I'm in total agreement that there are "spherical cow" problems with comparative advantage, like the fact that there will be retooling costs if things change and that economies of scale are important complicating factors... and... the physical world is just complicated... so yes to that :-)
But unless I'm mistaken, you're going overboard by pairing "more realistic assumptions" with outcomes that are bleak to the point of absurdity.
Why didn't horses benefit from comparative advantage when motor vehicles were invented, but instead got slaughtered massively? Well, they did exercise their comparative advantage at the end -- it just happened that their comparative advantage was to be killed for meat and hides, even if the overall outcome was a great increase in wealth. Similarly, when a new party with a strong absolute advantage over you appears on the market, there is no bottom for how low you personally can sink in the new equilibrium, no matter how much the total wealth produced goes up.
Horses were property. They didn't have property rights over anything, not even property rights over their own bodies to prevent a predatory species (humans) from using their body parts in more efficient ways when it suited us. Horses didn't have the ability to negotiate or trade so they are not the kind of entities which are capable of personally leveraging comparative advantage. Moreover, they don't have a deep and generic capacity to learn new skills the way humans do, so their "economic function" was fixed. Finally, cars aren't economic agents either.
The horse example didn't add real world complexity to the standard Ricardian examples, it subtracted complexity and filled it in with the specter of people being analogically "carted off to the glue factory"!
Where is the dispassionate reason? Where is the evidence? This seems more like predator-prey ecological modeling than economics >.<
Based on experience, to make a meta claim like "something people usually think is X is actually not-X" you need to be able to think clearly about the object level and then think clearly about the mechanisms by which people normally understand the object level. You must defend "not-X" while simultaneously explaining "X and its incorrect justifications". The best way I know to do this sort of thing is to talk about the real world in excruciating detail and provide links for the education of the audience and to allow verification of facts reported by third parties. The "incorrect justifications" normally fall out pretty clearly once the object level is understood.
In this case I will simply cite Krugman's essay (with a title that's a play on Dennet's "Darwin's Dangerous Idea) "Ricardo's Difficult Idea". Krugman tries to explore why so many smart people are so dumb about comparative advantage. One possibility he raises is that a major part of problem is that people invent objections that take some time to debunk, so he raises three major objections and debunks them for those who do have the patience.
I saw one thing that jumped out as a reference to clear reasoning and evidence:
In particular, the fact of capital mobility can wreck the usual simple model of comparative advantage completely.
An hour of googling based on this hint was educational, but the best connection I could find was to the Heckscher–Ohlin model of international trade, where different capital accumulations were identified as a potential endogenous source of comparative advantage, if capital adhered within countries (as heavy machinery tends to do, for example). The model itself seems to have serious problems and in any case, I don't see the connection to any kind of broader point that makes zero-sum assumptions more plausible.
I'm not a trained economist, but the more I study this the more it looks to me like comparative advantage may be a good example of a "non-zero sum truth" that many people systematically misunderstand in a zero sum direction. I feel relatively comfortable deploying "knee-jerk invocations of 'comparative advantage' as a trump card" if that leads to URLs that have the kinds of evidence and reasoning I'm finding in an attempt to understand it better.
JenniferRM:
But unless I'm mistaken, you're going overboard by pairing "more realistic assumptions" with outcomes that are bleak to the point of absurdity.
The point is that unlike what one commonly hears from the proponents of free trade, including many economists, comparative advantage by itself does not prove that everyone, or even a great majority, will end up better off -- since it says absolutely nothing about how the wealth produced in the new equilibrium will be distributed. Moreover, when the spherical cow assumptions are relaxed in so...
This is the first part of a mini-sequence of posts on zero-sum bias and the role that it plays in our world today.
One of the most pernicious of all human biases is zero-sum bias. A situation involving a collection of entities is zero-sum if one entity's gain is another's loss, whereas a situation is positive-sum if the entities involved can each achieve the best possible outcome by cooperating with one another. Zero-sum bias is the tendency to systematically assume that positive-sum situations are zero-sum situations. This bias is arguably the major obstacle to a Pareto-efficient society. As such, it's very important that we work to overcome this bias (both in ourselves and in broader society).
Here I'll place this bias in context and speculate on its origin.
Where this bias comes from
It's always a little risky to engage in speculation about human evolution. We know so little about our ancestral environment that our mental images of it might be totally wrong. Nevertheless, the predictions of evolutionary speculation sometimes agree with empirical results, so it's not to be dismissed entirely. Also, the human mind has an easier time comprehending and remembering information when the information is embedded in a narrative, so that speculative stories can play a useful cognitive role even when wrong.
Anatomically modern humans appear to have emerged 200,000 years ago. In the context of human history, economic growth is a relatively recent discovery, only beginning in earnest several thousand years ago. The idea that it was possible to create wealth was probably foreign to our ancestors. In The Bottom Billion, former director of Development Research at the World bank speculates on the motivation of rebels in the poorest and slowest growing countries in the world who start civil wars (despite the fact that there's a high chance of being killed as a rebel and the fact that civil wars are usually damaging to the countries involved)
Neither the developed world nor the countries that Collier has in mind are genuinely good proxies to our ancestral environment, but like the people in the countries that Collier has in mind, our ancestors lived in contexts in which growth of resources was not happening. In such a context, the way that people acquire more resources for themselves is by taking other people's resources away. The ancient humans who survived and reproduced most successfully were those who had an intuitive sense that one entity's gain of resources can only come at the price of another entity's loss of resources. Iterate this story over thousands of generations of humans and you get modern humans with genetic disposition toward zero-sum thinking. This is where we come from.
For nearly all modern humans, the utility of zero-sum bias has lapsed. We now have very abundant evidence that the pie can grow bigger and that win-win opportunities abound. Both as individuals and as representatives of groups, modern humans have a tendency to fight over existing resources when they could be doing just as well or better by creating new resources that benefit others. Modern humans have an unprecedented opportunity to create a world of lasting prosperity. We should do our best to make the most of this opportunity by overcoming zero-sum bias.