www.planned-obsolescence.org/p/six-milestones-for-ai-automation
1 correction found
But this only applies because those models assume that land is infinite (so humans can always go to marginal land and subsistence farm there) and that trading overheads are zero.
This overstates the assumptions behind comparative advantage. Comparative-advantage models do not require infinite land, and economists have also modeled comparative advantage with positive transportation/trade costs.
Full reasoning
The sentence says comparative advantage only works in models that assume infinite land and zero trading overheads. That is not correct.
- Introductory economics treatments derive comparative advantage from opportunity cost under scarcity, not from infinite land. OpenStax’s macroeconomics text explicitly discusses comparative advantage using scarce resources, including "labor, land and financial resources".
- Mainstream trade theory also includes models where comparative advantage comes from relative factor supplies (for example, land, labor, and capital), rather than assuming land is effectively unlimited. A Federal Reserve paper summarizes a core prediction of the Heckscher-Ohlin theory this way: countries specialize according to comparative advantage, and the source of that comparative advantage is differences in relative factor supplies.
- Zero trade costs are a common simplifying assumption in some basic models, but they are not required for comparative advantage to apply. NBER published a model of comparative advantage that explicitly includes transportation costs and studies how comparative advantage interacts with them.
So the problem is not just that the article mentions simplifications; it claims those simplifications are the only reason comparative advantage applies. The cited sources show that economists analyze comparative advantage with scarce land/factor endowments and with positive transport costs as well.
3 sources
- 20.1 Absolute and Comparative Advantage - Principles of Macroeconomics 2e | OpenStax
"if Zambia focuses its resources on producing copper, it cannot use its labor, land and financial resources to produce other goods such as corn."
- The Fed - Factor Supplies and Specialization in the World Economy
"A core prediction of the Heckscher-Ohlin theory is that countries specialize in goods in which they have a comparative advantage, and that the source of comparative advantage is differences in relative factor supplies."
- Comparative Advantage, Geographic Advantage, and the Volume of Trade | NBER
"A functional relationship between the degree of a country's comparative advantage in any good and the volume of its net exports ... is established using a model with per-unit-distance transportation costs..."