Monday, November 3, 2008

The Fruits of Comparative Advantage

Let's face it, Americans. We simply cannot match China's advantages when it comes to producing melamine-enriched dairy products:

"[P]rotein powder" of often-uncertain origin has been employed for years as a cheap way to help the milk of undernourished cows fool dairy companies' quality checks. When the big companies caught on, some additive makers switched to toxic melamine -- which mimics protein in lab tests and can cause severe kidney damage -- to evade detection ... Manufacturers of melamine, an industrial chemical used in plastics, say they have noticed demand for their factory's scrap rising. In the small Hebei farming village of Zhangzhuang, residents say, melamine bought as scrap from a nearby factory often was stored on the pavement outside the village school before it was turned into a milk additive. "They kept it in big piles," says one village elder. Business in the powder became so brisk that villagers involved worked long hours and through holidays to meet demand, residents say.
The Chinese have the infrastucture -- where, pray tell, can you find big piles of melamine in the United States? -- and the low-cost labor to bring it to market, even after accounting for the transportation costs. Our domestic producers simply cannot match these advantages, and lest we defecate on the very grave of David Ricardo, American farmers should redirect their labors to goods and services that are still most efficiently produced here, like lead-rich toys and pet food and pharmaceuticals.

OK, maybe those are bad examples, but the point is, we shouldn't defecate on Ricardo's grave. We can have our own opinions until and unless China or India produces them more cheaply, but we can't have our own logic of comparative advantage.

(H/T denialism blog)

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