Exports in the Scheme of Things

Traditional Economists extol the advantages of Trade, citing Ricardian Advantage. The composite of this Advantage must be examined, if one is to understand the value of Exports. It states for the undertrained that two countries can maximize Production and Profits by utilizing Trade with each Other, to the degree each country is producing the absolute Most of what they produce best, then they trade products with each other for each's best advantage. A great number of Economists thought Ricardian Advantage could not be explained without the use of mathematics, and Some probably still think so. This is the economic theory behind support of Trade.

Contemplation of Ricardian Advantage suggests it must consist of geographical advantage in production--access to resources, access to production energy and capital, and availability of trained labor cadres. This definition incites another utilization of Economics: if it is a concept of geographical advantage between Producers (i.e., Competitors), then superior Productive capability can be evaluated by Marginal Utility. This means that the value of producing in one Country over the Other can be determined by the Profitability of production at the Marginal Dollar position of best production levels.

The above seems overwhelmingly certain, and it brings on many speculations. The Profitability of production at the Marginal Dollar position can vary by location to resources--initial ore being consumed with transference to alternate location ores, amounts of capital investment--aggregation of capital over time, advances of technology--especially the development of alternate (created) materials for production, and greater levels of labor education and training. Consideration of all the above variables indicates that the Marginal Utility of Trade itself, over time, will decline; less and less Products would enjoy the advantages of Ricardian trade. This is not a call for autarchy, but a statement that advancing economies will acquire greater autarchcal capacities.

Another element enters the matrix at this point: the Cost of Trade itself. This Cost consists of the capital cost of Transportation, the expense cost of Fuel, the capital cost of Transportation facilities, and the Manpower utilized in Transportation. It is clear Trade is defunct of value when the Marginal Utility Profits of Trade alongside the Profits of Transportation do not equal the Costs of Transportation. A advancing Economy would seemingly demand a reducing Trade volume. So why is the United States suffering from an increasing Trade Deficit?

Artificial barriers and Costs to Production exist in the United States, which prohibit the decline of Trade in the U.S. Economists would be quick to point out it is environmental regulations, artifically high Wages due to Welfare payments, and declining resources. These are all a factor in the growth of Trade, but cannot explain the rapid growth of the Trade Deficit. Other noneconomic factors must be impacting, as the previous factors had been in place for decades. Later Posts will examine these factors. lgl