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    Ricardo's Difficult Idea

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    Jose Rvr
    The document discusses David Ricardo's idea of comparative advantage and why it has been difficult to accept. It analyzes several factors that affect its acceptance, including that modern intellectuals prefer new ideas over tradition, successful books don't rely on mathematical models, and economists often overestimate their audience's understanding of concepts like constant employment and self-correcting trade balances. It concludes that defending proven but old economic ideas is seen unfavorably, and advocates taking people's ignorance more seriously by better justifying models and not assuming concepts are easily understood.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd

    Ricardo's Difficult Idea

    Uploaded by

    Jose Rvr
    429 views10 pages
    The document discusses David Ricardo's idea of comparative advantage and why it has been difficult to accept. It analyzes several factors that affect its acceptance, including that modern intellectuals prefer new ideas over tradition, successful books don't rely on mathematical models, and economists often overestimate their audience's understanding of concepts like constant employment and self-correcting trade balances. It concludes that defending proven but old economic ideas is seen unfavorably, and advocates taking people's ignorance more seriously by better justifying models and not assuming concepts are easily understood.

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    Ricardo’s difficult idea.pptx

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    The document discusses David Ricardo's idea of comparative advantage and why it has been difficult to accept. It analyzes several factors that affect its acceptance, including that modern intellectuals prefer new ideas over tradition, successful books don't rely on mathematical models, and economists often overestimate their audience's understanding of concepts like constant employment and self-correcting trade balances. It concludes that defending proven but old economic ideas is seen unfavorably, and advocates taking people's ignorance more seriously by better justifying models and not assuming concepts are easily understood.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    429 views10 pages

    Ricardo's Difficult Idea

    Uploaded by

    Jose Rvr
    The document discusses David Ricardo's idea of comparative advantage and why it has been difficult to accept. It analyzes several factors that affect its acceptance, including that modern intellectuals prefer new ideas over tradition, successful books don't rely on mathematical models, and economists often overestimate their audience's understanding of concepts like constant employment and self-correcting trade balances. It concludes that defending proven but old economic ideas is seen unfavorably, and advocates taking people's ignorance more seriously by better justifying models and not assuming concepts are easily understood.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 10

    Ricardos difficult idea

    By Paul Krugman
    By Jos Rivera - 201290042
    Contents:
    Introduction
    Factors that affect the acceptance of his idea:
    You just dont understand
    The cult of the new
    A harder concept than it seems
    The two cultures
    What can be done

    Introduction:
    The author compares the aversion of intellectuals to accept the idea
    of evolution through national selection and Ricardos idea of
    comparative advantage.

    The article mentions 3 hypothesis:
    Fashionable.
    Needs a proper audience.
    Aversion to mathematical models.
    Factors that affect the acceptance of the idea:
    The Trap by Sir James Goldsmith, mentions that Ricardos ideas are
    not valid in todays world. Goldsmiths argument is based in:

    Pauper labor fallacy:
    Foreign competition based on low wages harms the domestic economy.

    The truth: It does not matter whether a foreign country's advantage in
    producing goods at low cost is due to high productivity or low wages.
    Each country should specialize on the goods on which they have
    comparative advantage.

    1. You just dont understand:
    Modern intellectuals are supposed to be daring innovators, not
    respecters of tradition.

    The article explains how missunderstood is the analysis of
    productivity increase, benefits and wage variation by author
    Michael Lind.

    2. The cult of the new:
    Wages are determined in a national labor market:
    Workers can move from one industry to the other.
    If they achieve western productivity, they will be paid western wages.

    Constant employment is a reasonable approximation:
    Economy has a natural self-correcting tendency to full employment.
    Countries have central banks, which try to stabilize employment.

    The balance of payments is not a problem:
    David Humes Price-Specie flow mechanism.

    3. A harder concept than it seems:

    The successful books dont explain mathematical models, they are not
    even based on mathematical reasoning.

    Economics is not as well served by its writers as evolution.

    4. The two cultures:
    Facts
    What people
    want to hear
    Take ignorance seriously:
    When the economist try to explain or argue in favor of free
    trade, they make the mistake of overestimating both their
    opponents and their audience.

    Adopt the stance of rebel:
    Defend old ideas that are proved to be true is not well seen by
    everyone, no matter how true those ideas may be.
    5. What can be done:
    1
    2
    Dont take simple things for granted:
    Dont assume that people understand why it is reasonable to
    assume constant employment, or a self-correcting trade
    balance, or any other basic argument.

    Justify modeling:
    Do not presume that people accept and understand the idea
    that models facilitate understanding.
    5. What can be done:
    3
    4
    Thank you for your attention
    Ricardo's idea is truly, madly, deeply difficult.
    But it is also utterly true, immensely sophisticated
    and extremely relevant to the modern world.

    - Paul Krugman

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