[[{“value”:”Doug of course is one of the top trade economists. Here is the audio, video, and transcript, from the same wonderful Mercatus team that brings you CWT. Here is one excerpt: RAJAGOPALAN: I have a different question on Adam Smith. We’re all taught Adam Smith’s division of labor, specialization, economies of scale, the cliff notes
The post Shruti Rajagopalan interviews Doug Irwin appeared first on Marginal REVOLUTION.”}]]
Doug of course is one of the top trade economists. Here is the audio, video, and transcript, from the same wonderful Mercatus team that brings you CWT. Here is one excerpt:
RAJAGOPALAN: I have a different question on Adam Smith. We’re all taught Adam Smith’s division of labor, specialization, economies of scale, the cliff notes version of that. Then, we learn about absolute advantage in about five minutes. Then, we set it aside and start thinking about comparative advantage.
The first question I have is does Adam Smith’s basic model of division of labor, specialization, and economies of scale anticipate the comparative advantage trade models, or does it actually undermine the comparative advantage trade models in the way that Krugman wrote about or something else?
IRWIN: I think that Adam Smith has a broader view of trade, a much richer view of trade than what I would think is of the narrower David Ricardo theory of comparative advantage. If you have to read one of the two, read Adam Smith because it’s much more fun to read. Reading David Ricardo is more like reading a textbook in the sense that he doesn’t have this broad historical sense and these new rich ideas and how they’re interacting that leaves a lot to the imagination and leaves a lot to future research to flesh out.
He’s saying, “England can produce wine and cloth. Here are the labor coefficients, and we’re going to do this static comparison between England and Portugal.” That’s a very narrow way of thinking about trade.
RAJAGOPALAN: So badly written, you want the wine by the end of it.
IRWIN: There’s a wonderful quote by George Stigler saying: “the only thing that someone will take away from reading Ricardo’s theory of comparative advantage is that they need a bottle of wine to get through it,” or something along those lines.
RAJAGOPALAN: I agree.
IRWIN: Adam Smith isn’t technically as sophisticated if you will, but in terms of the ideas, they’re very sophisticated. Obviously, he wasn’t thinking in terms of an economic model directly, but it’s a much richer overall discussion of trade that I think you can learn a lot from, even reading today.
RAJAGOPALAN: When you see the world today, what do you think the world looks like more? Does it look more like Ricardian comparative advantage and the more recent models like Heckscher–Ohlin, and those things that came about? Do you think it really looks like the Adam Smith story, which is much more nuanced, pay attention to what’s happening in the domestic economy in terms of division of labor, specialization, and that is the lead-in to foreign trade, which is so deeply entangled with domestic trade?
IRWIN: Well, I hate to waffle, but I think you need a little bit of both. It depends on the question, depends on the country, depends on the issue that you’re examining. These are just tools that you draw to help out your understanding of a particular situation. I will confess I’m a little bit more in favor of Adam Smith. I’ve always said that his theory of trade, and in particular his analysis of trade policy, which I think is underrated, is very sophisticated, and very wise, and has a lot to say to us today.
RAJAGOPALAN: Beautifully written, if I may add.
There are now 100 episodes of Ideas of India, here is a link to all of them. And here is my own earlier CWT with Doug.
The post Shruti Rajagopalan interviews Doug Irwin appeared first on Marginal REVOLUTION.
Economics, History, Law, Political Science
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