Friday, September 10, 2004

Proof that I don't understand globalization: Samuelson and Bhagwati

This New York Times piece, about how the economist Paul A. Samuelson is challenging the pro-globalization arguments of protege Jagdish Bhagwati (Mr. In Defense of Globalization), goes over my head at one moment:

His article, Mr. Samuelson added, is not a refutation of David Ricardo's 1817 theory of comparative advantage, the Magna Carta of international economics that says free trade allows economies to benefit from the efficiencies of global specialization. Mr. Samuelson said he was merely "interpreting fully and correctly Ricardoian comparative advantage theory." That interpretation, he insists, includes some "important qualifications" to the arguments of globalization's cheerleaders.

Can anyone explain Ricardoian comparative advantage theory for me?

That said, Samuelson's main point -- that one long-term consequence of outsourcing could be wage losses in the U.S. -- comes across crystal-clear.