"The long dominance of Ricardo over Smith of comparative advantage over increasing returns was largely due to the belief that the alternative was necessarily a mess. In effect, the theory of international trade followed the perceived line of least mathematical resistance. Once it was clear that papers on noncomparative- advantage trade could be just as tight and clean as papers in the traditional mold, the field was ripe for rapid transformation." - Rethinking International Trade, 1990Contrary to assertions that I am sure I will get in the comment section about worshiping Krugman, this is not the case at all. This is a widely recognized point.
Thursday, January 24, 2013
Krugman on Smithian Economics
OK, I knew the Krugman-Bastiat thing several months back would ruffle feathers, but I swear I thought Krugman-Smith was common knowledge. I thought I might have a tougher case on Arrow or Stiglitz - still a good case though - but that everyone knew Paul Krugman was the modern Smithian trade theorist. Apparently not.
Here is Krugman:
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Daniel: while I agree with Krugman here, I don't like the absolute/ comparative distinction as a way of getting at Smith versus Ricardo on trade. This is because it misses the big difference between the two, which is that Smith saw relative advantage - comparative or absolute - as the consequence of, not the precondition for, specialization. Before they took up their respective tasks, no one could have seen any difference between the porter and the street philosopher, whatever the vanity of the philosopher might lead him to believe to the contrary!
ReplyDeleteThis is a very important point and I think it only strengthens the idea that Krugman is today's Smith. Robert Blecker has a paper on this exact point that I'll try to post on tomorrow. Thanks for commenting.
Delete"I knew that the Krugman-Bastiat thing several months back would ruffle feathers"
ReplyDeleteIt's funny, I was just talking about this with Roddis just last night. I remarked that nobody who had ever read 'The Law' or 'The Parable of the Broken Window' could ever come to such a conclusion. However, in terms of Smith, I think what Bob might have been getting at is that Keynes was roughly seen as a neo-Mercantilist, and Smith's entire book was a refutation of Mercantilism, thus it seems strange to couple Krugman and Smith together like that.
I could be wrong on what Bob was thinking, but that was the first thing that popped in *my* head.
Smith's entire book? I thought it was just book V?
DeleteAnd Keynes didn't really agree with the mercantilists on the stuff that Smith disagreed with them on.
Directly, yes it was book V, as well as book IV. Indirectly, his theories are laid out in books I, II, and III, but those are integral to conclusions in books IV and V.
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