Comment on a post about comparative advantage in the U.S.

"But when it comes to basic economics, Sanders is totally out to lunch, which I assume he also believes should be free... Would a President Sanders demand that the National Zoo's pandas be returned to China so that two American bears can get those jobs?"

Video: https://www.facebook.com/Reason.Magazine/videos/10153106925809117/?fref=nf

My comment:

I'll try to ignore the subjective critics of this video such as those statements that include the word "embarrassing".

What I find kind of disturbing among many individuals who do not have a proper and deeper understanding of economics is that they believe that the only kind of theories that explain the market are those popularized by the marginalists (A.K.A. the neo-liberal school of thought). As a consequence, in day-to-day discussions they seem to ignore or avoid any other argument that serves as a critic to this school of thought. In the academia, however, there is no consensus of how markets really work. I want to think that this fact is due to the simplicity of marginalistic theories (of course, this only applies if Math is ignore).

The theory being discussed here is the most famous theory of David Ricardo although it's not his most important contribution to the understanding of markets: comparative advantage. This theory relies solely on the increasing amount of goods available due to specialization and availability of resources in a certain market but ignores sustainability and other long-run characteristics.

This theory was applied in Latin America about 100 years ago and brought nothing but stagnation. The idea was the we, latin americans, should be contributing with natural resources to the international markets and avoid industrialization because developed countries would be in charge of manufacture. Although I present this summary with negative connotations, it was a widely accepted belief as it is today with this North American case. 

Thank God my pariente Prebisch got rid of it, and we got the opportunity to develop ourselves.

In North America, this political economy ideology (another branch of economics that most people ignore) goes around consumer sovereignty and "a nation who offers services is wealthy". Although it is true that manufactured goods can find cheaper prices if produced in China, it is also true that this behavior generates negative externalities. Do you deny that part of the inequality, shrinking middle class, price of education, and wage stagnation are not some of the negative externalities of importing from China? 

Some counter-arguments will be that the price of life is decreasing and that we have cheaper goods available. However, the material characteristics of the U.S. have been increasing more rapidly than the decrease in the cost of life and the availability of cheaper goods. That last one I found it the most ridiculous (subjective here) because most of those cheaper goods are of lower quality and their fabrication destroys the environment. 

However, the most interesting counter argument is services. Here's where the knowledge of economics is tested. And this one comes from microeconomics, the only branch of economics that seems to be known. Do most defenders of this ideology know the difference between an oligopolistic market and a market of competition besides the number of players? To understand this difference, we need to analyze the way services are produced. In short, they're more easily produce than manufacture because while manufacture requires an extensive combination of fixed capital, most new services only require an office. 

In other words, it results more easily to enter to the service sector than to the manufacture sector being the service sector more competitive than manufacture. Empiracal economics demonstrates that less competitive sectors offer higher wages. (This is not a case for monopolies, to all those who are thinking in straw men). Also, the pure structure of manufacture offer more jobs. Of course, for business owners the first (sectors) is more defended than the second. We gotta include venture capitalist, the stock markets and etcetera that also are important.