Thursday, September 16, 2010

What's wrong with this view of international trade?

It's taught in Econ 101 after all...

Here’s the detailed technology by which you grow cars in Iowa:


"First you plant seeds, which are the raw material from which automobiles are constructed. You wait a few months until wheat appears. Then you harvest the wheat, load it onto ships, and sail the ships eastward into the Pacific Ocean. After a few months, the ships reappear with Toyotas on them."

Hints: externalities, transport costs, environmental costs, primary sector dependence, politics/power relations, exchange rates, terms of trade, technological adaptation ...

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