These articles describe the inherent conflict between trading partners that can be found in both the standard linear equilibrium model of international trade and in models with economies of scale.
To Defeat China, America Needs an Industrial Policy
The Hill, January 26, 2023
Free markets cannot be our guiding principle in industries where a competitor’s advantage is produced by having a bigger government subsidy, or by persuading our corporations to produce in their country, instead of ours, by giving them strong financial incentives.
The Nature of Trade Has Changed — U.S. Trade Policy Must Change Too.
The Hill, June 14, 2022
Trade is no longer about trading what you are naturally good at producing. It is about finding ways to make your country the major provider of the most productive industries. And there are many actions, some of them not very pretty, that countries use to get that result.
The U.S. Must Produce Goods as Well as Science
The Hill, January 28, 2022
Supporting scientific research is only part of what we need to do. Production matters too, and in today’s world production can be as technical, long term and demanding as research itself.
Why Americans are Right to Rethink Free Trade
PBS NewsHour, August 14, 2017
The events of the past year have clearly shown that many Americans, whether Democrats or Republicans, have finally rebelled against ‘free trade.’
Can This President Change the Direction of Our Economy?
The Hill, January 2017
Stronger U.S. economic growth requires taking actions that work even in a mercantilist world. The proposed Border Adjustment Tax will not work against mercantilism. The very different and very simple concept of Import Certificates will.
How to Rebuild Manufacturing
Remarks to the National Press Club, September 14, 2016
An agenda for the first 100 days: laying out what the next president of the United States should do about rebuilding American manufacturing in a mercantilist age.
America Rethinks Free Trade
Huffington Post, May 11, 2016
This extraordinary primary season has clearly shown that many Americans, whether Democrats or Republicans, have finally rebelled against “free trade.” It is high time.
Trade Pact Contains a Hidden Danger
Remarks to the National Press Club, February 11, 2016
The Investor-State Dispute Settlement language included in trade deals is elevating the interests of international corporations over the interests of our country.
Dagger Aimed at the Heart of Democracy
The Hill, June 2015
Within a “trade” agreement, a structure is being proposed that will subvert democracy in this country.
A Trade Pact in the Corporate Interest (with William Spriggs) The Huffington Post, May 2015
This article is about the proposed Trans Pacific Partnership (TPP) and related “fast track” legislation. It asserts that TPP’s special court aimed at protecting corporate investments against national decisions would pose a threat to our democratic system.
It Takes More than Economics 101 to Compete with China
The Huffington Post, October 24, 2013
This article discusses the likelihood of a revival of manufacturing in the United States.
On Manufacturing and Innovation
The Huffington Post, July 2013
This article calls for a national debate on the decline of the manufacturing industry and a discussion on what is really happening with manufacturing, innovation and unbalanced trade.
On Technical Progress and the Gains and Losses from Outsourcing (with William J. Baumol)
Oxford Handbook of Offshoring and Global Employment, May 2013
This is the published version of the New America Leture “Ricardo Revisited” listed two paragraphs below.
Trade, Education, and Innovation: Prospects for the U.S. Economy (with William J. Baumol)
Journal of Policy Modeling, July 7, 2011
Reliance on the doctrine of mutual gains from trade, even in the face of mercantilist practices, can be a significant mistake. Efforts to advance innovation, without considering the retention of the economic activity and jobs created by the innovation, will not ensure continued prosperity. This calls for the rethinking of trade policy by the United States and other developed nations if they are to ensure continued economic growth.
Ricardo Revisited: Sino-American Trade and Economic Conflict (with William J. Baumol)
Public Lecture given at the New America Foundation, January 18, 2011
We describe what a very standard model, the Ricardo model, shows about the impact on a developed nation, such as the U.S., of the economic development of a trading partner, such as China. We show that: (1) there is a dominant and dominated relation possible between the two countries that is good for the dominant one and bad for the dominated one. (2) A country can attain a dominant position either by having a naturally undeveloped trading partner, or by mercantilist actions that destroy the partner’s industries. (3) While a country cannot gain a dominant position solely by building up its industries, it can avoid a dominated position by developing its own industries and not allowing them to be destroyed.
Globalization: Country and Company Interests in Conflict (with William J. Baumol)
Journal of Policy Modeling, 2009
The same theory that shows that free trade is beneficial also shows that globalization can be harmful to at least one of the trading countries. Moreover, with globalization, the interests of a country and its companies may diverge. These conclusions emerge from some of the oldest and most time honored models in economics. We identify some of the key policy issues that must be addressed in today’s interdependent world.
Global Trade and Conflicting National Interests Book (with William J. Baumol)
MIT Press, Cambridge, MA, 2001
This book provides in a more accessible form many of the results on trade conflicts described below. It deals with the conflicts that can appear in models with economies of scale and with those that can appear in models with linear production functions when countries change their productivities. The book is divided into two parts, the first for interested non-economists, and the second for economists.
National Trade Conflicts Caused by Productivity Change: The Analysis With Full Proofs (with William J. Baumol)
C. V. Starr Economic Research Report (New York University), November 1998, RR # 98-35.
This combines in one report the central results on both economies of scale models and linear production models. It contains the full proofs of these results. In addition it provides several new results such as proving that the linear programming boundaries of the individual country regions have single peaks and obtaining exact formulas for the boundaries in many situations.
Analysis of Linear Trade Models and Relation to Scale Economies (with William J. Baumol)
Proceedings of the National Academy of Sciences, U.S.A., 1997, Vol. 94, pp. 10002-10005
We show that the exact boundary of the region of equilibria can be obtained by an integer programming calculation. This result applies to models with small numbers of industries as well as to those having the large number of industries such as the models already discussed below. It also describes the close connection of equilibria from a single economies model to the maximal productivity equilibria of a family of linear models.
Productivity Differences, World-Market Shares and Conflicting National Interests in Linear Trade Models (with William J. Baumol)
Japan and the World Economy, International Journal of Theory and Policy, Elsevier Science Publishers B.V. (North Holland), 9 (1997), pp. 123-150.
This paper amplifies and explains the NAS Proceedings note described below and shows that conflict in the interests of countries can arise with the usual linear production functions. It uses the standard Ricardo equilibrium model with linear productivities. It obtains multiple equilibria by considering all productivities in the two trading countries that do not exceed some given technological limits. We show that the resulting regions of equilibria have the same characteristic shape as those produced by economies of scale. We discuss the inherent conflict in the interests of the two trading countries due to the fact that the best equilibria for one country are usually poor ones for its the trading partner.
Inefficient and Locally Stable Trade Equilibria Under Scale Economies: Comparative Advantage Revisited (with William J. Baumol)
KYKLOS, International Review for Social Sciences, Switzerland, 1996, Vol. 49, Fasc. 4, pp. 509-540.
In a world of scale economies market forces can easily maintain inefficient equilibria. We introduce the concept of degree of efficiency and of local efficiency to bring structure into the concept of efficiency in the presence of scale economies.
Productivity growth, international competitiveness and the welfare of nations (with William J. Baumol)
Revue d’économie industrielle, Vol. 78, 4e trimestre 1996. pp. 47-66.
This article shows that productivity improvement in one trading country will sometimes benefit, sometimes harm its trading partner, and explains the reasons and circumstances under which each possibility will occur.
A Linear Ricardo Model With Varying Parameters (with William J. Baumol)
Proceedings of the National Academy of Sciences, U.S.A., 1995, Vol. 92, pp. 1205-1207.
This note shows that if we consider all possible productivities, that is all productivities that do not exceed some given technological limits, in the standard linear Ricardo model, that the resulting multiple equiibria form regions having the same characteristic shape and economic consequences as the regions produced by the multiple equilibria resulting from economies of scale.
Scale Economies, The Regions of Multiple Trade Equilibria, and Gains From Acquisition of Industries (with William J. Baumol)
C. V. Starr Economic Research Report (New York University), June 1992, RR # 92-10.
This positions the economies of scale model into the background of the existing literature. It also describes the transition from the traditional linear model to the economies of scale model as more of the industries of the model are allowed to have economies of scale.
Ricardo Model with Economies of Scale
Journal of Economic Theory, April 1994, Volume 62, No. 2, pp. 394-419.
This carefully develops the methods and results summarized in the proceedings note below. It shows that the shape of the region of equilibria, for large numbers of industries, is obtained by a linear programming calculation. It also discusses the consequences of the regional shape; in particular the inherent conflict that can exist between the interests of the trading nations.
A Ricardo Model With Economies of Scale
Proceedings of the National Academy of Sciences, U.S.A., 1991, Vol. 88, Issue 18, pp. 8267-8271.
This introduces the standard equilibrium model of international trade (Ricardo Model) changed only in there are economies of scale in the production function. It shows that the multiple equilibra that then result form a well defined region of equilibria with a characteristic shape having significant economic consequences. It introduces the mathematical methods required to understand the shape and other characteristics of the region of equilibria.