What went wrong with finance? Why is Macroeconomics such a mess? "Visualizing a Systems Approach" Economists find evidence for famous hypothesis of ‘comparative advantage’ David Ricardo’s concept of “comparative advantage” is one of the most famous and venerable ideas in economics.
Dating to 1817, Ricardo’s proposal is that countries will specialize in making the goods they can produce most efficiently — their areas of comparative advantage — and trade for goods they make less well, rather than making all kinds of products for themselves. As a thought example, Ricardo proposed, consider cloth and wine production in England and Portugal.
Economists find evidence for famous hypothesis of ‘comparative advantage’ Getting Economics to Acknowledge Rentier Finance. The economics discipline has for the most part managed to ignore the 800 pound gorilla in the room: that of the role that the financial services industry has come to play.
Astonishingly, even though the reengineering of the world economy along the lines preferred by mainstream economists resulted in a prosperity-wrecking global financial crisis and a soft coup by financiers, the discipline carries on methodologically as if nothing much had happened. And one of its huge blind spots is its refusal to acknowledge the role of banking and finance in modern commerce. Interest rates are simply an input into the preferred form of macro models, DSGE (dynamic stochastic equilibrium models).
Economies are assumed to be self correcting, and to automagically “correct” to full employment.