Dear Prof.Shiozawa,

It is my opinion that any free trade agreement has various dimensions. As many economists have declared, TPP is a free agreement which can decrease the China's trade power in the world. Also, it may be a challenge for labor markets, the U.S. law, etc. Due to these crucial reasons, I think the next U.S. presudent would stop TPP or at least revise the mechanism of TPP to overcome its likely threats or challenges. Shortly we should pay attention that  a free trade agreement may be act as a start point of future economic crisis.

Thanks for reading my answer.

Ehsan

Dear Shiozawa, 

Good question. I think one common criterion used to be the net benefits. When the NAFTA was formed around 1994, the International Trade Council found tremendous net benefits will be generated, using their CGE forecasting model. While some industry suffered and other gained, the net benefit was significantly positive, so the Trade Adjustment Assistance program was beefed up to compensate industry and people that came up short.

But other problems lingered and showed up in the long run. For example, the expectation of free-traders that by trading off some capital to mexico for less inmigration to the US did not materialize. This is probable a fault of theory, beause the CGE model that estimated benefits could not find the optimal tradeoff for capital to inmigrating labor.

Another example. When the EMU was formed in 1999, tremendous benefits were estimated for its members at the expense of  less developed countires using CGE models. But some researchers were sourcing the benefits to the economiies gained from having to mange only one currency, the Euro. In other word the gains were not attributable to free-trade, but to saving from using one and not many currencies. But this advantage which is not premised on free-trade lasted only for a short-term.

I just want to mention also the idea of some analysts that FTA are not free-trade areas but are PTA--preferred trade areas. In the case of NAFTA, for instance, the US purchased more expensive goods from Mexico, which before the agreement  it could purchase cheaper from other countries such as in the Carribbean areas.

What I mention are just ideas in my mind. But the loss of jobs consequent to FTA agreement is a current hot topic in the media, which I do not have a model to assess.

. 

Dear Ehsan Raasoulinezhad,

thank you for your posts. We must have some "strategic" dimension such as "contain China" in a new meaning. This must be the subject-matter of International Political Economy. I am also interested in these aspects of TPP. However, I am more interested on the reason why we are producing people who worry about new FTA agreement. This must be a good subject-matter of the International Political Economy. The question might be divided in two strata.

One is the theoretical problem of international economics. The standard theory explained gains from trade but it continued to explain all in conveniences as a matter of transitional temporary friction. Here lies the very deep problem. I will explain briefly in my response to Lall B. Ramrattan.

The other stratum is how people come to acknowledge the problem. Do they have a correct opinion? Is their opinion based on firm experience, observation and economic theory? This stratum requires also a well organized analysis.

Would you have any opinion on them?

More than 6 thousand people participate to the question category  "International Trade." My question was posted 3 days ago and there are now only three followers and 21 views. What does this mean?

have listed 5 possible choices. Which do you vote for? Or have you any other interpretation?

(1) My question is so silly that it need no attention.

(2) My question has already answered in a definite way. It is only these three persons who do not know that.

(3) Arguments never end, but most of people are tired of this question.

(4) Many economists who work in international trade never imagined that this is a question that international economics must answer.

(5) The question is too difficult for a humble researcher to answer or respond.

Interesting question.  This is not my area of specialization (American Politics, Parties and Elections, Constitutional Law), but I have always been interested in it as a matter of theory and public policy.

In American Politics today, we find opposition to free trade on the left and on the right ideologically:  Bernie Sanders an example of the left, and Donald Trump an example of the right.  Hillary Clinton has caved on the issue by opposing TPP at the Democratic convention, but if she is elected President she will support free trade, as all American Presidents must, because all American Presidents are dragged by economic necessity into supporting the global interests of multinational corporations (I am talking strategic interests of economic and foreign policy, not conspiracy theory).  Trump would also become a free trader...he would just claim to be negotiating better deals.

This debate in American politics goes back a long way, most particularly to the debate between internationalists and isolationists between the world wars.  It was most colorful within the Republican Party...liberal Republicans (Willkie, Dewey, Eisenhower, Rockefeller...iternationalists) vs. conservative Republicans (Robert Taft to Goldwater...isolationists or America firsters)...There's nothing new under the sun.

More recently, free market Republicans (Gingrich, etc) joined President Clinton in support of NAFTA.

Nothing new in this debate in America...it pits labor unions and small competitive capital against global capital.  From the end of World War II to the 1970s, internationalism was a cornerstone of bipartisan foreign policy.  The Vietnam War broke up the bipartisan foreign policy, and Nixon floating the dollar and the oil shocks broke up the American consensus on internationalism.

In terms of broader international and development theory, I would compare the diffusion model, which argues that the diffusion of global capitalism into LDCs aids development, with the dependency model (mostly Latin American based and some of it Marxist), which argues that global capitalism, from colonialism to the neo-colonialism of the multinationals is what caused underdevelopment.  Compare the two literatures...they are fascinating.

This debate can be applied to modern postindustrial societies, as with the debate in America,  Europe and the recent Brexit.  The central issue is that the industrial age is over, manufacturing jobs are disappearing, and people caught in the tide of history fear the future.

Dear Prof. Shiozawa,

First of all, I should say that all your opinions and questions are entirely interesting.. you discuss wonderful topics which are not debated in any classes or books.

In the case of your two mentioned points:

1- I agree with you on this point. Unfortunately It seems that some international trade theories do not support the real world. Because I think a theory always has several assumptions. Without assumptions, we can not make a specific theoretical framework in trade. But in the real world, we can not assume anything,, we deal with all the factors affecting on trade.Hence, I think Free Trade Agreement (FTA) is not proper for all nations in the real world. Just theory can 100% prove the positive role of FTA.

2- I am not sure whether we can define economist and economic readers. Economists find the answers by using economic theories.. but economic readers who learn economic sciences through economic newspapers or TV economic news, can analyze an economic problem, for instance by using the newspapers' articles. It is my real experience that I have seen these people even better than some academic economists. 

Be happy to hear your opinions about my idea.

Good Luck!

Ehsan

In the case of your voting, I want to choose (3) and (5).

On the one hand, International trade researchers have faced with these kind of discussions without any exact and clear responses. However, I think International trade is a dynamic field in economic sciences that due to influencing various factors, it needs long discussion time.

On the other hand, these questions are difficult for many scholars to discuss. It is my opinion that since nowadays many high-level journals always accept a paper with a mathematical analyse, many economic researchers are focusing on mathematical estimation and conclusions. It negatively affects on the discussion power of them. They do not try to learn what happens around the world and can not participate in a discussion.

It is just the things in my mind.

Yours,

Ehsan

It seems that Nenad, Arthur and Ehsan all support option (3): we are tired of this question. All right. 

Why are we tired? Because, there were no theories which can explain the state of affairs. The question is whether you are pro or contra FTA, and TPP in particular.  Some political scientists prefer to talk about containment and other "strategic" dimensions. But, we know the reasons why people oppose FTA or TPP. They fear of loss of their job. They fear the pressure to lower their wages. 

Evidently these are not "strategic" questions but economic ones. If so, why economics theory, or Theory of International Trade cannot give answer to these fears. Are they completely baseless? Or is it the trade theory which is not based on the reality of the economy? We have to question the theory structure, because "friction" is an inevitable consequence of general equilibrium framework. It is evident that we need a new theory. 

Somebody may think such a theory is impossible in economics. No, it is possible. Please read my paper: New Theory of International Values: General Introduction. It is still in a burgeoning stage, but I believe you can tell the difference.

I think the trade theories is not  based on the reality of the economy. Economists have tried to use more and more assumptions before introducing a theory. Some of them argue that an economic theory without assumptions is impossible. I believe that we have to find a way to make a theory in related to international trade with more real structure, which can explain the real trade pattern in the world. I absolutely agree on lacking a new more-efficient theory.

"I have downloaded your valuable paper. I'd surely read it and write my opinions".

International trade trade theory (except in very special conditions--as noted I guess about 30 years ago by Paul Samuelson) says lowering trade barriers causes gains from trade for all countries involved.  (I am ignoring issues of trade diversion when barriers are reduced between some trading nations but not all nations).  However, standard neoclassical models show that in each participating nation there will be gainers and losers, eg a nation that exports capital intensive goods will see a rise in income for owners of capital in equilibrium but (assuming only two factors of production) there would be a loss of income for labor.  This is true even in long run equilibrium.

Once the effect on distribution is noted, then an analysis in terms of Political Economy shows that in the example given owners of capital would favor increased trade (lower barriers) but workers would oppose it.  Unless there are associated policies to compensate losers from trade there will always be opposition even in equilibrium, in spite of the standard result that gains are larger than losses within each country.  

During an adjustment process there is also the issue of owners of capital in an industry that experiences tougher competition due to increased trade do not get to make a cost free transition to having capital in the export sector.  In fact they often face ruin.  They will also oppose opening up trade.  So will workers in that industry, even more than workers overall.  Some owners of capital will gain, so may workers in the export industry (in the short run) but commonly fear of loss causes a stronger reaction than does hope of gain.

The losses in the short term are likely to be very concentrated, while benefits from cheaper imports are very diffuse.  Those who gain in consumption have little incentive (small gains per person) to strongly support trade while those who lose in income have to fear large losses per person.  Conditions in which negotiations for freer  trade can succeed are relatively rare because of the political economy of redistribution effects.

The health sector has been the most vocal opposition, among others.  For New Zealand for example, the national drug purchasing agency will oppose any elements in the Agreement that will interfere with their ability to buy in generics. The purchasing agency has a list of drugs they will allow into the market.  Pharma companies in the advanced northern countries want to be able to sell their drugs a their price, unhindered.

Neil,

(1) This is the first of your "answer"s in the ResearchGate. You are welcome and let us deepen out discussion.

(2) Neil > Standard neoclassical models show that in each participating nation there will be gainers and losers.

This is what HOS-theory indicates. However, this conclusion has two different problems:

- Is this a solid fact endorsed by empirical studies? Leontief paradox and Treffler and Leamer's works show that this conclusion is most likely false.

- Workers are generally opposed to FTA (and TPP), but what they fear is job loss and unemployment and not the income decrease.

HOS's fundamental flaw is that it excludes the possibility of unemployment as principle.

(3) I have a feeling that International Political Economists are not much interested in the question of FTA and TPP. Despite of its name as political economy, they are more interested in power games.

(4) In any case, adjustment processes matter. Before compensating the apparent losses, it will be important to design the mile-stones to freer trade regime. We are now too hasty.

(5) Neil > The losses in the short term are likely to be very concentrated, while benefits from cheaper imports are very diffuse.

This is very important point. Trade conflicts between Japan and the US had such a typical structure. Remind of textile, automobile and home appliances conflicts. TPP case seems a bit different from these classical type of conflicts.

Hello Yoshinori,  .. and all the new friends responding to this question.  

I am an economic reader who looks at Political Economy as a tool by which we can identify first what it is that we, in our societies and also globally as a species, want from life and secondly what it is that we are doing in producing the functionalities and the dysfunctionalities of the present so that we might describe the sets of institutions, methods and behaviours that are most likely to yield the functionalities that we aspire to, without dysfunctionalities.

When we invent models to describe the mix of good and bad outcomes of the present with a view to gaining the understanding needed to eliminate or ameliorate the bad outcomes of the present and to achieve only good outcomes in the future, or any optimised mix of the two, we do so with an objective function whose details are themselves an assumption and the validity of which is based on not much more than the opinions of a self-selected group of model builders.

Is it surprising therefore that when more widely held, and hence more legitimate, views as to what the objective concerns of international trade ought to be are expressed, such as full employment and directly linked improvements in the well-being of individuals in the short-term and in their confidence of these effects persisting for themselves individually into the future, that these model builders have to treat these fears as 'externalities'?  If they believe the very purpose of human economic activity which we seek to improve to be an externality to the operation of their models then I would suggest that they first spend the next 20 years individually working on the assembly line of the nearest factory to them at minimum wage and a zero-hours contract or on 7-days notice... with their entire family to support, cherish and daily assure that things will be better because the politicians and largest business owners have made an agreement which will grow their capital investments while shrinking the business of small employers and further reduce real wages at the lowest levels.

At the end of that period they must then be re-admitted, after appropriate renourishment and bringing back into health, to their universities to continue with their assumption and value laden models.   Will the fears and worries of labour and smaller businesses remain externalities?  I do not think so. 

So why continue with methodologies which are not based upon real human behaviour and universally aspired to norms and values?  Is it because it is difficult?  and perhaps because it is difficult it takes a long time, and because it takes along time some (well-fed) people are bored with it.  I think so.

It is the increasingly vocalised and heard common-sense of real people which explains opposition to FTA's and to the associated growth in the aggregation nexii of economic surpluses and in their public-private distribution arrangements.  That is the externality to the politico-economic calculations of diplomats and is also an externality to International Trade Theory as well as IPE models.  None are sufficiently well rooted in realistic models of real people to be of much use at all... to the aspirations of real people.  Social media may be the new proxy you are looking to include in your models, if one posits that it is the vector by which the non-acceptability of FTA's becomes known.  Or may be it is simply that the unintended, or at least unexpected, consequence of the much lauded trickle downs of neoclassical approaches, and of reactionary models to them, that result in higher living standards is the knowledge and self-confidence that increasing education beyond the capital owning class brings to those people who are now vocal and now able to express their displeasure at unilateral decisions whose most direct bad consequences they will be likely to suffer.   The mere fact that there is a differential distribution of probabilities, at a 'class' level, of the good and bad consequences of any decision taken in which the foreseen good effects are correlated to accrue to those directly identified with those with the power to be making the decisions and for the bad effects to correlate as accruing to those who have no direct power is all that is required to explain strong opposition to free-trade agreements.

Human behaviour, social and economic, and its institutions of the present and those aspired to lie along an evolutionary path.  They have always, still do and will continue to evolve.  Our individual behaviours are analogous to the multi-species webs of mycelium that lie, grow and spread out beneath a forest floor amongst the illia of fine tree roots in a symbiotic evolving reality. 

You would not model that with an equilibrium model because it is a living system, you would use a simulation.  So 'why?' 'oh! why?'  do we doggedly persist with modelling our own living systems like we would the stresses in a fixed physical girder structure under conditions of static loading?  Economic readers, throughout the social media, know this very well.  It seems that economists are yet to catch up with human reality.  I just hope they are no complicit in destroying it by 'fiddling while Rome burns'.

I recommend you move on quickly, and begin reading Yoshinori's MicroFoundations of Evolutionary Economics and also his much earlier 'Manifesto'.... for historic perspective.

Robin

Yoshinori:

There are a number of reasons for the simple versions of H-O models not to be a good fit with reality, a 2 country, 2 good, and especially 2 input model is more of a metaphor than an empirically applicable model.  However, such metaphors are useful in understanding interactions in the more complex real world cases.  I think the explanation I offered uses the HO model in this way, or at least that is what I meant to do.  

Your point about fears of unemployment not income loss is the same as saying that short term effects (which are more nearly certain) are more influential than long term (anticipated) effects.  While I have not doubt that is true, it does not make the long term effects mean nothing.  However, when a move to equilibrium may take a really long term (and may never happen--especially if the move toward equilibrium is slower than the movement of the equilibrium to to ongoing shocks and structural and other basic changes--then the short run may be the overwhelmingly important consideration.  

While I sympathize with the current move to more complex models with no path to things like closed form solutions, requiring simulation methods to get any answers, the simple models offer paths to a feel for relationships that the complexity of the simulation methodology may not.  In this area as well as in general I see the two approaches as complementary.  

Dear Yoshinori, good day.  I vote 3

I think you are right the conflicts created by TPP may not fall between the classic conflicts of FT as TPPs are different than FTAs in my opinion in terms of structure. 

Even in Canada where generally NAFTA is taken as a benefit or deals like the FIPA Canada-China are approved on the basis of net benefit to Canada the opposition to TPP seems to be strong too. 

I am working on a paper about the evolution of trade models to be able to point out the nature and implications of trade models like TPP, which are linked to a mixed of international political economy and international trade theory as you point out in your question as it is clear that different ways of looking at these issues are needed.

I am sharing attached the main figure I am using to guide my ideas in this paper: a) Figure 1 depicts the period of full protection based trade model; b) Figure 2 indicates the classic free trade period model/FTAs where individuals are seeking to benefit from the comparative advantages they have; and c) Figure 3 highlights the current free trade model such as TPP which I call “Intrusive free trade” as it seem it seeks altering the comparative advantages of your competitors.  And it is this intrusiveness that makes TPP different than FTAs I think and the reason why it attracts such a strong opposition.

Have a nice day

This is a rich discussion enlivening two fields of study in mutually beneficial ways. Free trade in an idealized scenario is intended to create open opportunities for all participants' assuming of course that the negotiations cover for disadvantaged sectors, sensitive products, environmental sensitivities and the livelihoods at stake.  But alas therein lies the infra and the grand politics of positioning.  However we should not lose sight of this conjuncture. Austerity continues to be a failed experiment and locking in trade agreements of this magnitude is more than the political market can bear. This may be the factor that counts more in the equation. Austerity and free trade fundamentalism are two sides of a neolithic globalization coin and this has been the ire of both the right and the left. And no one wants undemocratic power exercised by diatant bureaucrats.

So many posts! I am happy but cannot answer to all of them.

Robin,

I appreciate your long post. I also thank you for having recommending one (or two) of my papers.

Neil,

are you not thinking that simple tractable model is limited to HOS model? Even if it is simple and understandable, the very concepts like factor endowment and factor intensity are irrelevant as leading concepts in international trade. Can you explain why India is a country which exports services based on cutting edge techniques? Can you explain outsourcing and fragmentation by HOS model?

My theory of international trade (see A New Theory of International Values) has an extremely general scheme as a model, but it adapts well to International Input-Output Analysis and can provide a new analysis frame of international trade. It can explain outsourcing, fragmentation and world optimal procurement. No ad hoc extensions are requested.

Lucio,

thank you for an illustration of structural changes of three periods. Historic sense is always required in any economic and political questions.

Don,    

You work for Sir Arthur Lewis Institute. I started my study in development economics from one of  Lewis's papers, i.e. Unlimited Supplies of Labour  and his book The Theory of Economic Growth.   

Globalization and International Trade have enabled many firms in developed countries to outsource production and jobs to low-wage, developing countries.  As jobs disappear from developed countries, even those who are still employed are beginning to worry that their jobs may be exported soon.  These people are the "new dispossessed" - they are the source of the popular ground-swell against free trade.  The dilemma is that lower wages abroad means cheaper (imported) products at home - but without employment and an income, the dispossessed cannot even afford cheap products!

William, what you say is of course absolutely true.  It is not difficult to understand how with the benefits that this brings to those individuals embedded in the trade based nexus of political and governing power that are now entrenched within the institutional landscapes which have been erected over the centuries around this phenomenon, are so deliberately and resolutely blind to its logic.  

It is is a state of denial which they can only avoid confronting in themselves by ensuring that the advisory circles with which they surround themselves are increasingly vocal and insistent in echoing back to them the mantras of their own belief system.   It is a prime illustration of the power of 'group think' to maintain and defend an illogical and continuing process of institutionalised "Unreason".   Even to defend itself on occasion with state violence against those who might publicly observe that they "see through the Emperor's new clothes".    Dick Taverne's 2005 book "The March of Unreason" is an important contribution to this key aspect of the debate.  

The number of 'dispossessed' has grown substantially in the last ten years.  Now more than ever, more people can see the same prospect for themselves.  None are so stupid as to believe anybody who tries to represent to them that 'the Emperor" has having a new set of clothes, and is a new person.  And, they mostly know that his 'old set of clothes' was, anyway, also a fiction.  The longer this fiction is institutionally perpetuated the greater the disillusion of the 'new dispossessed' will become.  With it greater still will our experiences of widespread 'civil unrest' become, and also of the actions of those operating at its inevitable extremes.   I do still maintain no reason to revise my 1980's prediction.  We probably do not have much more time than between now and my dates of 2032 to 2034 to redirect that disillusionment and recreate reason for hope.  It is now too late for effective delivery of much substance in the live's of a hurting global population.

My fear is that term's such as 'new dispossessed' carry an implicit message that the dispossessed had something in the first place which was their's, and hence is a 'right' that they have lost, or are about to lose.  We must never forget that the primary product, over the centuries, of International Politics and Trade has been military and commercial power in those few countries who have been dominant in each period.  In each period the subsidiary effect of this has been to raise the living standards of the majority of people in them through the cheap labour of others brought under their dominion in foreign lands. 

This has been facilitated by their dominance, over generations in some cases, and has been normalised by their populations as being in their 'possession' as a right of inheritance, as are the jobs they do.  Jobs which they have unquestioningly accepted that they do entirely themselves, unaided by the sweat of others.  Unaware of the value chain of sweat and toil in horrendous conditions, from which the materials they themselves work on have emerged.  This has not been visible to them and therefore did not exist to them.  

At least, not before the availability of mass communication at a ubiquitous personal level.   With that came a questioning. It is not always coherent or well expressed.  For some it is not much more than a fear and an understanding that a change is on it is way and that it is one over which they individually have no power and that they might well be the one's, having least, to be those that lose the most.  Their reaction is extreme. 

Others, perhaps more vocal and more skilled in general and confident in their capacity to learn and adapt are less fearful.  The younger amongst them tend to be optimistic, hopeful and while concerned they are not afraid.  The older ones in that group have more fear and trepidation.  Some remember their youthful ideals and keep on a brave face and hope for the best and follow the familiar Green paths of 'Woodstock'.  Others amongst them have had a tough time already and are more fearful.  They hanker for the status quo, the comfort of keeping things just as they were... the neo-conservatives remembering the 1950's and even, dangerously for us now, the 30's and '40's.

They are all a part of the 'new dispossessed',  But this neologism that describes them reinforces in them a sense of unrighteous dispossession.  A feeling which can only add to the problem which we seek to solve through our work and study.  That sense of self-righteous loss which the term might breed in them is itself unrighteous.

As was also unrighteous, in any universalistic sense, the local historical flows of power from economic domination in trade and of the third-party arbitration of the terms by which was granted the access of people to the resources that only the exercise of their own labour efforts would and could turn in to the stuff of their well-being, and of others.  Those 'terms of trade' developed as the foundation of major elements of the institutions making up the institutional landscapes of today and which constitute those norms and values which they are needed to encourage.  And which, so often, seem to be capable of validation only by appeal to each communities' supreme source of moral right,  rather than by any logic intrinsic to the exploitative social proposition which they represent.

'Dispossession' is a term which reinforces, in the minds of those in the present generation, and potentially also of those in future generations, in those countries who are at the consumption end of those ancient value chains, exactly that normalised belief that their past well-being in no way depended upon their own society's exploitation of more distant populations and by holding them at much lower levels of well-being, and the appropriation of their most valuable local resource endowments. 

A different term is required, however unpopular that might be to book publicists.   These 'dispossessed' are in fact pioneers at the new frontier of the re-invention of the very basis of our societal structures and the processes by which we now need to interact with one another.   Our institutional landscapes will be transformed by what happens next.  They will either be devastated or they will be transformed as they evolve in support of the next great evolution in our relationships with our planet and amongst ourselves

The dispossessed you talk of are in fact the vectors of the skills and knowledge from the old 'landscapes' which will be needed to be adapted and built upon across the new landscapes.  Without them there will be no re-invention of our social and economic institutions.  They need enlisting, not alienating. 

Our past institutions, built around cheap energy from the co-opted labours of others, and from energy minerals, enabled lands to be settled, in the last four hundred years particularly, with intensities far beyond their carrying capacity.  Even with the application of significant technological prowess.  But now we are seeing the cost of the distant labour rising, as the means by which those people are governed changes and becomes more able to 'charge more' for their labour.  At the same time formerly cheap energy is becoming more costly as  the concept of the eventual exhaustion of its mineral sources looked ever more likely. 

Charles A Hall and  Kent Klitgaard have documented volumes of work by others, and themselves, which has shown investigation supported by rigorous mathematical and statistical analysis that, contrary to the main thrust of the received mantras of our most 'successful' nation states, it was not technology per se that drove the expansion of populations and kept them in states of historically high well-being over the past 200 years in those 'advanced' countries.  It was in fact their ability to cheaply and quickly access the incomplete products and raw materials of remote countries with machines whose very existence and viability was posited on their ability to convert seemingly inexhaustible supplies of minerals into energy to drive them and the processes they made possible.   It was in other words their substitution of human muscles in the transformation of energy from foods with the mechanical transformation of energy from wood, coal and oil that achieved this 'wonder'.  It was, in fact, a simple adaptation of the ancient mechanisms of imperial conquest of one another that we have practised for millenia. 

Poor communications limited distant trade to low bulk, high value goods and with it imperial ambitions.  However, every imperial flowering was always associated with the development of some technological advantage in transportation which gave a military edge and the capacity to significantly exploit that relationship of power at a commercial level.  But in human terms transportation as still slow.  Good widespread and intensive communication between many individuals over those value chains was absent and so an understanding of the factors critical to their functioning was absent in the general population.  And so, so too was the likelihood of widespread concern developing among the people whose peaceable labouring the systems depended upon most.

Is it any surprise, today, that the countries whose institutions have grown strong around feeding resources and products into the early stages of our incarnations of those same value chains are the ones who are most vociferous and autocratic in their efforts to deny their working (still sweating and toiling) populations full access to global communications and the social media? 

Of course it is not.  It is not even a matter of ethics or political science.  The phenomenon you are looking at is a very simple, very standard insight drawn from the discipline and methodologies of any academic Economic Historian, but at a level which is accessible to even sophomore undergraduates.  It is a conclusion that even they can quickly come to.  And do so.  But many of whom, at the 'wrong' end of the international value chain, get shot for saying so.

Truth, not sophistry, is the task of our profession.  Logical argument not bigoted belief in archaic discredited systems of thought.  Defending that calling calls for integrity.  A subject never taught....  only learned.  Usually very painfully.  What is our threshold for pain?  When does the sheer weight and ubiquity of truthful voices quieten the economic 'luminaries' and their institutional and commercial benificants? 

Until then free-trade agreements will attract strong opposition, and much else will also.  In fact, whatever in the end depends chiefly upon processes of maintaining and trading in the differential well-being of the populations comprising the world's societies, for they are in fact systems of exploitation at some level. By the definition of  Mathias Risse and Gabriel Wollner (2014 - "Three Images of Trade: On the Place of Trade in a Theory of Global Justice"  De Gruyter) they are a modern form of slavery.  Which in itself is not new news...  just a further explanation of the strong opposition to FTA's and other macro-level trading agreements between commercial firms and our major political institutions which have no other primary function but to shore up and create the institutions of that continuing 'tradition' of international trade in value towards those 'possessed' of the power to 'acquire' it and those with the institutional powers to 'supply' it.

Robin

Robin

Psychological surveys of widespread attitudes reveal that, the loss of something formerly possessed is felt more deeply than the failure to get something promised.  Whether the jobs that have been lost were "owned" by those who formerly possessed them, or those jobs were "just on loan from the employers," loosing the income and status which such jobs provided, is now deeply resented, and also deeply resented is the "establishment" that conspired to eliminate those jobs.  I see no sophistry in any of this explanation.  I am just being careful not to pontificate!

Apologies for my pontification.  Sincerely so.  :-)  Thank you.

Dear William, your two comments are right on the issue.  

Pervasive free trade is associated with both " the new dispossed" and the "new homeless", those affraid of losing their jobs and those who already lost their jobs and  now need to have up two new jobs to barely meet housing cost and basic needs that they easily could cover with their original job...coupled with local housing bubbles created by foreing capital moving to take over foreign housing markets within these trade deals or opennins you have a nightmare for the new dispossed and the new homeless as they are competing with factors that they can not see nor control....and this leads to vocal opposition to these deals

A few years ago(2012) when I saw the possiblity of markets and trade models going from traditional structure to green structure I thought about this issue as part of the new social race to the bottom to be expected with the shift from traditional markets to green markets from the point of view of traditional economic sweatshops and the coming of green sweatshops,,,;

and I could see then that the social race to the bottom in this new more aggresive model should be expected to be even worse than one that took place within the economy only model....The article is here as food for thoughts:

From Traditional Sweatshops to Green Sweatshops: Is This a More Socially Friendly Strategy?

https://www.researchgate.net/profile/Lucio_Munoz2/publications?sorting=newest&page=3

Hava e nice day

My apologies, this is the right link, I do not why the other link showed up there.....

From Traditional Sweatshops to Green Sweatshops: Is This a More Socially Friendly Strategy?

https://www.researchgate.net/publication/281277722_From_Traditional_Sweatshops_to_Green_Sweatshops_Is_This_a_More_Socially_Friendly_Strategy

Article From Traditional Sweatshops to Green Sweatshops: Is This a M...

Lucio & Robin

We all agree that we would rather see a more equitable sharing of power and wealth  rather than exploitation, widening inequality, and regressive policies.  And we all know that the thrust for more inequality is located within all societies, developed or under-developed.  I am looking for feasible ways to change all of this.  Once we get beyond outrage and/or high idealism, what strategy and tactics will guide real change to a better world?  Is there a message or a goal that will actually galvanize public support and action?  I am looking at both the "top-down" and "bottom-up" proposals that are available so far, but none of them has actually inspired the kind of overwhelming support  that is needed to transform social organization.  If I were a consultant, and society was my client in this kind of situation, my first action would be to "interview the client" to find out (1) what the prevailing conception of the problem was; and (2) what the preferred type of solution was.  This approach is not only good consulting practice, it is also good democratic practice.  YET, I notice that virtually NONE of the existing proposals for "social solutions," are created through this kind of process!  Does that tell us something about what is missing from the proposals for social change?

Dear William, if you were the president of the world and you had the political capital to make true local and global change and you ask my free advice I would tell you:

Mr. President, two things:

a)  you need to abandon the model of dominance,  you ned to end the goal of maximization, and you need to bring in full binding regulation local and global at the same time

Maximization, partial regulation, and system dominance: Can they be drivers of true sustainability?

https://www.researchgate.net/publication/235270181_Maximization_partial_regulation_and_system_dominance_Can_they_be_drivers_of_true_sustainability

b) when doing this you are moving towards the world of sustainability making even todays model, the eco-economic model or green market model, fully socially friendly at the same time.

Eco-Economic Development Under Social Constraints: How to ReDirect it toward Sustainability?

https://www.researchgate.net/publication/242225305_Eco-Economic_Development_Under_Social_Constraints_How_to_ReDirect_it_toward_Sustainability

But you do not have that power and you are not the president of the whole word and I am not a polititian.

So we are back to  square one....

Have a nice day

Article Maximization, partial regulation, and system dominance: Can ...

Article Eco-Economic Development Under Social Constraints: How to Re...

 Dear Robin, William and Lucio,

thank you for active discussiona. Let me add some words. Lucio is proposing a new wold order. William is presenting a psychological explanation why people are angry with FTA and TPP. They are important points of discussion, but what I wanted to discuss in this question page is of a more "epistemological" dimension. Is our science (or sciences) prepared to explain the Trump and Sanders phenomenon? One manifest fact is that majority of economists explains that FTA and TPP have a big merit. The anger and frustration of the people are based just on baseless fear they hold. The only obligation of an economist is to explain how they are misunderstanding. I doubt this understanding. My thesis is that people who fear FTA and TPP know the fact better than economists. It is the failure of  (mainstream) economics that those economists who adhere to standard economics theory cannot explain what is happening now.      

Let me explain.

One of influential theories in this relation is the HOS or HOV theory that explains gains from trade and patters of specializations. There are many other economic theories that deals with these question, but the most influential theory or model is the HOS theory (HOV is a variety of HOS). Now, it has a strong characteristic as an economic theory. There is no place for (unintended) unemployment. HOS theory started in 1940's  but it was never influenced by then powerful Keynesian theory. Any conflict of interests which may occur in the theory is the change of factor prices.

Wage rate (per hour per person) is a factor price of labor (labor is a factor of production in its understanding). Profit is a factor price of capital services. So there may be a conflict between workers and capitalists concerning a change of distribution of their incomes but no conflicts which comes from fear of unemployment and bankruptcy. It must be a misunderstanding from the part of economists that there are no such conflicts. This is a strong reason (and a motive for some economists) to expect a new theory.

Then, if I divide my question into two questions directed for each discipline: International Trade Theory and  International Political Economy, they may be formulated as follows:

(1) Question for International Trade theorists

HOS and HOV theories exclude unemployment and  cannot explain why may people feel strong fear of  FTA and TPP. We have to re-structure HOS and other related theories. What is your perspective?

(2) Questions for International Political Economy

International Political  Economy must have of it own economic theory if International Trade Theory is incapable to elucidate the main causes of trade conflicts.  It cannot be a field of purely political theory. It needs an economic theory by which we can explain the origin of trade conflicts. What is your perspective?  

I have parallel questions that are closely related to the above questions:

For Question (1):

Who still supports Hechscher-Ohlin model?

https://www.researchgate.net/post/Who_still_supports_Hechscher-Ohlin_model#view=57a425053d7f4b12ce62afd1

For Question (2):

Is conflict in international trade an illusion?

https://www.researchgate.net/post/Is_conflict_in_international_trade_an_illusion

The role of trade in international relations was explained long ago by the early Political Economists - comparative advantage is still with us.  It might be fair to ask "Comparative advantage for whom?"  Initially it was producers and consumers who were identified as the main beneficiaries.  What about workers, or the unemployed, or the disabled, or the dependent, etc.?  These others were "externalities" that economists preferred to ignore!

Competition is a form of conflict, so there is always conflict with international trade.  As for a new world order, I too would like to see one!  BUT what is the appropriate design, AND how is this new world order to be implemented?  None of the existing proposed designs is adequate for the job, and most proposals for implementation are just wishful thinking. 

Economics has its own epistemology and ontology, as do the other social sciences.  Perhaps the most efficacious way to explain the range of approaches across the social sciences, is to say that each focuses on different aspects of the human condition.  BUT any theory that deals with the whole of society (like a new world order) must take a holistic methodological approach - so, some psychology, and some economics, and some political science, and some sociology, and some anthropology, etc. are all necessary in the perspective that attempts to design a new world order.

What are the two main drivers of global social change?  Comparative advantage AND automation of jobs!  What are the implications?  Even China is beginning to automate its factories, as is Brazil, India, etc.  But without incomes from jobs, there will be less and less consumption - so we are over-producing and under-consuming!  Trade is playing a role, as is geopolitical conflict, environmental degradation, and further waves of rising expectations.  Where is the coherent theory or political savvy to deal with this global problematique?!  Please tell me you have an answer, OR help me find one.

We are talking here about the traditional economy and its working and we know that in the traditional economy only the economy matters, social and environmental issues are externalities....and you can not use economic models to explain exogenous factors....In your last two posting I see you highlight the fact that social issues like unemployment, the poor..., are left out; and social wellbeing in general is left out....

The marriage of politics and traditional economy still leaves social issues as externalities and it has the same weaknesses as just the economic model....it should not be expected to explain exogenous factors too.....

I see the issues of Sanders and Trump that you mention from the moral and practical liberal model discourse....where morality and practicality breaks into internal extremes and the dynamics of these extremes reshape the morality and practical components of the liberal model....you can see these ideas here....

Moral and Practical Sustainability Gaps: Implications for the Current Morality Based Liberal Development Model

https://www.researchgate.net/publication/282332054_Moral_and_Practical_Sustainability_Gaps_Implications_for_the_Current_Morality_Based_Liberal_Development_Model

Have a nice day

Data Moral and Practical Sustainability Gaps: Implications for th...

Dear Yoshinori, this response was for you, my apologies, the heading did not show up

We are talking here about the traditional economy and its working and we know that in the traditional economy only the economy matters, social and environmental issues are externalities....and you can not use economic models to explain exogenous factors....In your last two posting I see you highlight the fact that social issues like unemployment, the poor..., are left out; and social wellbeing in general is left out....

The marriage of politics and traditional economy still leaves social issues as externalities and it has the same weaknesses as just the economic model....it should not be expected to explain exogenous factors too.....

I see the issues of Sanders and Trump that you mention from the moral and practical liberal model discourse....where morality and practicality breaks into internal extremes and the dynamics of these extremes reshape the morality and practical components of the liberal model....you can see these ideas here....

Moral and Practical Sustainability Gaps: Implications for the Current Morality Based Liberal Development Model

https://www.researchgate.net/publication/282332054_Moral_and_Practical_Sustainability_Gaps_Implications_for_the_Current_Morality_Based_Liberal_Development_Model

Have a nice day

Data Moral and Practical Sustainability Gaps: Implications for th...

Dear William, I see you are clear that the classic theory of comparative advantatge of Adam Smith/the traditional market has not work and do not work because it assumes social and environmental externality neutrality...The social conflict and the environmental conflicts of today are facts showing that not internalizing those externalities in the pricing mechanism of markets has brought us here...Now we are trying to correct the traditional market to reflect environmental friendliness only by the shift to green market thinking, but we are doing it wrong because instead of internalizing environmental issues in the pricing mechanism of green markets we are still managing then or treating them as externalities when they should be internalities through an array of green taxes....

You are right the solution has to be a systematic interdisciplinary solution that bring together all components, social, economic and environmental, as equal partners...and this is the world of sustainability and of sustainability markets....You can see the ideas here:

Beyond traditional sustainable development: Stating specific and general sustainability theory and sustainability indices using ideal present-absent qualitative comparative conditions

https://www.researchgate.net/publication/281276522_Beyond_traditional_sustainable_development_Stating_specific_and_general_sustainability_theory_and_sustainability_indices_using_ideal_present-absent_qualitative_comparative_conditions

Beyond Green Market Thinking: What would be the Structure of the Perfect Sustainability Market?

https://www.researchgate.net/publication/303014272_Beyond_Green_Market_Thinking_What_would_be_the_Structure_of_the_Perfect_Sustainability_Market

Perfect Green Markets vrs Dwarf Green Markets: Did We Start Trying to Solve the Environmental Crisis in 2012 With the Wrong Green Foot? If Yes, How Can This Situation Be Corrected?

https://www.researchgate.net/publication/305067067_Perfect_Green_Markets_vrs_Dwarf_Green_Markets_Did_We_Start_Trying_to_Solve_the_Environmental_Crisis_in_2012_With_the_Wrong_Green_Foot_If_Yes_How_Can_This_Situation_Be_Corrected

Have a nice day William

Article Beyond traditional sustainable development: Stating specific...

Article Beyond Green Market Thinking: What would be the Structure of...

Article Perfect Green Markets vrs Dwarf Green Markets: Did We Start ...

Dear William Sheridan,

yes! "Externalities" are the magic word for economists. By casting this mantra, we can oust economic factors out of our range of explanation. I respect Alfred Marshall, but it was he who started this bad custom. When he could not define his "supply function" when constant or increasing returns to scale prevailed within firms,  he kicked off increasing returns from within the firms and spelled it "external economy."

I agree with you that each science has its own "epistemology and ontology,"  and perhaps this is the reason why Lucio is so frustrated. But I have some doubts on the possibility to "deal with the whole of society."  Even if it is necessary, I believe it is impossible (or I am very pessimistic) to approach to a truth or a core of the problem by "a holistic methodological approach."  "Holistic approach" is our target, but to do so we have to change or rebuild our science to deal with the problems that  were once ousted by a reason or another. This is just why we need collaborations between different sciences. Political science can contribute to change economics by pointing big political phenomena which are excluded from traditional economic analysis. International Political Economy is such a field in which both economics and political sciences can and must cooperate. 

The scale and interdependencies of the modern world have only been able to develop because of the assistance and direction of governance.  With out global coordination and cooperation, human society is no longer sustainable.  So, whole system solutions are the only ones that can handle the magnitude and seriousness of contemporary problems.  To what extent can such solutions "emerge" from the bottom up, and so what extent must they be governed from the top down (because both emergence and governance are characteristics of modern societies)?  I don't particularly "like" the fact that this is the kind of problem humanity faces, but there it is!  Let's not "regret" this situation, or try of deny it, or avoid it - let's be brave and try to figure out a way to deal with the problem.

Good day Yoshinori, my apologies if I sound frustrated to you, I was trying to point ouf the facts straight and linking them.....

a) If Adam Smith model/the traditional market model should not be expected to explain exogenous issues to the model, the the policial model based on that traditional thinking should not be expected to explain exogenous issues too, and if the trade model, which is a set of markets in action, is based on the traditional economy thinking, then they too should not be expected to explain exogenous issues....

b) If Adam Smith model needs correction(e.g. to shift to green markets), then the political economy model build on it needs correction too and the frade model supported by traditional economic thinking needs correction too...that is what I call "The house of cards fall down effect" creating knowledge gaps such as the green market knowledge gap....

The Unintended Consequences of Paradigm Death and Shift: Was the Arrow Impossibility Theorem Left Behind?

https://www.researchgate.net/publication/299879934_The_Unintended_Consequences_of_Paradigm_Death_and_Shift_Was_the_Arrow_Impossibility_Theorem_Left_Behind

c) if environmental issues and/or social issues are internalized in the price mechanisms of the market  then they become endogenous issues and you can deal directly with them through the market....no more trickledown expectations.....

d) If you do not internalize themk you have to tax your way out of the traditional market to get it closer to the perfect market you are aiming at.....For example, adding a green margin to the traditional price  of the perfect market internalizes environmental externalities and shift it towards perfect green markets and now green producers and green consumers interact to clear the green market at the green market price....If you do not do this, you need to tax the tradidional market to push it as closed as possible from the perfect green market, but as you know this level of production and consumption would not be optimal/efficient as non-green producers and non-green consumers are clearing this market at a price lower than the perfect green market price....

e) I will leave it here Yoshinori and William......Time told us that Adam Smith and those who blindly accepted the social and environmental neutrality assumption since 1776 to 1987/2012 were wrong and now we have to deal with correcting the past.

Respectfully yours;

Lucio

Article The Unintended Consequences of Paradigm Death and Shift: Was...

Dear Lucio,

I don't think that your are frustrated against me. You are frustrated to the actual state of the world. It is important  for a scholar, because it is the frustration that impels us to research. However, we cannot persuade all the people at once. Every scholar must have his / her first target  to change. As a researcher, I think it is the first step.  

A lot of people are frustrated these days, scholars and others.  We all have expectations about how the world should work, but we are disappointed.  One strategy is to argue with each other, but that rarely produces change for the better!  We need to develop an effective change strategy, AND get out there and actually work for change.  Let's start with the effective strategy - HOW can we mobilize the public for change?  Anyone?!

Dear Yoshinori it is not frustration, it is persistency,,,i agree with you...change is slow....Thomas Khun says that after paradigms shifts the status quo is slow to start or react.... as time passes and more ideas are shared on how to ffix itt...Those who just argue but then shifts and catch up...

I always share my ideas on how things are or work or do not work; and back them up with either new ideas or ideas on how to fix it.....I am a resercher, not a politician...,,we are supposed to live in a science based development world at least in Canada and if the politicians do not use that science based approach that is fine with me....

This issue of correcting Adam Smith's world affects every country, many profeessions, all universities and educational institutions and financial institutions....all governments...so change will be slow.....but step by step is fine...

Towards True Sustainability Step By Step Is Fine While There Is Time: Pointing Out The Unifying Nature Of True Sustainability With The Help Of The True Sustainability Wheel

https://www.researchgate.net/publication/282317313_Towards_True_Sustainability_Step_By_Step_Is_Fine_While_There_Is_Time_Pointing_Out_The_Unifying_Nature_Of_True_Sustainability_With_The_Help_Of_The_True_Sustainability_Wheel?ev=prf_pub

Data Towards True Sustainability Step By Step Is Fine While There...

Let us return to the original question.  My question was:

How do International Political Economy and International Trade Theory explain the strong opposition to free-trade agreement?

This is no political solicitation. There is something wrong in international trade theory and cannot explain why strong opposition to FTA occurs. This is because traditional trade theory cannot explain unemployment which follows a shift to freer trade system.

The task of trade economists is two-fold. In one side, there is strong opposition to connect trade and unemployment. In another side, if there were some researchers

who try to consider on trade and unemployment, they are trapped in the framework of general equilibrium and can consider unemployment only as friction.   

As Carrère et. al. (2014) cite it, Paul Krugman (1993)  emphasized    

• It should be possible to teach students that the level of employment is a macroeconomic issue, depending in the short run on aggregate demand and depending in the long rung on the natural rate of unemployment, with microeconomic policies like tariffs having little net effects. Trade policy should be debated in terms of its impact on efficiency, not in terms of its phony numbers about jobs created or lost. (Krugman 1993 AER 83(3) p.25; Reprinted in Krugman 1998 Pop Internationalism, p.123)

Here, Krugman has no doubt that his theory may be wrong with this important issue which connects trade and unemployment. 

If there exist a few number of research with the theme trade and unemployment, their theoretical frameworks are frictions. Carrère et. al. (2014) Trade in Unemployment, UNCTAD Study Series #64, examines unemployment as frictions in the labor market. The true issue should be effective demand (or aggregate demand as Krugman prefers to say). If one doe not assume Say's law, it is not automatic that an economy after the shift to a freer trade regime creates it sufficiently in such a way that all workers can find a job. This is not a question of labor market friction. 

Céline Carrère, Marco Fugazza, Marcelo Olarreaga, and Fréderic Robert-Nicoud 2014 Trade in Unemployment, UNCTAD Study Sereis #64.

https://www.unige.ch/degit/files/8914/4102/1901/Fugazza.pdf

It is now well known in Japan that both Democratic and Republican candidates for the presidents of the USA are opposed to the TPP agreement.  Japanese majority party (Liberal Democrat Party) people are considering that discussion in the Diet is useless until the attitude of the USA is determined. Because they have an absolute majority, it is possible for them to ratify the treaty if they really feel necessary.   

It is clear that Japanese bureaucrats and politicians have no firm opinion on TPP. They are only following  American initiative. This proves indirectly that they have no theory of international trade  by which to evaluate TPP quesion.

Dear Youshinori, good day

The position of the republicant candidate is known, but the position of the democratic candidate is still a question mark

There is stronger opposition to TPP models besides the negative impacts and theoretical clarify you mentioned because they go far beyond FTA models as they seek legal venues that can disrupt the development programs, the supply and demand structures, and the regulatory environment of their competitors….

This can be seen by dominant systems as a threat or weak deal and it is seen by those under the dominance cloud as a winning strategy that leads to penetration….

In my view TPP models are ways to induce compartmentalization in the competitor environment…I shared some ideas on partial regulation and the behavior of local firms, the compartmentalization of your competitor’s environment leads or may lead local firm to act or behave differently abroad…

Maximization, partial regulation, and system dominance: Can they be drivers of true sustainability?

https://www.researchgate.net/publication/235270181_Maximization_partial_regulation_and_system_dominance_Can_they_be_drivers_of_true_sustainability

It seems to be known also that the republican candidate is not fun of FTA either.

Have a nice day.

Article Maximization, partial regulation, and system dominance: Can ...

I do not want to make this question page a place where each people expresses his or her opinion. We have to find theoretical explanations on the present confused political arguments.  The basic reason of this confusion seems to me the lack of well established theory of trade that can offer economic consequences of the new treaty. Most of  mainstream trade theories are based on General Equilibrium Theory and thus exclude by assumption the existence of unemployment. International trade theorists are always for the liberalization and explain that the fears that people are afraid are baseless. But people do not believe their explanations.

We have to produce an international trade  theory by which  we can analyse unemployment.   

Okay, only your opinion will be

Have a nice day Yoshinori

Dear Lucio and other readers,

If I do not give any example, you may have difficulty to understand what kind of discussion I want to make.

Please see Section 4 Gains from trade and possibility of trade conflicts of my working paper  

New Theory of International Values: A General Introduction

https://www.researchgate.net/publication/304717720_New_Theory_of_International_Values_A_General_Introduction

This paper is not intended to discuss the present question, but if we do not have firm basis of arguments, the discussion will be vacant and be a display of political judgement that we cannot examine if it is reasonable or not.

In Section 4 in my paper, I give two theorems. One (Theorem 4.2) explains who gets gains from trade and how gains appear. The other (Theorem 4.3) explains when and how unemployment is inevitable by sudden liberalization of tariffs and quotas.

I do not contend that my paper is unique one that can examine these kind of problems, but it is also very rare to find any papers which can serve in the examination of our question.   

Working Paper The New Theory of International Values: An Overview

There are a few books which treats unemployment as a part of international trade theory. The next is one of such few books.  

Paul Oslington 2006 The Theory of International Trade and Unemployment, Edward Elgar.

At the flap of front cover, at his book, we read 

• In this book, Paul Oslington underlines the contradiction between the prominence of contradiction in political conflict over trade liberalization, and trade economists usually working with full employment models.

Although I finds a fundamental misconception in his theory construction, Oslington know the  situation.

Let me cite some sentences from the Introduction. 

• Fear of job losses is prominent in most political conflicts over trade liberalization.  ... Unemployment seems more important to most participants in the debate than effects on resource allocation, wages, government revenue or other issues.
• In contrast with its prominence in public debate, trade economists usually treat unemployment as a distraction or ab issue for others such as macroeconomists or labour  economists.

Oslington cites the phrases from Paul Krugman to attest his contention:

• The level of employment is a macroeconomic issues, depending in the short run on aggregate demand and depending in the long run on the natural rate of unemployment, with microeconomics policies like tariffs having little net effect. Trade policy should be debated in teems of its impact on efficiency , not in term of phony number about jobs created or lost. (Krugman 1995 What Undergraduates Should Know about Trade)

The Nobel prize economist is saying that  undergrads should not be taught about unemployment issues. If this is the general attitude of all professors who teach international economics in the undergraduate level, it is easy to tell the result of this education. 

The trouble is that the situation does not change in the higher level of education and research. Few graduate students challenge the liberalization effects on employment. This happens not because students are dissuaded to do so. Orthodox economics lack the framework to treat this problem. This is because the economics they use assumes full employment of labor and other resources. This is the very serious problem in economics. 

Dear Yoshinori, with all my respect I will pass this discussion this time….

We are living in different world, I am thinking about the future, green markets, red markets, sustainability markets, markets beyond traditional micro-economic and macro-economic thinking....letting the past go…..

You say that "This is because the economics they use assumes full employment of labor and other resources", which is I think the same as saying unemployment issues are externality issues and you cannot expect any model to be able to deal directly with externality issues, they can only deal directly with endogenous issues, they will count on so called "trickledown forces” for that.......

So traditional economic model/international trade models cannot deal directly with social issues and environmental issues again as the model assumes social and environmental externality neutrality, and therefore it should not be expected to do so....the shift to green market thinking ratifies that is not true...those externalities should be internalities, then you can deal with employment issues/poverty issues/populations issues and environmental issues head on....

Therefore the issue of your interest should be expected to have a different nature within these new markets than the one that traditional market thinking did not explain properly or failed to explain as you said....I am sure in the future we will exchange ideas again Yoshinori…...

Just a food for thoughts Figure 1 in my coming article titled “Markets  and Production Pricing: Using the sustainability Market Price to Point Out and Link the Production Price Structure of Partnership  Based  Paradigms and Deep  World View Based  Paradigms” is shared here as food for thoughts, it connects future for profit sustainability markets structures and the production price structures of all possible lower level markets, including the traditional market model, when coming down you go from the highest level model in terms of sustainability to the lowest level models as different externality assumptions are made, ….when going up from lower levels to higher level models you see the corrections that need to be made step by step to move to more sustainable higher level models and still making a profit....even at the highest level

With all my respect Yoshinori, I will leave it here;

Lucio

Dear Lucio,

there are so many problems to think about and we are not in the situation that we are both interested in the same problem. See you again when we find question that we are both interested of. 

Dear Lucio & Yoshinori,

Clearly, we are all climbing the same mountain! 

While I agree with Lucio that the externalities in the neoclassical model are anachronisms whose time has come for inclusion as being endogenous to any contemplation of policy making for the future, I am not very clear on how the multi-coloured markets of the future will achieve distributive justice at a systemic level.  Does the wealth still just trickle down? Or will we have structural elements (a common institutional factors across all markets and nations) which ensure that if labour remains a resource/commodity in those markets that the individuals which it comprises are protected from them?

And I also agree with what I think I understand Yoshinori's focus to be.  By highlighting the inadequacies of Orthodox economics, of which the externality of labour in orthodox teachings on Trade is but one of many examples, the very necessary rational and many faceted foundation is being established by which the behavioural model of rational economic man can be logically annihilated once and for all.

It seems to me, without too much reading on my part of Lucio's papers I admit, that when the concept of market behaviour has become dominant in our orthodox model building by virtue of the limitations imposed by the concept of man being a sentient rational machine then no amount of market segmentation, differentiation and re-structuring will alter the processes by which markets are assumed to work on account of the assumptions made, wrongly so, about the way human beings think about their problems and and make their decisions.  Green, red, blue or white.. markets remain markets and require CGE math techniques to model.  Models which cannot be solved until they are abstracted to a degree of simplicity equivalent to have held on to the externalities one has hoped to make endogenous.  Is not an over simplified endogenous factor, made intrinsic to an equilibrium model, likely to be very little better in reality than applying conditional values to proxy 'constants' in the same model?  

If one is modelling an aggregated universal system according to the deductions from an inaccurate axiomatic form of individual behaviour of the individual particles of which it is comprised the results must also be inaccurate.  Further more the 'law of compounding errors' would suggest that the resulting macro-level model will be exponentially of greater inaccuracy as a representation of the truth than was the wrong axiom initially.  This is inescapable.  Unless when embraces the evolution of different axioms.

In 1960, Drs. J Brnowski (also.. Bronowski) and Bruce Mazlish published their acclaimed work 'The Western Intellectual Tradition'.  Their Chapter 19 title 'Adam Smith' should be required reading, and testing, for all PPE and humanities students so that they might understand his place as a philosopher within the 18th century Heterodoxy.  A similar position to where we, in the 21st  century, now find ourselves.

Smith could only do what any philosopher scientist can do, in their time and place, and took the very best knowledge then available as to the nature of the problem, and the very best knowledge then available about the factors which might be influential in the creation, conduct and outcomes regarding the problem.  With these tools and deductive logic he proceeded to investigate how things might be arranged more advantageously.    The result was inevitably a reflection of the new enlightenments then available.  But also of the persisting ignorances and prejudices.  Irrespective of what he wrote and wished for, the political and economic outcome of the influence his thinking, like that of anybody else in the time following their 'works', was always going to be the result of the interplay of powers and influence in the present upon the interpretations and selective assent to them as each protagonist appealed to them to give authority and legitimacy to their individual areas of self-interest.  One does not have to be rational to act in one's self-interest!  Conversely, acting in one's self-interest is not necessarily rational...  the many fruits of which we now suffer.

Brnowski and Mazlish write (p.338 para3.. Hutchinson & Co of London) "In sum, the aim of mercantilism was neither to raise the standards of living of its own people nor to contribute to the well-being of other countries, its only aim was to regulate commerce and industry and to manipulate financial policy so that the power of the state might be promoted relative to other nations.".  This relative power was believed to be intrinsic to the possession, within a country's borders and especially in the possession of its political and hence also economic rulers, of just one thing... gold.

Smith's contribution, building on Quesnay's idea.. from the evidence available in France.., that it was agricultural land that measured wealth, showed that... from the evidence uniquely available to him then in industrialising Britain... it was in fact the labouring of a country's people that is the source of the wealth of nations.  Not of people, but of Nations.  With a capital 'N'.   The amassing of wealth remained the 'name of the game'.  A fact somewhat lamented by Smith, who after the publication and success of Wealth of Nations, in which he was as concerned about the origin of wealth as much by its circulation and how its flowing between industries and activities maximises its usefulness and hence of the measure of wealth it represents, understood that this source of wealth was actually comprised real, suffering people!  Unlike Mr. Krugman, as it would seem from Lucio's quotation. Smith had hoped to place his 'mere ideas' about economics into a 'general moral and philosophical system' (p.343 para5) of which, to quote Smith, "might properly be called natural jurisprudence, or a theory of the general principles which ought to run through and be the foundation of the the laws of nations."

In this statement his use of the adjective 'natural' is at the root of the problem which neoclassical economics, and any other systems which rely upon market behaviour and the rationality of man, have with the real world.  Rationality is a rare and fleeting commodity in the real world just as it is in each and every on of us.  But in 18th century Europe it was the 'New Enlightenment' and the basis of the heterodoxy in political, social and economic thinking.  The idea that the 'natural' order of things included the essential rationality of man, the mechanistic nature of the world and the belief in the 'fact' that hence, since it was created by God, all of its workings were ultimately for the good of all.... and that, perhaps, it was His invisible hand that would ensure that the benefits, if not the substance, of the wealth it created would be ultimately shared by all.  These ideas remain intimately enshrined within the neoclassical dogmas of 'flexible labour' and the primacy of 'financial 'commodities', whether considered at the levels of the micro-economic, macro-economic or within international trade. 

Money is the new gold, and is to be accumulated in terms of real value vis- a vis everybody else.  Labour, which creates the monetary measure of wealth, is to be kept at maximum efficiency in so doing by enforcing its constant flow to those places it is to be most advantageously applied and only at those times it is needed... so long as it is still needed.   Market theory describes the constraints by which actual human behaviour and inclinations can be 'nudged' and directed so that it flows at minimum cost and disruption to the production of the monetary wealth markers by which the efficiency of its production is measured.  These neoclassical principles, and the barely evolved social institutions they support through the very evolved economic insttitutions by which they are accomplished, are the clearest demonstration of the practical consensus achieved between the 18th century economic philosophers and the powerful self-interest of the mercantilist society whose excesses spawned them.

Mutatis Mutandis the circle has turned full well.  Today the very same 'stasis' and bankruptcy, with the same processes of self-interest and self-belief at play, which faced the mercantilist world-view 250 years ago now faces its off-spring. Globally. More accurately, perhaps, the governments of the world and their advisors... today's orthodoxy... are its grandchildren.

No Heterodoxy of the present that is not the disinherited offspring of the present orthodoxy can hope to succeed in preventing the next turn of the heavy wheel of time from grinding again slowly over the people upon whom it floats.  The axioms must change... markets are mechanisms and tools of production, to be monitored and controlled.  They are machinery.  They are not the engine... that is our bodies.  They are not the fuel... that is our visions and our hopes.  They do not produce wealth, even though they might seem to 'make money' that money is not wealth.... that is the infrastructure of life itself and all is all that we know, and do and use to maintain, preserve and grow its efficiency in maximising that life, in and for and amongst each and every one of us, now and in to our future... individually and severally... responsibly and accountably... diversely and cooperatively.

Meanwhile trade, and especially international trade, is the one arena where this conceptual failure of neoclassical theory, to treat human behaviour and aspirations endogenously and accurately, is most apparent.  Even within a country, businesses will be mostly free to do as they wish until they begin to act in ways which evidently, at a level of common sense, begin to affect the lives of individuals within their 'active domain'.  People, through their political representatives and other organs of governance and services, will seek to assert their personal well-being in the moment and in the future for them that they can see, over those of an encroaching business or group of businesses.  Businessmen on their side do not 'waste' their time seeking to be elected to local political posts or in nurturing friendships with local political figures.  On the contrary they see it as an investment in making the operation of their business smooth by 'eliminating' or 'controlling' possible interference from members of the population local to them... and they often expense those 'tasks'.  In so far as the ethos of governance in a representative democracy remains that of representing the overriding need to create wealth for and within the 'realm' this is usually tolerated or even wholly endorsed.  Periodic re-election exposes the governance process and it development of business to the 'power' of the electorate whose jobs have come to depend upon those businesses.  They are typically very antagonistic to any bye-laws, agreements or concessions to business or arrangements between businesses which will very evidently affect their jobs.

The International arena is, in essence, no different... but for many countries the stakes are much higher... and the disapproval of a nation's population for a government or their officials can be felt much more painfully and immediately.  But their is a second 'onion-skin' in the international arena. If one considers the businesses of a nation as its population, as would have been the case in mercantilist days, then those of them engaged in trade can be seen to be those of the 'local' population whose businesses have interests that may not be well-aligned, on a short time scale, to those whose businesses are entirely domestic.   The same types and sources of disagreement are going to occur between those engaged in trade and those who are not, and those who mostly export and those who do the opposite, and the various government departments to whom their areas of activity relate and through which they each can exercise political influence and hence power over policies.  That power is delegated from the ministers and other elected representatives in the governing structure.  But they are also subject to the periodic 'approval' of real people in their electoral regions and are thus at the nexus of not two competing requirements, but at each of three layers of grouping... importers, exporters and 'the public'.

It is likely therefore that for every clause of a free-trade agreement there is a focus as to outcome.upon one of those groupings.  An outcome to which the other two are likely to be opposed.  The mathematics of arriving at consensus and agreement on any one point is impressive.  Multiplied over 300 odd points in even a simple agreement it becomes truly awe-inspiring.

It is no wonder that free trade agreements give rise to so much opposition.  The system is actually structured such that this is inevitable.

And it is all because its axiomatic behavioural model of man is wrong, and that both the mechanistic and the 'ordained destiny' views of the universe accept as axiomatic the inevitability that wealth must accumulate to a few and labour must flow to where that process requires it to be there to do only what it must.

International trade agreements can never be arrived at without creating antagonisms and resistance until the societies between which they are sought are themselves able to be governed and to run according to those principles and requirements which only a true appreciation of human behaviour by all humans can give rise to.   This goal is not imminent, nor is it likely to be achieved.  But we do know much more about ourselves than we did 250 years ago, and we have different ideas of distributive justice than those which are enshrined in our current institutional landscapes and economic theories.  We also have many many other views, hopes and visions of ourselves and our individual rights than those at the time of The Enlightenment ever had.  

This conceptual gap, this dialectic, between the ethos of aspiration in the economic sphere and the aspirational ethos of personal humanity, opens wide during the time that international trade agreements are negotiated, usually in secret as a consequence, and even more so when they are announced and put into action.  Inevitably so.

As the time of this heterodoxy approaches let us just hope that its usurpation by  incumbent relationships of power, and the ethos they have preserved for millennia, is significantly less effective and that this time there is an axiomatic shift which more closely than ever before approximates the truth about ourselves.

To you both, Yoshinori and Lucio,...I leave you here,

in my deepest respect and esteem.. till next time

Robin

In would like to briefly refer back to Yoshinori's second point in his response to Neil Garston on Aug 2..

Neil had written "However, standard neoclassical models show that in each participating nation there will be gainers and losers, eg a nation that exports capital intensive goods will see a rise in income for owners of capital in equilibrium but (assuming only two factors of production) there would be a loss of income for labor."  and also...

"Those who gain in consumption have little incentive (small gains per person) to strongly support trade while those who lose in income have to fear large losses per person."

..then Yoshinori writes...

"2) Neil > Standard neoclassical models show that in each participating nation there will be gainers and losers.

This is what HOS-theory indicates. However, this conclusion has two different problems:

- Is this a solid fact endorsed by empirical studies? Leontief paradox and Treffler and Leamer's works show that this conclusion is most likely false.

- Workers are generally opposed to FTA (and TPP), but what they fear is job loss and unemployment and not the income decrease.

HOS's fundamental flaw is that it excludes the possibility of unemployment as principle."

_______________________

First, I would just note that Neil's contribution expresses in terms of theory pretty much the same sentiment as underlies my (long) behavioural explanation of why trade agreements are not generally welcomed.

I would observe that HOS talks of the gain of "income to capital", and the loss of "income to wages".  In HOS-GE these two factors of production are production categories in a macro-economic analysis.  They cannot be subject to anthropomorphism and made into individuals with human emotions and reactions. Doing so introduces micro-economic analysis into the macro-economic model.

One cannot validly deduce a reduction in wages to individuals from a loss in income to labour's share.  'Share' being the unsaid, but operative, noun that is missing here.

What is real is that working people affected by a trade agreement do fear job loss and hence income, and their employers (and shareholders) also fear loss in total profit and hence income loss.  they fear the same thing... but this is a micro-economic issue.  In the HOS model labour, in aggregate, just as labouring individuals in reality have no degrees of freedom with which to reconfigure their activity.. in the short term i.e. in their response to a new equilibrium. For them what will be, will be. 

Meanwhile capital, at the microeconomic level, can respond and will do so.  But here we are talking of only that subset of 'capital' who are, at the point of disequilibrium, potentially going to be amongst the losers in the new equilibrium.  They have some freedom to respond.  Some of them, a further macro-economic sub-setting of 'capital', will choose to drop their prices to maintain volume.. but will only know if this works after a fairly long period while the effects of direct competition and or product substitution effects work through.  But they would also want to maintain total income, to shareholders, which would require them to drop prices sufficiently to raise volumes under the new competitive conditions.  This strategy can only be entered into as a second phase response once it is clear what the new competitive landscape will settle at. 

But both phases require, of themselves, sufficient super-normal' gross profit in the pre-existing conditions to allow for the lowering of prices in the first phase and then again in the second phase.  The HOS model cannot handle this because it implies that the pre-existing condition was not an equilibrium one, or it is working in an imperfect market... ie. no 'market' at all, but in a state of actualised international oligopolistic power.  That condition also invalidates the HOS model as the appropriate tool.

This macro-economic 'capital' sub-class, as micro-economic agents, must ameliorate their perceived medium to long-term risk in the situation that looms from the imminent effects of an FTA even if they choose to initially adopt a tentative response according to the 'fat' already in their products' GP. 

If they have large stocks of product relative to their production rate it would be wise to reduce current output and run down stocks.  But to make that effective current total production costs must be cut along with production.  Unless non-labour direct costs of production are a very high proportion of direct costs this can only be done in the short-term by three strategies..  shorter working hours, lower wages and fewer employees. Oh! And no new hiring.  In the medium-term money can be spent to make their labour more productive by training, exhortation and encouragement.  And by fear.. a few sudden and immediate job cuts in a visible function which forces remaining colleagues to strain to keep up could well be the response of some managers.  In the long-term, productivity can be increased by re-tooling with more and more cost-effective machinery to lower overall costs.  Whatever this does for individual employees it is all in the long-term.  Even where this is a low risk strategy for the employers because they sit well-behind the technological envelope of their trade, i.e. they have technological 'fat' as well as GP 'fat' to draw on, it transfers some of that risk, long-term, upon the employees prospects as the 'share' of capital increases and the current positions filled by labour will be de-skilled and subjected to downward wage pressure.  The creation of new jobs will be at higher 'machine-setting' and maintenance levels unavailable to those currently employed, especially those beyond a 'certain age'.  There are many other specific scenarios that may apply in the long-term.  None of them are likely to translate in the minds of labour as anything but a decreased individual perception of their job security.

All three planning horizons.. short, medium and long.. for labour, at the micro-economic level... the level at which resistance to FTA's manifest, look threatened by an move towards freer trade in an economy which is already doing fairly well.  In such economies labour, at a micro-economic level, is usually very vocal for reasons I have discussed at length and are often organised.  In those countries that are already well-behind they are in one of two situations regarding the response of their 'labour'...  It has no say simply because the individuals delivering that macro-economic factor are already so dis-empowered by the poor availability of any jobs at all amongst a relatively large population.. for them any job is better than none, and a few more would be welcome to some.   Or labour has no say on account of a social structure of institutions in which only capital has any opportunity  to be heard.  And their thinking is likely to be very short -term, self-interested and very much aligned to classical rational economic man... a position already well-catered for in the aggregations inherent to the macroeconomic model.

'Capital' can choose, as individual firms and subsets of firms, amongst many different strategies across those three planning horizons and in many permutations.  If a country's 'capital' was validly represented, at a statistical level, as being homogeneous in their overall behaviours according to the model, once an FTA looms they will begin to break ranks according to the detail.  This dissipation of the appearance of common purpose would be even greater if an FTA were agreed and then implemented to such an extent that the positional conditions assumed in the FTA's negotiation phase would not apply once enacted.  In practise, as in the case of the Transatlantic Foreign Trade Agreement this year (2016), the negotiating self-elected cohort worked in such secrecy that not even elected EU and national elected representatives were actively denied access to their work process and even to the agreement itself until after the deal had been done and approved within that cohort and was incapable of modification or rejection by either non-influential business ( i.e uninvited within the negotiating cohort) or elected representatives of the people who would be directly affected. 

Such concentration of opinion, behaviour, power... call it what you will, in the context of such wide ranging and detailed and complex FTA agreements is an externality in any macro-economic model of the HOS-type, any GE-model or any model that depends upon a competitive market mechanism.  The reason is that not only are they based upon individual behavioural models that are inaccurate they are based upon the existence of 'laws of economic relationship' existing objectively which in turn assumes a world which is objectively mechanistic, as was the case in the 18th century context in which this form of analysis and subsequent futile attempts at economic prediction through increasingly complex mathematical sophistries have their roots.

The flaw in HOS-GE is that it is flawed at floor-level!

As is the neoclassical edifice that has lifted itself up upon it and imposed itself between nations and their peoples and within nations amongst their peoples.  It is trying to impose a mechanistic (however stochastically addressed) economic theory upon a world which is as intensely comprised behaviours with power as their motive as it is of behaviours with economic advantage as theirs.  It is the study of Political Economy as a part of the philosophy of life.  It is not a Political Economy of control that a PPE degree would recommend, such that it becomes no more than a 'must read'  Annexure to Machiavelli's 'The Prince' for aspiring 'leaders without a cause'.

The practise and pursuit of free-trade today, at an international level, is in no substantial way different in its aims as was the Mercantile Doctrine which it replaced.  It continues to be concerned with relative power between states such they may take advantage of one another and perceptions and the reality of that power lies in the relative wealth which they possess.  Which was gold (silver etc...) and is now the digits of monetary accounting methodologies (there are many of them too..). 

Only the methods have changed. the Mercantilists were concerned with stealing gold from one another or by trading 'sharp practice' through market manipulations involving taxes, tariffs, licenses, limitations of access to routes and physical force of arms.  The neoclassical neoliberal tradition is now concerned with the mechanisms and policies for stealing 'surplus value of labour' from all who work, and for maximising the individual's potential in that work to increase the proportion of their labour which is surplus and available to take and to do so at minimum overall cost.

The behaviours of 'capital' which we have tried to justify and give authority to for 150 years by showing them to be part of the 18th century 'natural order of things'.   This has been diligently attempted on the basis that if they can be shown to exist objectively through their 'discovery' by mathematical investigations then indeed they must exist.

While this may look like scientific method to politicians and business men in particular, those who are scientists will not recognise it as having anything to do with an exercise in the scientific method. 

The error lies, in non-scientists, thinking that Physical Science is not characterised by a search for axiomatic truth but for the mathematical appearance of it and that these 'appearances' represent truth because they are mathematically expressed.  Rather than what is in fact the case, and which is that the mathematical results and models  are merely representations of the theories that we develop and hold about the possibility of them being working approximations of the axiomatic truths which they appear to give the appearance of.  Until we toss them out of the window and build again every time that this process yields inter alia new insights which expand our understanding of where truth may lie and cause us to develop new and improved theories to be tested and adopted for a further while. 

This evolutionary path of discovery and the development of successive solutions to the problems of life is the way of the rule of nature.  To borrow from de Quesnay, it is the Physiocratic approach and is inherently sustainable.  In sharp distinction to the evolutionary dead-end the human race now finds itself in.  One which may in fact be, as a direct consequence of coming down it, also be a dead-end for our entire species, if not our entire technological civilisation.  And in the very near future.

.. always cheerful.. :-)))

Robin

Agreed Yoshinori, next time it will be, we both seek a better world so let's interact when we can

Have a nice day.

Robin, thanks for your note.... 

I think that not just Adam Smith ideas, but also karl Marx ideas were distorted by the "power culture of the day" that you described and implemented to fit their aims without much blowback or dissent....Had they both proposed their ideas today they would have been scrutinized more given the global nature now of knowledge and action....perhaps the boats would not have left port without modifications or left at all....

so I think academic connectivity is good to bring out workable unbiased solutions to the world we have received...In terms of my thinking, I will expand my ideas and concepts to make simpler to look at the future in simple, implementable, and replicable systematic ways....the knowledge gap created by these paradigm shifts is huge so a lot to share in the years to come....

Until next time;

Have a nice way

The "strong disagreement with a Free Trade Agreement" is not by any means shared with everyone - a careful look at those who do disagree may provide a clue as to their motivation.  Workers whose jobs are "exported" to other countries wherein the pay for workers is considerably lower, will, not surprisingly, disagree with Free Trade.  On the other hand, consumers who can buy the same products for less money, may very likely support Free Trade!  In such cases, is the "problem" the export of jobs, OR the lack of the capacity of the displaced workers to find other jobs?  In the globalized economy, people cannot realistically expect that their jobs will be secure, with guaranteed pay and benefits.  Adjustment MUST be made continuously, to accommodate such changes.  Does everyone involved recognize these challenges, AND possess the willingness to make the adjustments?  Obviously not!  THAT is the problem - far too many people still want to pretend that things can go on WITHOUT the need for major changes.  Alas, it is NOT so!  Let's stop kidding ourselves, and instead commit ourselves to facing reality!

Dear William, you are right, those who are affected should be expected to strongly disagree.  However, the fact that high paying jobs are being substituted by lower paying  jobscompleting the same or similar  task does mean the traditional market model is not working well, it is...it is working at its best as designed......

Subsituting high paying jobs for low paying jobs is part of the reuirement tof traditional markets to be able to produce at lower costs....who loses it does not matter...it is an externality......the market is not responsible for externalities(it has no heart remember!}; and therefore, since only economic issues are endogenous issues...those types of substitution(high paying jobs / low paying jobs) should be expected and are consistent wtih the traditional model structure: only the economy matters....dominant, independent choice structure......maximization of high paying job exports should be expected....$$$ in lower cost of production.....

Now if both social issues and economic issues were endogenous issues...then such a program would be inconsistent with this socio-economic model as now decisions would be codependent....and economic activity/action that works against social goals would not be consistent witth the model as now you have a partnership society and economy...codependent choice structure....exporting high paying jobs would not be consistent with such a socio-economic model.....Optimization would lead to lower cost of production

Have a nice day William

Dear William,  I have to agree, almost totally, with what Lucio has just said to you.  Your position is exactly what you have been taught to teach to others.  That is the mechanism by which a paradigm is sustained.  Short of periodic Inquisitorial purges of dissenting intelligentsia by threatened hegemonies.  There is no problem with that.. if ones Moral Precepts require that  of you.  This was the case in the times that Smith and Marx were writing from within the Heterodoxy of their respective times.  Marx's motivation in writing was in part his recognition that the essential message and the concerns reflected by Smith in his commentaries were being commandeered and corrupted by his successors operating from within the orthodoxy of philosophical thought in the area of Political Economy.  It is a pity that that Smith's publisher did not see fit to publish Wealth of Nations only in a single volume in which the first chapters were a reprint of Smith's earlier Moral Precepts. perhaps then our governance and commercial institutions of power would not no be in the logjam of amorallty in which they find themselves.

This has crept up upon an establishment which, intent on preserving the moral philosophy of the Mercantile era and social structures of privilege that is rewarded by the 'tithes' gained through their control of all opportunities for work by all others, have not accepted that the dynamic, of a more universally social morality which Calvinistic thought had transmitted to Scotland and which had been imbued in Smith during his initial studies in Divinity, had not only been set in motion but was all the time growing in influence within the flowing development of the Zeitgeist of each generation of the intervening 250 years.  Several semi-orthodox(?) notables, attached to the developing Liberal conscience movement in politics, contributed to re-seeding and reinforcing of these more inclusive moral principles during that time; Bentham, the Mills, Veblen, Commons, Mitchell, Russell.  For a while this worked well, for both streams of thought.  Improvements in the general well-being, notably in housing and in health and in education, rewarded the efforts of the 'socialists' while also improving productivity in the work-place and the capacity and appetite in the population for its products.  A truly virtuous circle.  Except that it was not.  It was a spiral.  In fact two spirals. Developing in contrary directions.  As the lip-service to universal well-being paid to the social morality dynamic by the orthodoxy pushed this ethos into the core of the Zeitgeist of our modern times, and hence into the very core of the hopes dreams and visions of every ordinary man, woman and child on the planet, the contradictions and constraints and systemic flaws in the orthodox view of the workings of the Political Economy were becoming more and more apparent.

In 1948 when Eleanor Roosevelt succeeded in getting signatures to the Declaration of Human Rights under the aegis and authority of the United Nations, fortunately for the world's people, commerce was still the honeymoon period of massive production growth at low incremental cost hidden by fire-sale purchases of ex-wartime production machine tools, consequently minuscule depreciation charges and also low maintenance costs on relatively new equipment.  Profit and business growth were good.   Agreement on human rights could be well afforded... as a 'noble gesture' of magnanimity.  And a place in the history books.

While a moral philosophy of political economy continued to develop and gain strength in the 20-30 years after 1948, the spiral being ridden by the commercial hegemony passed by in the opposite direction as it emerged from its post-war honeymoon towards its potential nemesis.  Retooling, high depreciation costs and emergent nationalism and self-interest in resource producing ex-imperial lands were playing havoc with profits and growth.  Particular as regards oil, unconstrained and exclusively advantageous access to which had been at the root of both the World Wars.. and which was inevitable in a world in which international political economy was still played according to Mercantile philosophy.  Although now it was well able to justify the sacrifices demanded, since enclosure and inevitably growing urban industrial destitution through to the exigencies of wars vying for imperial power, by picking out of Smith's works the (supposed) invisible hand mechanism to assure those paying the personal costs that all would be well in the end... according to God's almighty plan.  Ignoring the fact that the same and subsequent economic works have generally agreed that with increasing industrial efficiency and consequent growth the share of capital will increase while the share of labour will decrease.  Why?  Even a child at your feet knows they cannot 'have it both ways', and even politicians know it.

The question is "Did economists know it?".  I would say they did... and that is why, for example, when the new University of East Anglia (UEA) was set up in the very late 1960's Economics was a mere department in the wider School of Behavioural Sciences.  Along with Economic History, Econometrics, Sociology, Anthropology and... Philosophy.   It was a display in the strength of that upward direction of the spiral that the dynamic of a moral political economy that had been unleashed in Smith's less often studied prologue work to the conveniently separate Wealth of Nations.  remember that Smith was already famous before that latter work.  Almost entirely because of the former one.  What happened to this ascendant stream of economic thought and moral philosophy?  the clue perhaps lies in the UEA demonstrations in the early 1970's when even the socialist Labour government was embarrassed by the student and faculty display of social conscience in the face of complicity with apartheid South Africa and later with pre-Independence Southern Rhodesia (now Zimbabwe).

By the end of the 70's funding was flowing into academic projects aimed at building the mathematical tools to properly understand, once and for all, and to thence  manage  'the natural laws of political economy' so that all people can be authoritatively constrained to accept the paradigm by which the world does and can only operate by.  Universities whose Economics departments resided in the Schools of Applied Mathematics or of the 'new' Business Studies and Accountancy were soon well provided for with research and teaching funding.  And UEA eventually found itself branching out to providing government with behavioural 'nudge' research services, on a commercial footing.  After all, as we entered the 21st century all this economic research had quite clearly shown that it was not the mathematics nor the axioms of the neoclassical model which was wrong, it was the fact that people did not respond in their behaviours according to the requirements of the model.  The solution being obviously one that involved 'nudging' people to change their behaviours to be more in line with those of theory so that the politicians' policies might work and so business will do so much better.  And the Invisible Hand will hand down the 'sweeties' to reward the newly compliant and obedient 'children'.  This did of course require, for decency's sake, that most economists saw no problem with this approach.... and so teaching of anything but HOS-GE and Friedman and Game Theory and a 'macro-economic arithmetic' became a necessity.  Not to have the fervent belief in the required dogma at a 'fundamentalist' level of commitment when delivering 'authorative' bullets of academic, political and commercial wisdom to the general population as they decide who to vote for would after all be an act of blatant fraud and deception.  Perhaps even criminal?  Self-deception by comparison results in crime without intent to do harm and, although still not victimless, it is as far as the orthodoxy of the paradigm is concerned non-accountable to the perpetrators.

And so we come back to William's closing comments from above being typical of the present cohort of 'experts' of 'political economy', although not experts in the Precepts of the Moral Philosophy of Man as regards those relationships and behaviours by which the Political Economy of our society one to another should be required to function and the goals to which it ought to aspire. 

After all, why would one study 'what ought to be' in a world in which the way things work is William's 'Reality' and is therefore completely due to 'natural law'.  Where Natural Law is a given of the universe, ordained in the moment of its Creation by God, and therefore totally susceptible to discovery through mathematical analysis if you work hard enough at it.  I would propose that 250 years is plenty long enough to work at it!

It is time to accept that humankind is not the only biological species exempt from the phenomena of biofeedback and evolutionary change.  It is time to continue with the recently abandoned focus upon building a "Moral Philosophy of Political Economy".

A useful first step would be to require the equivalent of the UK 'PPE' degree, so beloved of aspirant leaders and policy practitioners of the fruits of political economy within the study and practice of political 'science', to be re-purposed under one umbrella discipline only concerned with the "Moral Philosophy of Political Economy" as an 'MPPE' first degree, and as the essential qualification at 2:1 minimum qualification to each and every Master of Business Studies course, and all other subsequent accountancy qualifications should have the MBE as their pre-requisite. 

Just like medical doctors are only regarded as being sufficiently wise and knowledgeable to practise, semi-autonomously at the level people's lives depend upon it, when they have attained Consultant and even Senior Consultant status, typically beyond after 30 years of age, so too should policy advisers, politicians and leaders of all large commercial concerns whose impacts upon thousands and millions of people's lives be based upon the knowledge and wisdom that comes from a thorough appreciation of the existing and developing body of knowledge of the ways of 'humanity at work' which is at each point in time the basis for our best practices. 

The time is past for self-appointed and adjunctive representatives of a self-perpetuating elite whose world view, and position, depends upon having its roots in an axiomatic system built upon a now archaic knowledge base dependant upon a dogmatic and unquestioning fervent belief and reliance upon the 'Theory of Universal Natural Law' and to so 'a-morally' evade all responsibility or accountability to any external institutions from which a moral judgement of their actions might arise.

That path is the identical path of self-justification of every immoral 'fundamentalist' religious activist wreaking havoc across the globe at this moment.  I leave you with one thought... think on it long.

"Like brings forth Like"

Don't blame others so quickly for the havoc we are all suffering.  Pause.  Think a while.  Perhaps it really is time for a collective and deeply convicted 'Mea Culpa'.  One that will endure and be a watchword lest we go down yet another moral dead-end.... assuming we can back out of this one successfully!

Robin

It is indeed time for us all to re-think the situation we find ourselves in, and contemplate better possibilities.  But for that to happen, we need leadership that can present our problems and their solutions in a manner that will inspire and mobilize the general public to take an active role and "demand" a new social agenda.  Where is that leadership, and what is their message whose appeal will unite us rather than divide us? 

To ALL social critics, I repeatedly ask the same question - stop just complaining and tell us what the message will be that will motivate the public to put aside their different perspectives, and unite to make a better world.  But despite my repeatedly asking, I have not received so much as a single credible answer! 

So I am again requesting - will everyone with an interest in social transformation, please "go back to the drawing-board" and prepare an appeal to the public that we can test to see if it will, in fact, motivate the public to support a transition to this new social agenda. Unless and until this happens, there is no prospect of a new social order. 

William,  Thank you for your impassioned plea!  Every voice adds to the impact of this assertion. The shortcoming you identify amongst social critics is one which I have also seen and commented upon, and which has motivated me for several decades to privately engage upon the task of creating the message which is needed.  I began with some formulations of what parts of that message might be and have since been pursuing the envelope of 'social critique' and the necessary reconstruction without which their can be no credible message.  Leaders do not create messages, Their job is polemic, oratory, camera make-up, humility and deference to the members of their movement by which they are ruled and to whom their task of rallying people to it is delegated.  Leadership is a job just like any other, in any world which would be capable of operating under any archaeo-economic paradigm that is even vaguely consistent with the landscape of human rights which is becoming institutionalised amongst the peoples of the world.... even though their governing institutions are yet to embrace their implications.

The first target for 'the message' will therefore have to be the 'leaders'.  New ones from the present crop, I do suspect.  However, that message can only be a condensation, suitable to their limited comprehension  -- exceptional characters aside, of the fairly complete development, description and operating characteristics and interrelationships of a very large proportion of the 'new' institutions, and of the adaptations to existing institutions, that will be relevant to each targeted society in what must remain a diverse and complex world.  There is 'one approach to fit all sizes' but their cannot be 'one solution in terms of that approach which can nor should fit all sizes'.  

This is the dilemma.   A great deal of work, in detail, has to be done before 'leaders' can be even sent out with the message, and that message cannot be accurately formulated unless the new body of knowledge has been constructed from the myriad sources, in the heterodox, where in large part it already exists.  That process will also construct inter alia an informal expert College of Advocacy within the heterodox from which the authority and legitimacy of the message will derive.  This must be trans-national as must also be the body of knowledge as regards possible locally appropriate institutional landscapes.  Around the world and in significant number and quality.   The proper vehicle for the preparation work needed prior to deciding on the 'text' of the message would seem to be some sort of Foundation through which a sub-collegiate multidisciplinary cohort of researching developers can author the many interlocking parts of that BoK.  Funding is always difficult.. but when one is trying to fund the very instrument which will alter for ever the conditions under which the provided funds were probably amassed by its donors then I would imagine one would find it very hard to find the required combination of wealth and altruistic vision.  Maybe I am wrong.  Meanwhile I have no time to worry about it... I am tackling the work that you rightly identify as being crucially needed.  Sometime, perhaps after my death, the conditions and motivations for a real solution in the world will have developed to being that of a 'clear and present danger'. At that time here will be no time to invent what is needed and have any degree of surety that it may be any better than what the world suffers from now.  But, there might at least be some skeletal approach documented here on my time-line and which links into the work and notes of the many colleagues and interested parties here on RG who have made and who will make contributions to this mammoth task.

We live in hope.... because we cannot live without it.

Robin :-)))

William that was the mentality in previously socialist countries, then it suddenly happened red socialism together with Karl Marx's world is gone and green markets are here....They were not waiting for a leader, and paradigm shift came.....

that was the mentality before 1987/our common future/Bruntland report, then since then to 2012 to 2016 all changed the traditional market model of Adam Smith is left behind and shifted to green market thinking....They were not waiting for a leader, and the paradigm shift came.....For capitalism to survive, if it needs to change color it will.......the old cold war red socialism vrs bare capitalism now has the structure of the future cold war...red capitalism vrs green capitalism...

I am not waiting for a leader, I am waiting for first sporadic, then constant economy black outs....locally and/or globally, then a new world older will come......

Those who think that some type of change is impossible to happen get a huge shock when it happens...think of BREXIT ....Think of hard core socialists...think of hard core economists....what was supposed to be impossible happens, and it will happen again...Walls come down....

Sorry this paragraph should have said:

William that was the mentality in previously socialist countries, then it suddenly happened red socialism together with Karl Marx's world is gone and red markets are here....They were not waiting for a leader, and paradigm shift came.....

Lucio, Where do I find a clearly detailed and complete vision statement of the socio-economic structure and the micro-economic functioning of the green capitalist society that is expected to arise from green market operations?  Or just a well argued development of its philosophical principles and moral precepts would be a useful start in getting 'up to speed' with your heartfelt assertions.

Thanking you in advance.. best regards, Robin

Dear Robin, I have been approaching the issue systematically from different angles with the theory of sustainability and sustainability markets in mind all the type so that all my articles are connected to the general sustainability theory I proposed in 2003 and 2009...

If you see my profile I have 4 projects ongoing right now that complement each other and which can be seen individually too....I am focused on helping to close the red market paradigm shift knowledge gap, the green market paraditgm shift knowledge gap and the sustainability market knowledge gap....all of them beyond Karl Marx's ideas and Adam Smith's ideas as all those markets can be seen as partial or full corrections of their models...while pointing out that the corrections can be linked through their respective production price mechanisms....

The paper I am about to finish now based on using the sustainability market price to show how all these models/markets, including red socialism and the traditional market came to be and how they can be link to general sustainability...., The first figure of this paper I shared here in the discussion and it can be used to show that you can arrived to socio-economic structures or socially friendly capitalism two ways, by fixing Karl Marx/the red socialism model to make economy friendly(RSM = SM----> SM + P = RM) or by fixing Adam Smith/Traditional market model to make it socially friendly(TM = P------> P + SM = RM)....They required red micro-economics and red macro-economics..... The other article is aimed at advancing the structure of the perfect red market....detailing analytical and graphically how the came to be and how both can be linked at the red market level and form the body of the perfect red market and perfect red market price....I will share these two articles in the coming weeks before publication.....

Relevant articles are:

Adam Smith and Karl Marx Under the Sustainability Eye: Pointing Out and Comparing the Sustainability Gaps Behind these Two Great Simplification Failures.

https://www.researchgate.net/publication/290607852_Adam_Smith_and_Karl_Marx_Under_the_Sustainability_Eye_Pointing_Out_and_Comparing_the_Sustainability_Gaps_Behind_these_Two_Great_Simplification_Failures

Understanding the Death and Paradigm Shift of Adam Smith’s model: Was Going Green the Only Option? If not, Is This Option the Most Sustainable One?

https://www.researchgate.net/publication/299882613_Understanding_the_Death_and_Paradigm_Shift_of_Adam_Smith%27s_model_Was_Going_Green_the_Only_Option_If_not_Is_This_Option_the_Most_Sustainable_One

Beyond Green Market Thinking: What would be the Structure of the Perfect Sustainability Market?

https://www.researchgate.net/publication/303014272_Beyond_Green_Market_Thinking_What_would_be_the_Structure_of_the_Perfect_Sustainability_Market

Beyond Traditional Market Thinking: What is the Structure of the Perfect Green market?

https://www.researchgate.net/publication/302025169_Beyond_Traditional_Market_Thinking_What_is_the_Structure_of_the_Perfect_Green_market

Perfect Green Markets vrs Dwarf Green Markets: Did We Start Trying to Solve the Environmental Crisis in 2012 With the Wrong Green Foot? If Yes, How Can This Situation Be Corrected?

https://www.researchgate.net/publication/305994500_Perfect_Green_Markets_vrs_Dwarf_Green_Markets_Did_We_Start_Trying_to_Solve_the_Environmental_Crisis_in_2012_With_the_Wrong_Green_Foot_If_Yes_How_Can_This_Situation_Be_Corrected

Article Adam Smith and Karl Marx Under the Sustainability Eye: Point...

Article Understanding the Death and Paradigm Shift of Adam Smith’s m...

Article Beyond Green Market Thinking: What would be the Structure of...

Article Beyond Traditional Market Thinking: What is the Structure of...

Article Perfect Green Markets vrs Dwarf Green Markets: Did We Start ...

Dear Robin,

I have re-read Chapter 19 of Bronowski and Mazlish's book. I came to understand the true meaning of Adam Smith by the help of your comment that we should place him as a philosopher within the 18th century Heterodox. It is true that we, in the 21st century, are in a similar position.

You proposed that "all PPE and humanities students" must "understand his [Smith's] place as a philosopher within the 18th century Heterodoxy." The word "students" in your expression must be interpreted as all sincere researchers and thinkers. We have an accumulation of neoclassical economics for at least 140 years. If we include the period of political economy, 240 years have passed. It is a great heritage but contains many flaws and anomalies. As I have hinted in my working paper on Mill's reversion and an Origin of Neoclassical Economics, neoclassical economics can be interpreted as the geocentric system (or Ptolemaic system). It is sophisticated and precise, but wrong in its core construction.

Dear Yoshinori, I agree with the following statement:

 “We have an accumulation of neoclassical economics for at least 140 years. If we include the period of political economy, 240 years have passed. It is a great heritage but contains many flaws and anomalies. As I have hinted in my working paper on Mill's reversion, neoclassical economics can be interpreted as the geocentric system (or Ptolemaic system). It is sophisticated and precise, but wrong in its core construction”.  

 I came to a similar conclusion in the late 1980s while at The Ohio State University and I thought then what I could do to make it better at the core…At that time the old cold war was at its peak and the environmental issue was slowly growing pressing……

 The realization that you cannot easily change the core of the economy problem from inside out came clear to me then and I thought only a steep paradigm shift a la Thomas Kuhn could bring the economic model outside down and allow room for corrections…Out of nowhere in 1991 the paradigm shift from red socialism to red capitalism came along in former socialist countries….and relatively close the 2012 paradigm shift to green markets took place in old capitalist countries….so the opportunity to make changes to the core is here today....

 In my view, both groups core red socialist and core economist missed the paradigm shift….I think that core red socialist thought just making red socialism economy friendly is fine, a need to survival….I think that core economists thought in similar ways just greening the old economy model  would be fine, a need for survival…

None of those two groups seem to have realized then that they were on the verge of paradigm shifts, one from red socialism to perfect red market thinking ;and the other from the perfect traditional market thinking to perfect green market thinking….And that is the source the two of the current paradigm shifts knowledge gaps…..

The use of micro-economics and macro-economics to deal with red market issues or green market issues as a full theory-practice inconsistency….red markets need red microeconomics and red macroeconomic thinking; and green markets need green microeconomics and green macroeconomic thinking….The world today is working under this inconsistency….no wonder why they seem to have problems setting up true markets and move towards dwarf markets….

For example still dealing today with environmental issues through externality management(e.g. carbon pricing based markets or low carbon based markets) instead of using perfect green market theory and environmental cost internalization to create true green markets after the 2012 shift to green markets/green economy/green growth does not makes sense…unless is due to the paradigm shift knowledge gap and the lack of perfect green market theory from 2012 to 2016 until I brought it up in 2016 ….and let the free green markets deal with green economic issues…respecting so the theory-practice consistency principle…..

All my writings are geared to help capitalism/economies evolve in more socially and/or environmentally friendly manner by providing academically sound way outs hinting that in the end we will end up with sustainability markets anyway…

There is no way of going back to business as usual neither in old capitalist countries nor in former socialist countries, the paradigm shifts are here…independent choice structure/dominant model(a la Arrow Impossibility Theorem ) became codependent choice structure/partnership model(Arrow theorem does not as usual) in all old capitalist countries…and in all previously socialist countries the knowledge based of red socialism does not work under the society-economy partnership or red market…When an outsider points these things out then those inside the box suddenly see it or should be able to see it….

At the beginning as right now decision makers/planners/core stakeholders will be able to walk away for a while operating under dwarf markets, like dwarf green markets and dwarf red markets, but under full knowledge they are operation outside the science based framework/scientific method as they are violating the theory-practice consistency principle knowingly when doing so...….I will continue to do my part in providing ideas to move forward into the future...the dominance based development wave is a thing of the past, the partnership based wave is here today to stay...

Have a nice day Yoshinori.

My apologies, this paragraph should have said:

" There is no way of going back to business as usual neither in old capitalist countries nor in former socialist countries, the paradigm shifts are here…independent choice structure/dominant model(a la Arrow Impossibility Theorem ) became codependent choice structure/partnership model(Arrow theorem does not  work as usual) in all old capitalist countries…

Hello again, Lucio.

Have we found a common point of interest? You have realized that  we "cannot easily change the core of the economy problem from inside out." It is true that this is not an easy task, but I am still thinking to change economics from inside. I believe this is the  most effective way for a simple economist to change our world. 

Dear Yoshinori, are you saying you can deal with social and environmental externalities from the inside the traditional economic model?.....I do not think so.....

Yoshinori from inside you can only explain or fixed endogenous factors....that is what I first found....to fix the core of the model you need to make the exogenous issues endogenous......That  was what I thought to be a difficult task then in the absence of paradigm shift as the status quo was going to jump high if someone suggested corrections  were needed at that time.....There was supposed then not enough environmental evidence and social evidence for change, now there is....so the paradigm shift....Now there is room to change the core by internalizing exogenous issues makding them endogenous as they should have been from the beginning...

.I am sorry Yoshinori, without internalizing externalities you can not fix the traditional model....I will leave it there....

feel free to comment on anything you read by me......The best feedback people can give us is the one that force us to change  ideas or calibrate them or abandom them all together....

Have a nice day

Lucio,  Thank you for providing me with 'the full set'.  I will assimilate those papers, and have something to say further when I have.

Meanwhile, picking up on Yoshinori's observation that you two do after all have an interest in common, and recording the fact that the same is true for myself and Yoshinori, it seems to me that between the three of us are the seeds of a pretty comprehensive Future Political Economy.  Perhaps, only separated by our 3 different styles of developing and presenting our thinking and the sequence in which we address the issues we each encounter along our paths.  What unifies us all, in particular, is not so much the form of the that future goal but the care with which we are all treating the issue of transition and for that to be essentially non-destructive but in a sense evolutionary even though the eventual move will only gain momentum through some existential major crisis or other.

The form of those future paradigms capable of 'delivering the goods' has a certain logic to their development which is implemented quite well through the discussions such as these on RG.  I do recognise that I have so far revealed little detail of my position regarding the micro-economic aspects of that future form.  Those notes and writings were where I started on this road in the 1980's, having only concentrated here on the 'transitional' requirements that must be fulfilled if anything at all constructive and 'salvational' will come from any of our work. 

Until that path is plotted in some detail the leader (preferably leaders) and the groundswell of popular will for change, which William rightly identifies as another component of reaching our destination, dare not be unleashed.  A popular 'front' with no substantive core of theory and philosophy behind  the vision it aspires to can be no more effective a force than the change in air density occasioned by a passing wisp of mist on a clear night.

Markets, pure as you can get them and designed to promote sustainable economic activity and 'repress' negative activities are essential to that future.  So too is a model of 'economic man' and his decision making which is realistic and computable.  Not to mention, the development of these two aspects, markets and economic decision making, into the computational methods and mathematical 'management and planning tools' which the practise of macro-economics totally relies upon.  Also in that future is the subject of the whole enterprise - people! 

It is their behaviour, and the benefits they perceive as being received from their behaviour, which frame their present lives and their visions of the future.  That is in their nature.  We cannot change that nature in the time frame of a few generations.  Neither can we change in detail the basis of their behaviours.  What we can change is the landscape across which those behaviours operate.  That landscape is our social fabric.  It comprises the institutions of our social interactions, our traditions, our expectations and crucially those of our economic interaction and those which flow from that... status, power, law and justice.

The most enduring institutions in our societies are those which require no laws.  They are the behaviours that we often refer to as our 'norms and values'.  We follow them because they both provide benefit and seem to be just or 'right' or 'decent', even though we might be tempted to do otherwise according to some of our baser instincts.  These positive actions confer an element of positive moral affirmation upon their performer. 

In the same way, a future paradigm will be strongest, and also most easily gain the assent and support of a transitioning population of societies, to the extent that its institutions create the circumstances whereby even the natural tendency to seek to do those things which are most immediately advantageous to us as individuals result in positive social and economic effects which feedback into the benefit of that same individual while also creating societal benefits.  This may seem somewhat abstract, but think about it.  This is where I started...  and which principle I was able to transpose into a quite simple modification of the current economic arrangements.  The eventual 'institutional' micro-economic structure included several ideas from the foundations we are all building upon.   I spent two decades seeing the world through that lens and 'testing' it and in the process identified many of the 'tweaks' to the wider institutional landscape which would add to its strength and assure its internal consistency. The more I did this the more sound the edifice became, scattered throughout my notes but 'real' in my head,  The more real also became the exponentially expanding horizon of that institutional landscape which would be affected and which continued to appear to be susceptible to 'tweaking'.... the more clear also was the realisation that its eventual implementation would only work if the task of change, which will necessarily happen over some significant period of time, if its end-point was largely visible to all from the outset... a coherent and credible vision.  So I stopped that thread of work.  The expansive nature of it made it clear that this was beyond even a single Adam Smith or Marx.  It needed multiple fields of expertise delivered by  multiple minds in a concerted effort of creation.  I started seeking for those minds.  there were a few false starts... though they may be useful links for the future.. and then found RG.  Certainly not 'the solution' but certainly a rich source of enquiring minds with similar concerns to mine. And very much greater skill.

But, the philosophical glue was not there.  That glue is also foundational.  Institutional frameworks are the vector for the future.  The more overloaded they become with anachronistic and obsolete baggage through a failure to continually evolve to all of the realities of the existence which is faced by each of our societies the more dysfunctional they become and the worse are the futures experienced by the populations they drag with them.   This must be understood well and be a part of our consciousness as we move into any transition period.  The operation of markets and the exercise of CD Transforms by individuals as economic agents are very closely entwined (perhaps not written down at this moment... it will come.. so long as Lucio and Yoshinori just keep talking!) but they are by their nature institutional material as will be the mechanisms by which they will be introduced and maintained within our future institutional landscapes.

When I have completed the reconstruction of my notes related to institutional architecture and 'moral precepts' I will update and add to my working papers here on RG.  I anticipate that then will be the time to fit my old work, that one might loosely term a Theory of The Firm, into the sandwich of Yoshinori's treatment of CD-transformational decision behaviour, fixed price strategies and 'simulatory' computation and Lucio's sustainable market conditions.  And, I should mention here Israr's focus on the need to deflate the economic 'bubble' which is 'consumerism'.

Together, this might be the very small beginning of the visionary 'core' which you, William, speak of as being so much needed before any transitional spark can be lit.   Just a bit of patience is needed to build up the wood stack,  It must be made secure before it is lit...  for our mutual 'Health and Safety'!

Best regards,  Robin

A systematic critique of the inherently flawed, theoretically, and empirically untenable concept of comparative advantage.

Dear David,

Have you noticed that in his post (post #55) William Sheridan just wrote this:

• To ALL social critics, I repeatedly ask the same question - stop just complaining and tell us what the message will be that will motivate the public to put aside their different perspectives, and unite to make a better world.  But despite my repeatedly asking, I have not received so much as a single credible answer!

Can you answer to this question? Please explain how the concept of comparative advantage is "inherently flawed, theoretically, and empirically untenable"? If so, please present your theory that will replace "comparative advantage" theory. If it is not completed yet, please show us your prospectus.

First, the assumption of comparative resource specialization that translates into a PPP trade equilibrium in the long-run ignores the extent to which the world economy is governed by ABSOLUTE advantage (i.e. competitive advantage). Second, besides this contention, there is no evidence that such a trade equilibrium has ever been reached...

Article Demystifying the Principles of Comparative Advantage : Impli...

Article Deconstructing the Mythology of Free Trade: Critical Reflect...

Article Did Ricardo Really Have a Law of Comparative Advantage? A Co...

Article Deconstructing the Theory of Comparative Advantage

David, to stay away from the traditional economic thinking terminology  as much as possible and be able to convey new in my writings ideas I use the term "dominance" as equal to  or tending to "absolute advantage"....

Under dominant-dominated system interaction any model of comparative advantage should be expected to be skewed in the long term in favor of the dominant component.......Under such conditions, I do not expect ever to see evidence such equilibrium can be reached….even if all participants in the model benefit, the benefits should be expected to be skewed in favor of dominance….

Now if we bring paradigm shifts into the picture, red markets and green markets….the whole idea of comparative advantages need to be rethought…under the thought of partnership based absolute advantages…

Let’s keep exchanging even contradictory ideas in good faith and let’s write more and more often about what each of us thinks is the best way forward and share it with the public and other professionals through publications they can access and follow and that is the beginning of the move to close the current paradigm shifts knowledge gaps….so when one of the future generations decides to finally do the job they do not start from scratch…

I will now focus on my writings and move on

Have a nice day

Dear David, 

I wanted that you expose your own research. All right. Let us examine these four papers. Two of them are accessible inside the ResearchGate but two others are not. I tried to download them but both of them are closed sites. Do you have a copy of them?

 I have read two of four papers that  David Fileds has enumerated. i have requested the paper written by Jesus Felipe and Matias Vernengo, as Vernengo is a member of RG. I have also requested Pullen's paper, but he may not be an RG member.

By the way, I highly respect Jesus Felipe, because he with JSL McCombie continued to criticize aggregate production functions (including Cobb-Douglas and CES functions) after Anwar Shaikh (of New School) and H.A. Simon. this criticism is important for trade theory, because Heckscher-Ohlin trade model is usually based on the aggregate production functions.

However, to reply David, it seems it is not necessary to read all of the four papers. 

In this post, I will comment on  Carmen G. Gonzalez's Deconstructing the Mythology of Free Trade: Critical Reflections on Comparative Advantage.

This is a paper written from the viewpoint of International Political Economy or more precisely International Trade Law. This is one of a few papers that argues trade conflict drawing on economic theories. When I posed questions:

Is conflict in international trade an illusion?

https://www.researchgate.net/post/Is_conflict_in_international_trade_an_illusion

Trump and Sanders are opposed to the TPP. How the International Trade theory and International Political Economy explain this?

https://www.researchgate.net/post/Trump_and_Sanders_are_opposed_to_the_TPP_How_the_International_Trade_theory_and_International_Political_Economy_explain_this

I was asking this kind of studies. I have posted many answers to Julio César Cepeda Ladino's  question.

https://www.researchgate.net/post/Can_International_Political_Economy_IPE_be_considered_as_a_field_of_International_Relations_IR_or_an_autonomous_discipline_of_the_social_sciences

International Trade Theory and International Political Economy should be a twin disciplines that must complement each other. In this respect, I highly estimate Carmen G. Gonzalez's attempt.

She argues international economic theory, in both neoclassical and heterodox strands, although mentions to heterodox theory are limited to "postcolonial" debates like dependency theory and structuralism. As for her critique of the neoclassical theory, she is right except for a few remarks. For example, at the top of Section III. she concedes that  

• The theory of comparative advantage is theoretically sound when it argues

that there are benefits to economic specialization and trade. (p.74)

and  counterattacks against the theory by  questions of practical matters:

• However, as a practical matter, reducing state intervention in the market in order to promote specialization and trade in accordance with "comparative advantage" will not necessarily maximize efficiency or improve aggregate social welfare.

The first assertion is an unnecessary concession and covers the real question under ambiguity. The real question is not the conflict between theory and practice. It is a false opposition. The real question is the lack of a good theory which can treat  the problems of losses from trade as opposed to gains from trade. They may include unemployment, underdevelopment (or conditioning the country to it, development of underdevelopment), vulnerability to international business cycle,  lack of dynamical viewpoint (or considerations on the technological changes), and so on.     

The lack of such a theory is the responsibility of economists and not of researchers of international political economy.  Gonzalez's assessment of  states of the art at the time point of 2006 is exact and praiseworthy. However, David Fields as an economist who argues the question if our topic  must know that theoretical situation much changed since 2007. I will argue this point as a comment on Schumacher's paper.

Comment on Schumacher's Deconstructing the Theory of Comparative

Advantage (1)

I do not doubt her good intention in trying to redress economics in a better direction. The Journal that she published her work is issued by the World Economic Association which has a long history of contestations (a French word) against  the present state of economics. It is a precious movement and I sincerely support their efforts. However Schumacher's paper  reveals a weakness that William Sheridan once mentioned in his answer (post #55). In fact he wrote this:

• To ALL social critics, I repeatedly ask the same question - stop just complaining and tell us what the message will be that will motivate the public to put aside their different perspectives, and unite to make a better world.  But despite my repeatedly asking, I have not received so much as a single credible answer! 

Schumacher's criticism against the "theory of comparative advantage" is fine and precise. However, she forgets to presents her own theory. She is repeating the same error as Gonzalez has committed. In fact, at the beginning of Section 5 Implication for Internationa Trade Policy, she writes:

• As was shown, the theory of comparative advantage is an inadequate theory for the explanation and understanding of international trade because of its insufficient and deceptive assumptions. However, the most crucial consequences of a theory do not arise from theoretical inadequacy but from its utilisation in practical policies.(p.97)

Schumacher too makes the opposition between theory and practical policies. If she was a political scientist, it is all right. She has an attenuating situation, but Schumacher is economist. She had to take her responsibility. If the existing theory is bad, she has to try to construct  a new theory. Of course, this is not an easy task but she must continue to try it. If then, she would not committed an error to compare theory with practical policy. At least she should have mention some words on an alternative theory  that can replace "theory of comparative advantage."

The title of her paper is indicative. It reads "Deconstructing the Theory of Comparative Advantage". Gonzalez's paper had a similar title: "Deconstructing the Mythology of Free Trade: Critical Reflections on Comparative Advantage." Is this a coincidence or a result that comes from that David Fields favors deconstrucion?

Deconstruction was a favorite word among the French philosophers at the late 20th century. It may have undermined the present mode of thinking, but it had many decadent tendencies as one of aspects was revealed by Sokal Affair. Deconstruction is necessary but construction must follow. Theoretical construction is often very difficult but we should not forget it.

Comment on Schumacher's Deconstructing the Theory of Comparative

Advantage (2)

So far I have argued "environmental" questions. Let us now enter to the theory questions.

The first point: Is there a theory of comparative advantage or theories of comparative advantages?  Gonzalez and Schumacher consistently use the singular expression. No expression like "theories of comparative advantage" appears.  I wonder why.

In fact, when we think of the "theory" of comparative advantage, we should distinguish several different theories. I usually distinguish four of them:

(1) Ricardo's example and argument given in Chapter 7 of his Principles.

(2) Traditional  theory from John Stuart Mill to Jacob Viner

(3) Neoclassical theory from Heckscher-Ohlin to Vanek and other their variants.

(4) Frank D. Graham's theory and some part of Lionel McKenzie and Ronald Jones.

It is now known that Ricardo's four magic numbers should not be interpreted as conventionally understood. For a concise  account of this point, see 

• Faccarello (2015) Comparative Advantage

https://www.researchgate.net/publication/290821134_Comparative_Advantage

Further detailed examination was  made by Kenzo Yukizawa many years earlier than Ruffin and Maneschi. English translation is now translated and uploaded:

• Ricardo’s ‘Theory of comparative cost of production’: its archetypal understanding and deformational understanding

https://www.researchgate.net/publication/307601848_Ricardo%27s_%27Theory_of_comparative_cost_of_production%27_its_archetypal_understanding_and_deformational_understanding

I do not argue here the differences of (2) and (3). (3) is often explained as a modern theory of Ricardian trade theory, but this is a flawed explanation by the side of neoclassical economics.

Frank D. Graham occupies an unique place because his trade theory was totally different from (2) and (3). It was more close to Ricardo's original situation setting but he was not understood even by his students. McKenzie was a student of Graham when he studied in Princeton. Jones was invited to Rochester as assistant professor to help McKenzie to build a new graduate course there. Some of McKenzie and Jones papers have some influence from Graham but they were soon absorbed in the neoclassical framework.

The term "comparative advantage" was never used by Ricardo. To make an contrast between absolute and comparative advantages is an invention around the time of John Stuart Mill. It is also important to know that Smith did not advanced absolute advantage theory as this theory is commonly understood and explained in many of undergraduate textbooks.

The second point in economic theory is this: Is the theory ( or theories) of comparative advantage all that analyses international trade? It is possible to think of international trade theory (or theories) which does not rely upon comparative advantage. 

This depends how we understand by the word "comparative advantage." If we understand this as a theory that assumes some objective or subjective criterion that determines the pattern of specializations and directions of trade, this theory is already invalid, because there is no such criterion if we admit trade of intermediate goods (or input goods). In this point, Ohlin was right. In a bit complicated situation, there is no such criterion such as comparison of ratios of two input coefficients. Which industry of a country is competitive or not is determined by the costs of production. Of course, it is a monetary notion.

The third point: between Gonzalez's paper and Schumacher's there was an important event. A new theory of international trade gave birth. I will explain this point in the next post. 

Chapter Comparative Advantage

Working Paper Ricardo’s ‘Theory of comparative cost of production’: its ar...

Comment on Schumacher's Deconstructing the Theory of Comparative

Advantage (3)

A new theory of international trade gave birth somewhere between 2007 and 2014, but Schumacher had no chance to know it. The first paper appeared in 2007:

A New Construction of Ricardian Trade Theory--A Many-country, Many-commodity Case with Intermediate Goods and Choice of Production Techniques

 https://www.researchgate.net/publication/233943493_A_New_Construction_of_Ricardian_Trade_Theory--A_Many-country_Many-commodity_Case_with_Intermediate_Goods_and_Choice_of_Production_Techniques

It contained many important aspects but did not attract attentions of trade theorists except a few. One of new results was that it was a framework by which to analyze unemployment. Section 7 was titled Gains from trade and Origin of Trade Conflicts. It explained how gains from trade were gained by the workers who continue to be employed because their real wage level will be increased by opening the country. However, it showed at the same time unemployment is inevitable for some countries if the world demand is not increased in some way (Theorem 4.1). It presented how gains and losses from trade occur by a single framework.

The new theory may not be called a theory of comparative advantage, because no real term criteria were given to determine the pattern of specializations. The theory contained may other important aspects. Schumacher criticizes various assumptions of the theory of comparative advantage as unrealistic (to be more exact " insufficient and deceptive"). She picks up 5 assumptions. Namely they are

(1) Immobility of capital and labor across countries,

(2) Balanced trade,

(3) Static theory of specializations and gains from trade,

(4) Full employment of capital and labor, and

(5) International harmony.

Schumacher criticizes that the traditional theories of comparative advantage are constructed relying on these unrealistic assumptions. In her Conclusion she thus writes:

• After scrutinising the essential assumptions, on which the theory of comparative advantage is based – regardless of its specific formulation – it has to be concluded that these assumptions are inadequate and can be rejected on theoretical, logical and empirical grounds.

As I have said in (1) of my comment on Schumacher, it is easy to criticize that a theory is insufficient and deceptive. What a theoretician must endeavor is to present a new theory that is free of his or her own criticism. I know we have a kind of dilemma that, if our critique is deeper and more fundamental, the more difficult is the task to construct a new theory.

In 2012, a year before Schumacher wrote her article, I have written a conference paper:

• Final Resolution of the Ricardian Problem on International Values

https://www.researchgate.net/publication/281091621_Final_Resolution_of_the_Ricardian_Problem_on_International_Values?ev=prf_pub

In March 2014, I have written in Japanese a book with the similar name: A Final Solution of Ricardo’s Problem on International Values. The table of contents in English is uploaded in my contributions page. With this book my thought became much clearer. In addition, discussions in the newly organized research group gave me chance to discover new ideas to develop the new theory. The new theory is now commonly called the (New) Theory of International Values.

Article A New Construction of Ricardian Trade Theory--A Many-country...

Conference Paper Final Resolution of the Ricardian Problem on International Values

Comment on Schumacher's Deconstructing the Theory of Comparative

Advantage (4)

It is noteworthy that the new theory of international values has practically overcome all of five assumptions that Schumacher blamed as deceptive. The new theory does not assume any of five assumptions (except one point on labor mobility).

In fact, the new theory admits input trade. This is important when we want to analyze fragmentation, trade in task, world optimum procurement and others. These are most conspicuous phenomena that we observe in the globalized economy. The traditional theories of trade cannot deal with these questions except in the general equilibrium framework. However, this is not a practical solution, because general equilibrium theory has ubiquitous difficulty to treat corner solutions and specialization is but a typical case of corner solutions.

Introduction of input goods permits the new theory to oust the assumption of capital immobility. Capital trade comprises two faces: One is financial investment in view of direct control of foreign firms. Another is the trade of machine tools and apparatuses. All of these capital movements of the second aspect can be treated as common trade of commodities. Capital goods are if fact nothing other than sets of commodities. Thus the first half of Schumacher's assumption (1) is cleared. Immobility of labor forces is a bit different from capital movement. Labor force are constrained by various reasons. It is possible to treat migration of labor force but it is not the main theme of the new theory.

The new theory does not assume the balanced trade. We examine international values but characterized by a different conditions. One of characterizations is the international values that are possible when all countries are in full employment. This does not mean that we assume full employment. Such a vector of values is investigated in order to examine how full employment is realized or not. Balance of trade and currency exchange rates are important questions but the new theory assumes nothing on them. Thus Schumacher's assumption (2) is cleared.  

As far as the new theory normally assumes a fixed set of production techniques for each country, the new theory is static. But, it is remembered that the new theory has inside of the theory choice of techniques logic. If new sets of production techniques are given we can examine what will happen with the new sets of production techniques. Difficulty lies not in the theory of values but to predict the change of production techniques.

It is now clear that the new theory does not need assumptions (3) and (4). Assumption (5) is not an assumption in an ordinary sense but a vision of the economy. As the new theory has a framework by which to deal with unemployment and conflicts from trade, it is remote from a priori idea of economic harmony.

Major points of this post is explained in my working paper:

New Theory of International Values: A General Introduction

https://www.researchgate.net/publication/304717720_New_Theory_of_International_Values_A_General_Introduction

Working Paper The New Theory of International Values: An Overview

Comment on Schumacher's Deconstructing the Theory of Comparative

Advantage (5 and the end of the comment)

There were long tradition that trade theorists firmly support free trade and many other non-specialists in trade theory opposed to trade liberalization pointing many inconveniences that we can observe in the real life. This unfortunate state continued because we had no theory by which to analyze losses from trade as well as gains from trade. Now a new theory is constructed, at least at its basis. Defense of free trade without no knowledge of economic reality and accusation of trade theory without theory should be ended. Let us now start work more constructively based on both theory and empirical research.        

A deep reason why Trump trumped:

I am totally opposed to Mr. Trump's racist, chauvinist, anti-feminist speech which encourage hates among people. However, if we analyze the popular sentiments of the people who voted for Mr. Trump, it becomes apparent that one of a very deep reason why Trump trumped lies in the economics and its policy recommendations.

As I have argued several times in this question page,  the mainstream economics trade theory only observes the gains from trade and is blind to costs of free trade. As the newspapers and TV report, many voters for Trump think that their hardships come from free trade system. Most economists must explain that they are wrong, but I think Trump voters belief has some truth. Most of trade theories do not grasp the reality of the free trade and globalization. Free trade and globalization have their costs. Trump voters are directly feeling by their own experience.

We must rethink of our economics.     

True, Prof. It is part of economics to think of costs and gains. Now, the question will be what will happen to the world if countries go protectionist and how do we realize gains from there, that will not cost heavily to the world in terms of higher prices and costs and ensuing poverty for the rest of the world.   

Dear Maria Cristina Bautistica,

it may be a bad habit of economists to consider all at once. When 99 % of economists are recommending free trade, and do not think of social costs of free trade, is it a wise reaction to bring about the costs of protectionism? Have you considered costs of free trade deeply enough? If you haven't, you should first think of them, because this question is rather new, but what you have enumerated are old recipes. 

Economists "rationalize" the "costs of free trade" by considering it "the price of progress!"  Other professionals do the same thing - it's a fancy way of making excuses for the fact that policies always have both detriments as well as benefits.  It is very rare to see any attempt to customize a policy so that detriments are minimized.

I have posed a new question that is closely related to the present question and to my "answer" with the title "A deep reason why Trump trumped."

How do you explain the Trump’s victory as a question of economics?

https://www.researchgate.net/post/How_do_you_explain_the_Trumps_victory_as_a_question_of_economics

Please discuss this problem in a wider scope than that of this question. It is reported that white poor workers who are frustrated by their hard economic situation. They feel that one of the causes that forces them in the present difficult situation, because of immigrants from abroad and because free trade. It may be a wrong idea, but we should reflect humbly why many people became to think like it. The true cause of their hardship may not be the consequences of international trade or immigration. We have to ask also

(1) if there is something that the economics is loosing sight of, and

(2) why the popular sentiment and that of economists differ so much.

It is true economists often brush off the losses due to trade and immigration in favor of emphasizing overall gains.  That would be less the fault of economic analysis and more the fault of those using it, since I know of no models that do not include distribution effects, including losses.  In many papers and texts author(s) include an "of course" very briefly covering the notion of recovery of some of the gains for some to allow compensation/coverage of adjustment costs to those who lose (to get a Pareto optimum).  Others simply ignore the distribution issue.  

One reason, I regret to say, for the difference in views is that few economists are among those who lose and personal perspective is likely to bias the emphasis on such matters. It is relevant that (I think I saw this in The Economist) a comparison of compensation/adjustment cost coverage in the US vs Europe shows the US offering about 1/6 the amount (relative to real GDP per capita) compared to the EU and I don't know that the coverage is always adequate in the EU.

In addition, everyone involved being human, it is easier to focus anger on "the other," foreign producers, immigrants, than on the impersonal impact of technological change -- which probably has more impact of the loss of "good paying middle class jobs not requiring college or advanced training."

Trump articulated the discontent that those dispossessed of jobs and prospects that is experienced as a result of the after-effects of globalization.  It was the policies of the elite, both Republican and Democrat, that produced those after-effects.  The dispossessed wanted someone to blame, and Trump offered immigrants, refugees, outsourcing companies, foreign investors, etc.  The results of the election prove that the dispossessed accepted Trump's "blame mongering!"  BUT, the economic reality is that the factory jobs have gone forever,  THAT is why Trump offered "infrastructure building jobs" as the source of "recovery employment."  BUT, once the infrastructure is built, those jobs will disappear.  This is a short-term solution.  Regrettably, at the moment this is the only time-frame that most people use.  The problem here is not economics but rather social psychology - the public just wants to "re-activate the American Dream," not to change it.  BUT, fundamental change is what is really needed.  What can be done?

I have posted a following question:

How do you explain the Trump’s victory as a question of economics?

https://www.researchgate.net/post/How_do_you_explain_the_Trumps_victory_as_a_question_of_economics#582dce974048548ea67ac3f6

Although I think this is a new sincere good question concerning economics, the RG people in charge of topics link cut all links to topics to

• Economics
• International political economy
• International trade
• International economics 

Is it a fair measure?