate determination models | 42 | ||
| Piercing the fiction: Back to first principles | 46 | ||
| Do exchange rate variations correct for trade imbalances? | 51 | ||
| Economic Theory’s Double Failure – Analytical and Empirical | 53 | ||
| The Linked Fiction: Trade Misimagined | 56 | ||
| Summary: The Imagined Hand | 59 | ||
| Chapter 4 CLOCKWORK PRODUCTION AND THE ORIGIN-MYTH OF SPECIALIZATION | 61 | ||
| The Determinants of Comparative Advantage: Mainstream Tales of the Origins of Specialization | 63 | ||
| Ricardian half-stories | 63 | ||
| Modern retellings: The Heckscher–Ohlin–Samuelson approach | 64 | ||
| Critiques of the Heckscher–Ohlin–Samuelson Approach to the Origins of Comparative Advantage | 65 | ||
| Analytical failures | 65 | ||
| The Cambridge Capital Critique | 66 | ||
| Back to comparative advantage | 69 | ||
| Empirical failures | 71 | ||
| Fiction, Production and Comparative Advantage Analysis | 71 | ||
| Production possibilities, opportunity costs and the ‘exogeneity’ of comparative advantages | 72 | ||
| The underlying fiction: Physical scarcity and clockwork production | 74 | ||
| Piercing the Fiction: An Alternative Account of the Origins of Trade Advantage | 76 | ||
| Factors of production | 77 | ||
| The production process as social, relational and political | 78 | ||
| Ownership | 79 | ||
| Use | 80 | ||
| Sale/transfer and allowing access | 81 | ||
| Other (regulatory) constraint on action | 82 | ||
| Beyond fiction: Production and the economy as an interdependent network of mutually coercive relations | 83 | ||
| The social origins of scarcity and comparative advantage | 86 | ||
| Two Implications of the Social Origins of Comparative Advantage | 88 | ||
| Comparative advantages (and the gains from trade) are malleable and constructed: Troubling the optimality of market-generated outcomes | 89 | ||
| Comparative advantages are state sponsored: The fairy tale of ‘free’ trade itself | 92 | ||
| Summary: The Unwitting Architects of Trade | 94 | ||
| Chapter 5 ‘AND THEY LIVED HAPPILY EVER AFTER…’: FICTIONS OF BEING BETTER OFF AND STORIES OF WHAT ‘SHOULD’ BE | 97 | ||
| Back to the Textbook Story | 99 | ||
| Distribution and International Trade | 101 | ||
| Distribution between countries | 102 | ||
| The terms of trade and the mainstream perspective | 102 | ||
| Unequal exchange, exploitation and international trade | 105 | ||
| Normative implications | 110 | ||
| Distribution over time: Present versus future gains | 113 | ||
| Distribution within countries: Beyond the fiction of the country ‘as a whole’ | 115 | ||
| Where Welfare Economics – and the Normative Case – Run Out: The Fiction of Being ‘Better Off’ | 123 | ||
| The partiality of welfare economic analysis | 124 | ||
| Normative and evaluative insufficiency illustrated: International specialization | 131 | ||
| Insufficiency exacerbated – welfare and the role of the state | 135 | ||
| Summary: Confidence in Blindfolds | 137 | ||
| Chapter 6 CONCLUSION BY WAY OF IDEOLOGIEKRITIK: FICTION AND RATIONALIZATION | 139 | ||
| Comparative Advantage as Ideology | 140 | ||
| Two levels of rationalization | 140 | ||
| Giving the rationalization teeth: Scarcity, sacrifice and efficiency | 144 | ||
| The Rationalization Is Mistaken | 145 | ||
| This Mistaken Rationalization Has High Stakes | 147 | ||
| Misapprehension of the virtue of particular arrangements, policies or practices | 148 | ||
| Obscuring of important aspects of these arrangements, policies or practices | 148 | ||
| Misunderstanding the nature of the trade-offs involved in socioeconomic arrangements | 150 | ||
| Limiting of our understanding of the policy resources available to address international trade: False choices and hidden alternatives | 151 | ||
| Economics and Expertise – From Analysis to Assertion | 152 | ||
| NOTES | 159 | ||
| Chapter One Introduction: Ricardo’s Gauntlet and the Case for Free Trade | 159 | ||
| Chapter Two Exploring the Case for Free Trade: Unexpected Twists in a Simple Story | 161 | ||
| Chapter Three The Tale of International Trade’s Invisible Hand | 164 | ||
| Chapter Four Clockwork Production and the Origin-Myths of Specialization | 170 | ||
| Chapter Five ‘And They Lived Happily Ever After…’: Fictions of Being Better Off and Stories of What ‘Should’ Be | 177 | ||
| Chapter Six Conclusion by Way of Ideologiekritik: Fiction and Rationalization | 184 | ||
| BIBLIOGRAPHY | 187 | ||
| INDEX | 201 |