U.S. Trade Policy: History, Theory, and the WTO

By William A. Lovett; Alfred E. Eckes Jr. et al. | Go to book overview

4 RICHARD L. BRINKMAN Dynamic Comparative Advantage

In evaluating "gains" from trade, a major concern relates to the impact of trade on economic development. As Gerald Meier wrote: "Dominating all issues. . . . Can foreign trade have a propulsive role in the development of a country?" ( Meier 1968, 215). And the problem of development is not only for the LDC world, but also includes the ongoing development of mature countries like the United States. But the pure theory of trade, which historically provided the rationale for freer trade, is based upon static and doubtful assumptions. Consequently, trade theory needs a better understanding for economic development. The current global reality constitutes an evolutionary dynamic of development and transformation.


Structural Transformation: The Secretary--Lawyer Analogy

This analytical conundrum, in applying a static framework to a dynamic process, is illustrated in the secretary--lawyer analogy. Granting that a lawyer has absolute advantage in both legal and secretarial work, Friedman draws the conclusion, widely supported in the literature, that "both he and the secretary are better off if he practices law and the secretary types letters" ( Friedman and Friedman 1980, 45). The rationale, somewhat intuitively obvious, is that a lawyer would be better off by specializing in legal work and having the secretary specialize in typing and secretarial work ( Bloomfield 1994, 111). This problem was also addressed by David Ricardo with the "Doctrine of Comparative Costs." 1 But do the conclusion and logic, based upon static assumptions, necessarily follow?

Case 1, from Table 4.1, "Statics and Dynamics of the Secretary--Lawyer Analogy," illustrates a situation in which the lawyer has absolute advantage in both legal and secretarial work. It is assumed that the secretary and lawyer work one-half time at both legal and secretarial work for a total and combined income of $80,000. After reading about comparative cost

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U.S. Trade Policy: History, Theory, and the WTO
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • List of Tables and Figures vii
  • Preface ix
  • 1 - William A. Lovett Introduction 3
  • Tables 1.1-1.6 13
  • 2 - Alfred E. Eckes Jr. U.S. Trade History 51
  • 3 - Richard L. Brinkman Freer Trade: Static Comparative Advantage 106
  • 4 - Richard L. Brinkman Dynamic Comparative Advantage 121
  • 5 - William A. Lovett Rebalancing U.S. Trade 136
  • Notes and References 183
  • Index 219
  • About the Authors 227
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