A.
Truth be told, I found this article to be extremely trite and boring. But, I did feel like it brought up a couple valuable point. I guess the most interesting part I got out of the article was how according to Krugman, many people in society (including economists) have strong economic ideals/values, yet they don't understand/are unable to grasp basic economic principle that is vital to understanding such economic phenomenons as comparative advantage.
Because of this, several economists and non-economists are against comparative advantage. It is not necessarily because they think it is untrue, but rather, because they don't understand the complete phenomenon.
This misunderstanding of comparative advantage causes many intellectuals to refuse to talk about comparative advantage.
B.
1. Krugman argues that people who don't understand certain economic principles disagree with comparative advantage. Are there people who do understand these economic principles but also don't accept comparative advantage?
2. If the answer to the above question is yes, why do these people disagree with comparative advantage?
3. Why or why not is comparative advantage an important economic principle?
C.
Krugman's article basically gives reasoning for why certain economic intellectuals and non-economists reject comparative advantage. The reasoning he ultimately gives is that these people who do reject comparative advantage simply don't understand the phenomenon fully because they are lacking understanding in certain economic principles.
As Krugman explains, comparative advantage implies that trade between two nations raises the real income of both. Many people who disagree with comparative advantage also do so because they reject the idea of understanding the world in mathematical terms, which effectively is how comparative advantage looks at the world.
Specifically, Krugman also talks about people's rejection of Ricardo's idea, which in less words is that: we as a world/society will be able to produce more if everyone/every country specializes in what they are good at and abandon trying to produce what they aren't good at. This would make the world more productive with a lot of trade.
Krugman is convinced that those economists/non-economists who reject this idea and comparative advantage do so because they don't full grasp the concepts of it.
Krugman also discusses how he believes some people reject these ideas because most people aren't interested in reading/hearing about confirmation of old economic ideas, such as that of comparative advantage. People want new fresh ideas or ideas that challenge established beliefs. Thus, many people go against comparative advantage to accomplish that.
Krugman concludes his story by explaining what, in his mind, can be done to fix these issues:
- We need to understand that even renowned economists may be lacking in the understanding of simple economic principles
- We need to support old/accepted economic ideas because even though they have been around for a while, they are accurate in many instances
- We must explain our economic reasoning and can't assume people understand our economic ideas and modeling even if they are learned in the economics field
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Article #2: In Praise of Cheap Labor
A.
I found Krugman's piece to be much more interesting than the previous article. The one thing I found most interesting was his outlook on low wages. I have always wondered how it is fair that people in third world countries get paid so little to make us Westerners items we covet. But, I found the article Krugman makes in favor of low wages fascinating- and truthfully, very logical.
Krugman argues that if we as "wealthy" Westerners refuse to buy from cheap labor companies in Third World Countries, we are ultimately ridding these poor people of the best opportunity they have for progress, simply because our values say that it isn't right for low wage workers to make our luxuries for us.
I also found it very interesting how Krugman argues that if we do refuse to buy these products, we will be hurting the Third World Countries even more. Without these means of income, many poor people in these countries will have no jobs at all and will have to live in "garbage dumps", i.e. Smokey Mountain, to make ends meet.
And if we do decide to pay them more with higher wages, that would be harmful as well because it would create distinct social classes where a few people are wealthy, while the majority of people who don't have jobs would be extremely poor. Not to mention, it would be difficult for companies to be able to hire such workers so it is possible than an increase in wages would cost more people their jobs.
B.
1. Is there a psychological reason for why people feel so against receiving items from third world countries where wages are so low? If so, what is it?
2. Has anyone ever tried increasing their wages to see the effect it would have on their economy? If so, what did happen?
3. As a westerner, is it really in the third world countries' best interest for us to continue to buy from them even if the wages continue to stay low?
C.
Krugman's article begins with him explaining how some people in third world countries live/work on a garbage dump known as Smokey Mountain looking for scraps they can sell for money. He goes on to show how the biggest beneficiaries of globalization are Third World Workers.
Very interestingly, Krugman goes on to show how low labor wages in third world countries have led to progress in those countries. For reason's we can't fully grasp, these labor forces reduced the disadvantages of production in developing countries to that of first world and western countries.
Simply put, low wage labor allowed developing countries to break into world markets, which has led to the improvement in the lives of ordinary people.
The main reason why these low wage labor forces has led to relative progress in many of these developing countries is because they created competition among companies to get the most productive/efficient workers. While this hasn't happened in all instances, this progress has allowed many people to get off garbage dumps and "Smokey Mountain" and move from abject poverty to living conditions that are still bad, but are much, much better.
Finally, Krugman goes on to argue why low wage labor is actually a good thing for the countries who have it, despite many people in the western world believing it is an unethical behavior. (to see the reasons why Krugman argues it is not actually unethical to have low labor forces, see part A of this entry).
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Article #3: A Raspberry for Free Trade
A.
I found it interesting how Krugman argues how people will fight against low wage labor, but few will ever stop to realize how a country actually thrives on low wage labor. Without it, some countries would have very few means of income.
This begs the question whether or not people are against low wage labor because it is unethical or because it takes away jobs in America. According to Krugman, he says it actually creates different jobs and more competition, which is good. Low wages maybe aren't so unethical since some countries rely on it to thrive as a society.
B.
1. Why do people find it so wrong that there is low wage labor?
2. Has anyone ever went over to countries to analyze how third world countries are run with low wage labor? If so, what have these people found?
3. Are conditions really that bad in third world countries due to low wage labor or is the low wage labor helping those countries prosper?
C.
Krugman tells a story of imported raspberries and uses it to illustrate a point about globalization. He begins by talking about how Clinton asked for legislation that would allow him to ban the importation of raspberries from countries that don't have adequate health regulations. Opponents of globalization then came out and said why is it ok for the government to prevent trade of raspberries that hurt us, but not trade itself that hurts our economy/jobs.
According to Krugman, however, it is NOT the same thing. He asks how opponents of globalization would've reacted if the story was a bit different.
He points out how people's arguments against low wage labor might come about because their industry in America is faltering due to the sale and consumption of these low wage products. In reality though, the nation (Freedonia) might actually be booming, just people might go against it because they want to save their own industry.
In short, the point of the story is to argue against how complainers who are against the third world trade industry mix up protecting people from tainted products from third world countries and protecting workers from competing products. In reality, the competition is good.
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Article #3: A Raspberry for Free Trade
A.
I found it interesting how Krugman argues how people will fight against low wage labor, but few will ever stop to realize how a country actually thrives on low wage labor. Without it, some countries would have very few means of income.
This begs the question whether or not people are against low wage labor because it is unethical or because it takes away jobs in America. According to Krugman, he says it actually creates different jobs and more competition, which is good. Low wages maybe aren't so unethical since some countries rely on it to thrive as a society.
B.
1. Why do people find it so wrong that there is low wage labor?
2. Has anyone ever went over to countries to analyze how third world countries are run with low wage labor? If so, what have these people found?
3. Are conditions really that bad in third world countries due to low wage labor or is the low wage labor helping those countries prosper?
C.
Krugman tells a story of imported raspberries and uses it to illustrate a point about globalization. He begins by talking about how Clinton asked for legislation that would allow him to ban the importation of raspberries from countries that don't have adequate health regulations. Opponents of globalization then came out and said why is it ok for the government to prevent trade of raspberries that hurt us, but not trade itself that hurts our economy/jobs.
According to Krugman, however, it is NOT the same thing. He asks how opponents of globalization would've reacted if the story was a bit different.
He points out how people's arguments against low wage labor might come about because their industry in America is faltering due to the sale and consumption of these low wage products. In reality though, the nation (Freedonia) might actually be booming, just people might go against it because they want to save their own industry.
In short, the point of the story is to argue against how complainers who are against the third world trade industry mix up protecting people from tainted products from third world countries and protecting workers from competing products. In reality, the competition is good.
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