Tuesday, January 24, 2012

Comparative Advantage

This is Apple via Krguman blog  NYT.  Apple blunt and heart breaking comments  to the American people that why Chinese get their jobs, why American can not have their jobs. It is heartbreaking for lots of Americans but that is true I can perfectly understand Apple;

 “We sell iPhones in over a hundred countries,” a current Apple executive said. “We don’t have an obligation to solve America’s problems. Our only obligation is making the best product possible.” 
 “The entire supply chain is in China now,” said another former high-ranking Apple executive. “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away. You need that screw made a little bit different? It will take three hours.”


…their pattern of specialization is fully determined by comparative advantage: Harry does rockets, Louise does brains. Yet the gains from trade are to a large extent the result not of the differences between the two individuals, but of the inherent advantages of specialization: because Harry can launch Louise while Louise fixes his brain, each of the two only needs to master one skill.
Does this have any relevance to current policy disputes? Well, many people – myself
included – have argued that imports of labor-intensive goods from developing countries exert a
depressing influence on the real wages of less-skilled workers in advanced countries. This may
still be true, but the role of local external economies may offer a partial offset: if Chinese buttons are cheap not just because of low wages but also because of the advantages of the Qiaotoucluster, U.S. imports of buttons have an ambiguous effect on low-skill wages rather than a definite Stolper-Samuelson effect.
 Interesting point and I can understand. Successfully managing a company, management only two things in our mind.   Cost cutting + increase selling = maximizing profit.   Economists do the policy managers do profit.  I think comparative advantage and localization supreme ruler.  What is perfect solution for the American then? If anyone have the solution for the Apple brings back to the jobs to the Americans that WOULD be of course a huge discovery! Triple Nobel price!!!