05/24/2011
Last week, this column looked  at how, in The Predator State, James K. Galbraith demonstrates that the  theory of “comparative advantage” (“comp-ad” in our shorthand) is  completely divorced from the realities of the modern trading world and  is, anyway, just plain wrong.
When David Ricardo came up with  comp-ad, Britain was the rising capitalist pioneer, with a considerable  colonial empire. Free trade, which comp-ad was designed to support, was  in Britain’s interest as, being the most developed player, it could only  benefit by gaining access to foreign markets. More, the comp-ad theory  could be deployed to convince its colonies that their future lay in  producing primary products, while Britain’s lay in its manufactures,  thus ensuring there was no competition with the imperial “motherland.”
But  are people still under the spell of the comp-ad mantra? I ran a simple  test, typing in the words “comparative advantage” to the search engines  of a number of newspaper sites. The number of results were as follows.  Manila Times: 1; inquirer.net: 224; Malaya: 6; BusinessWorld: 50;  Philippine Star: 55; Manila Standard Today: 17. An archive search of  Business Mirror yielded eight results. The search engine of the Daily  Tribune was not working. We must therefore concede that comp-ad,  although dead as a guide to the real world, still walks abroad at night.  And there are some illuminating pieces among my search results..... 
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Source:  The Daily Tribune
URL: 
http://www.tribuneonline.org/commentary/20110524com4.html