WEEK 1 Flashcards
1
Q
Who is David Ricardo?
A
- 1817
- Convince Britain for FREE TRADE
- 3 Precepts
2
Q
What are Ricardo’s 3 Precepts?
A
- Trade is driven by “comparative advantage”
- Nations are the correct unit of analysis
- Globalization is driven forwards by lower trade costs
3
Q
What do these 3 precepts imply?
A
- As trade costs fall, nations will increase specializing in producing goods where their relative efficiency is highest, while the importation of goods is lowest.
- Trade volume rises
- All nations gain from trade
4
Q
What does the principle of Comparative Advantage explain?
A
- Why nations trade
- Why nations trade WHAT they trade
- Why all nations can GAIN from trade
5
Q
What are the 2 gains from trade?
A
- High Consumption
2. More productive economy
6
Q
What are gain amplifiers?
A
- Greater scale economies and agglomeration economies
- Upgrading
- Trade and Growth
- Trade and Peace
7
Q
What are the 2 pains from trade?
A
1.
8
Q
What is the law of Price Changes?
A
Anytime a relative price changes, someone loses, and someone wins
9
Q
What are the 2 main pains of trade?
A
- Relative prices change
2. Restructuring
10
Q
What are pain amplifiers?
A
- Trade can lock developing nations into producing goods where technological progress is slow or sectors where scale economies are absent
- Natural resource curse
11
Q
How does GLOBALIZATION play into this?
A
Politics of Compensation
12
Q
What is the classic liberal perspective?
A
- Efficiency is the market’s role
- Justice/equity is the government’s role
- Free trade and sharing gains and pains can make everyone better off if the government pursues the right domestic policies
13
Q
Anti-Globalization - What is Polanyi’s stance?
A
- Free markets are unnatural and immoral
- Free markets are destructive and self-destructive
- Laissez-faire is wrong - social relations are embedded in the economic systems
- We are “slaves” of the market
14
Q
Stiglitz and Rodrik
A
- Embrace traditional conceptualization of globalization and its impact - globalization provides net gains
- HOWEVER, they focus more on the pains than the gains
- Stiglitz - accompanying policies that will make globalization beneficial to all
- Rodrik - Maintain national sovereignty to greatest possible extent
15
Q
3 Costs that form 3 Constraints on Globalization
A
- Trade Costs - Cost of moving goods
- Communication Costs - Cost of moving ideas
- Face-to-Face Costs - Cost of moving people
