Wow, that statement brings back memories . . .

Instead of talking at one another about China credentials and time in-country and who is the most pithy journalist out there, we should talk about important, exciting stuff.

I’m sure everyone is dying to respond to Greg Mankiw’s post (anonymoused) on whether comparative advantage is a dead concept and whether free trade is the work of the devil and should be stopped as soon as possible. Mankiw attempts to clear the air about the apparent misunderstandings of the mainstream press regarding a paper and comments of Paul Samuelson.

I mean, is this cool or what? The upshot here is that Samuelson’s paper did not find that comparative advantage, particularly when one analyzes US-China bilateral trade, is a dead concept.

Samuelson’s paper involved three stages. First, starting from autarky, China and the United States open up to trade and experience the usual benefits of trade based on comparative advantage. Second, China has a productivity gain in its export good, which improves the U.S. terms of trade and further benefits the United States. Samuelson’s third stage (or second “Act” as he put it) involves a Chinese productivity gain in its import good. This narrows the differences between the countries and thus reduces the scope for trade, potentially so much that all trade disappears. As trade diminishes, so too do the gains from trade.

So don’t worry, trade is still a good thing, and we will not be going back to autarky anytime soon, unless you live in North Korea. I know a lot of folks out there were nervous.

OK, we can go back to navel gazing now. That’s fun too. Maybe we can talk about tiger photos later this afternoon. Oooh! How about whether the lunar probe pics were faked? Endless laughs there, methinks.