The drama surrounding President Trump鈥檚 decision to impose import tariffs on steel and aluminum has roiled the Republican Party and wide swathes of the corporate elite. The tariff decision comes on the heels of . This accusation of 鈥渦nfairness鈥� when it comes to US trade deficits is well worn. In a previous era, Japan was the alleged culprit of 鈥渦nfair鈥� trade practices because of its persistent trade surpluses with the U.S.Read More »
On Saturday, April 19th 1817, David Ricardo published The Principles of Political Economy and Taxation, where he laid out the idea of comparative advantage, which since has become the foundation of neoclassical, 鈥榤ainstream鈥� international trade theory. 200 years 鈥� and lots of theoretical and empirical criticism later 鈥� it鈥檚 appropriate to ask, how is this still a thing?[1]
This week we saw lots of praise of Ricardo, by the likes of , , and . Mainstream economists today tend to see the rejection of free trade implicit in Trump and Brexit as populist nonsense by people who don鈥檛 understand the complicated theory of comparative advantage (鈥溾��, as Paul Krugman once called it in his explanation of why non-economists seem to not understand comparative advantage). However, there are fundamental problems with the assumptions embedded in Ricardo’s theory and there’s little evidence, if any, to back up the Ricardian claim that free trade leads to balanced trade. On this bicentenary, I therefore think it鈥檚 timely to聽revisit some of the fundamental assumptions behind Ricardo鈥檚 theory of comparative advantage, that should have led us to consider alternative trade theories a long time ago. Read More »
Since 2001, the Vietnamese government has acknowledged the need to increase generation capacity in the electricity sector. With unprecedentedly , the electricity industry, however, commonly fails to deliver, especially during peak hours and dry seasons. It is reported that 鈥榠n the whole country there were 3,000 blackout incidents due to system overloading during the first 7 months of 2008鈥�, equivalent to 鈥�14 blackouts a day鈥� (). As a way to mitigate this chronic electricity shortage, the industry鈥檚 biggest player, Electricity Vietnam (EVN) has to buy in all that is produced domestically and import from neighbouring countries such as Laos and China. Yet, not only cannot EVN satisfy its primary objective of ensuring a secure electricity supply, but it also suffers significant annual financial losses of hundreds of million dollars. EVN claims that too low average pricing of electricity is the cause of this loss. In addition, audit reports reveal that EVN鈥檚 diversification policy had caused further losses.
The inefficiency in infrastructure investment and inadequacy in organizational management have caused anger amongst the public, creating an extremely negative attitude towards the traditional monopoly structure of the electricity sector. Utilising a popular measure, policy makers therefore choose to apply the 鈥榤arketisation鈥� or liberalization model that is, in theory, similar to the liberalization model that has been implemented in the UK and EU since the 1990s. The main reasons behind the policy are: 1) to assist the government in infrastructure investment; 2) to expose EVN to competitive forces through encouraging private and foreign investment which would force it to improve its financial and operational performance; and 3) to provide affordable and stably-priced electricity. These 3 major objectives are thought to be the outcomes of introducing competition to the traditional monopolistic market structure. This causal link is, however, usually assumed rather than discussed and tested.Read More »
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