Question

There are two questions related to Foundations of Modern Trade Theory: Comparative Advantage

1.Will it be impossible to keep low-skilled jobs in the U.S.?

2.Is it possible to estimate the gains from trade?

Answer 1

1-ans

* There are NO jobs that Americans won’t do. There are jobs they won’t do for the pay offered. Example, Picking strawberries is a difficult, back breaking job. In addition to getting almost no money, you work in conditions that put your physical well being at risk. Now, if farmers had to pay Americans to do the job, they would have to pay $15 or $20 an hour.

* The price of strawberries would go up by 25%, maybe 50%. People would consume less strawberries and a lot of land that is used now to grow strawberries would be used to grow other things. One reason it is so labor intensive is because there are no machines that can do a good job picking strawberries.

* The berries are too delicate and the berries ripen at different times on a single bush. So, no machines, but why would there be? Would you pay $250,000 to replace 5 workers who earned $25,000 a year? However, if they had to hire Americans and pay them $50,000 a year (or more), then it starts to make sense to spend the money on a machine.

* Those people who invent machines would start inventing and before too long, those workers would be replaced by machines. You would need factories to make the machines, and workers to repair and maintain the machines. More people would lose their job than would get new jobs taking care of the machines, but that is the way it always goes.

* Thus, we found that its not a impossible task to keep low-skilled job in the US.

2nd Ans -

Yes, to an extent you can measure a gain from trade being how much will it cost to make a product verses importing it, how will it create jobs, how will it improve in quality if it is made. Sometimes it is better to buy things made from somewhere certain because the quality difference like cars (debatable) but some people prefer GM cars because they say they are made better or last longer.