Tuesday, June 07, 2005
Quote Of The Day
When I went to school, they taught us that trade was based on comparative advantage. The folks in one place had piles of coal and iron ore, so they could make steel cheaply and we would all benefit using it. Other folks somewhere else had marshland and lots of people, so we would all be better off eating their cheap rice. See, everyone had some comparative advantage.
When I grew up I discovered that sometimes you couldn't find a comparative advantage. The Japanese had no raw materials or cheap energy. They just worked hard, kept their currency cheap and kept the competition out. They didn't have to worry about defending the home market and could concentrate on exports. China's comparative advantage seems to be having enough prison cells for anyone who wants a raise or a real union.
Nicely stated. Of course, I'd recommend reading the rest of the article as well.