9_15_Notes - Econ 4730 F2008 (9/15/2008) The benchmark...

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Econ 4730 F2008 (9/15/2008) The ‘benchmark model’ discussed before is, at the most, a first approximation. Its only merit is tractability. A theory defies understanding is of no use. Now is the time to take note that trade is not aid. By history, economic aid is like first aid (in medicine), not to be relied upon in any long term; by analysis below, trade can enhance productivty, aid cannot; now by nature, trade must involve two or more goods. Thus, any theory focusing on trade must include more than one good. Are manufactured industries superior to primary industries? Perhaps. Recent energy shortage seems to dispute the above view. It does not. The unit price of any primary good (even if it is not exhaustible) cannot increase that much. Otherwise, one substitute or another will become economically viable. True, this also holds for manufacturing goods. But here is a difference. Through on-the-job training, workers can cumulate experience, whatever the employment. However, in general, experience is less sector-specific in the
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This note was uploaded on 02/20/2009 for the course ECON 4730 taught by Professor Henrywan during the Fall '08 term at Cornell.

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