I couldn’t agree more. Economists, especially Bush appointees, espouse theories and arguments that have little factual support, and are often illogical.

The “benefits” of free trade are a perfect case in point. If an American company moves its production facilities overseas, and replaces $130/day American workers with $2/day foreign workers, it’s a net loss in American labor income of $128/worker. If the company doesn’t drop it’s prices enough to compensate for that $128/worker/day income loss, it’s a net loss to American workers.

And, of course, they certainly do not drop their prices to that degree. If they did, there would be no labor cost savings by moving the job overseas.

In reality, they drop prices the equivalent of a small fraction of the labor cost savings. The remaining labor cost saving goes into the profits of the multinational Corporation who moved its production facility to a cheap-labor foreign country.

It’s completely illogical to claim that the cost savings from replacing domestic goods with imported goods is greater than the American labor income lost. Yet Right-Wing Corporatists, like Mankiw, continue to espouse this myth.

Furthermore, to make Ricardo’s Comparative Advantage doctrine valid, it’s mandatory that the “factors of production” are not mobile across international borders (i.e., capital). As such, the Comparative Advantage doctrine has NO application when Corporate America can move its “production factors” across international borders.

unlawflcombatnt

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