I’m still hammering away on my next longer essay. Meantime, one recent article I noticed on the Mises Daily is something I’ve been meaning to ask you about.
I haven’t read in full Murray N. Rothbard’s An Austrian Perspective on the History of Economic Thought, which you can download here. The article is an extract from this work, linking Ricardo’s Law of Comparative Advantage to the Libertarian model of free trade. As some of you may recall, I made some heavy criticism back here of the social repercussions of applying Ricardo’s law to an insular society of long-established cottage industries, such as 19th century India. Yet Rothbard clearly sees value in its application to a globalized model.
What do you think of Ricardo’s Law, and how careful should organisations like the World Bank and the IMF be in its application to developing nations? Rothbard defends it like this:
Another implication of the law of comparative advantage is that no country or region of the earth is going to be left out of the international division of labor under free trade. For the law means that even if a country is in such poor shape that it has no absolute advantage in producing anything, it still pays for its trading partners, the people of other countries, to allow it to produce what it is least worst at.
In this way, the citizens of every country benefit from international trade. No country is too poor or inefficient to be left out of international trade, and everyone benefits from countries specializing in what they are most best or least bad at — in other words, in whatever they have a comparative advantage.
How much of a holy grail do you think should this theory be to supporting a global economy? Quite apart from its impact on developing countries, the goal of national specialization of industry seems to imply a corollary of loss of national independence. To the collectivist, this is probably something to be desired. But to the Libertarian?