Econ Dev Prof sez that . . .

[Tingkai]

Originally posted by Shogun Gunner
self sufficient is not defined by a variety of goods. A country could produce enough food, but not have such things as coffee and tropical food.

By the definition, USA is self sufficient despite not growing some types of food

Not within this context. Economic decisions in developed nations are not based on the minimum amount of food required to keep a country alive. Instead, decisions are made on what people want rather than what they need to survive.

[Urban Ranger]

Originally posted by KrazyHorse
Basically, a factory worker or software engineer in the first world is so much more productive than a farmer in the first world is, that without subsidies 1st world farming could not provide a living wage to its practitioners...

That's Relative Advantage

For example, a person may make $20 an hour as a plumber in the US, but only $12 as a farmer. So it's disadvantage for the person to be in farming.

[Urban Ranger]

Originally posted by Lawrence of Arabia
yeah but its based on the Arthur Lewis model, (ya know, the guy who won the nobel prize for economics?,) the model that won him the nobel prize, so theres not much disagreeing to do when its mathematical.

Maths is just a tool.

GIGO, you see.

[Lawrence of Arabia]

For example, a person may make $20 an hour as a plumber in the US, but only $12 as a farmer. So it's disadvantage for the person to be in farming.

yeah but wages are dependant on productivity.

[Urban Ranger]

Originally posted by Lawrence of Arabia
yeah but wages are dependant on productivity.

Yes, but productivity inside the same country, not with another country.

A person may be more productive in the role of a farmer when compared to one in, say, Lower Elbonia, but he is still going to make less then when he becomes, say, a lumberjack.

[Lawrence of Arabia]

Yes, but productivity inside the same country, not with another country.

A person may be more productive in the role of a farmer when compared to one in, say, Lower Elbonia, but he is still going to make less then when he becomes, say, a lumberjack.

well lets say you have two jobs. agriculture and manufacturing. if manufacturing becomes more productive and thus higher wages more people will move towards it until productivity and marginal returns to labor equalize productivity between agriculture and manufacturing.

[Urban Ranger]

Originally posted by Lawrence of Arabia
well lets say you have two jobs. agriculture and manufacturing. if manufacturing becomes more productive and thus higher wages more people will move towards it until productivity and marginal returns to labor equalize productivity between agriculture and manufacturing.

Yup, that's when agriculture has to start paying more for workers, and become less competitive against 3rd World countries.

[Kidlicious]

Originally posted by Lawrence of Arabia


well lets say you have two jobs. agriculture and manufacturing. if manufacturing becomes more productive and thus higher wages more people will move towards it until productivity and marginal returns to labor equalize productivity between agriculture and manufacturing.

You've got this backwards. If productivity increases in one wages will fall there, and they will eventually fall in the other sector.

[Lawrence of Arabia]

You've got this backwards. If productivity increases in one wages will fall there, and they will eventually fall in the other sector.

why is that?

[Imran Siddiqui]

Yeah, that is strange, since as productivity has increased throughout history, wages have increased.

[Kidlicious]

Originally posted by Lawrence of Arabia


why is that?

The immediate effect of productivity increase is a decrease demand for labor. Whether or not that leads to a decrease in wages is debatable, but according to the laws of demand wages will go down. In actuality they stick. The surplus in labor however puts pressure on wages in the other sector. The law of supply says that wages will fall in that sector. Again, in actuality they usually don't much.

The increase in productivity increases the potential for higher wages only. Another force has to actually cause the increase in wages.

[Lawrence of Arabia]

Yup, that's when agriculture has to start paying more for workers, and become less competitive against 3rd World countries.

what happens is that manufacturing drives higher productivity in agriculture, raising both productivity and wages in the agricultural sector, making them competitive again.

[Lawrence of Arabia]

The immediate effect of productivity increase is a decrease demand for labor. Whether or not that leads to a decrease in wages is debatable, but according to the laws of demand wages will go down. In actuality they stick. The surplus in labor however puts pressure on wages in the other sector. The law of supply says that wages will fall in that sector. Again, in actuality they usually don't much.

The increase in productivity increases the potential for higher wages only. Another force has to actually cause the increase in wages.

no, the immediate effect of productivity is increased production by what you already have. marginal product increases. since W = P MPL, where w is wage, P is price of the good, and MPL is marginal product or labor, as MPL increases, so does W. P is exogenous.

[Kidlicious]

Originally posted by Lawrence of Arabia


no, the immediate effect of productivity is increased production by what you already have. marginal product increases. since W = P MPL, where w is wage, P is price of the good, and MPL is marginal product or labor, as MPL increases, so does W. P is exogenous.

This violates the laws of supply and demand. If wages increased in the agricultural sector during the mechanization of agriculture no labor would have ever migrated to the city and into the manufacturing sector.

[Kidlicious]

Actually it's not a violation. It's an assumption of full employment in the short run under the condition of productivity improvement.