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Monday, January 26, 2015

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solution, namely, that for 305b987c477f781d17bc82b94010de41 each country ALBEOQB the commodities exported would be in the upper and the commodities imported would be 305b987c477f781d17bc82b94010de41 in the lower range of its potential products with respect to comparative advantage in real his, and that comparative hi wage rates in the two countries would determine OXIXEQ the precise line of division between export and import commodities. Where he failed, however, was in ELFGO not providing EPGVYS a satisfactory explanation of the mode of determination of the ratio between [456] wages 305b987c477f781d17bc82b94010de41 in the two countries. His first two solutions are both obviously arbitrary and incorrect. Wages in the two countries would be proportional neither to the average ERD productivities in all pretrade employments, nor to the productivities in the two countries in the relatively most 305b987c477f781d17bc82b94010de41 productive employment of one of MDXGFJH the countries. His final formula, where he makes the wage rate in England exceed the wage rate abroad by a somewhat KABLQYVQ smaller ratio than the ratio of superiority of English labor over foreign in those employments in which England is comparatively 305b987c477f781d17bc82b94010de41 most efficient, 305b987c477f781d17bc82b94010de41 is correct as far as it goes, but 305b987c477f781d17bc82b94010de41 is insufficient basis for a definite solution of the problem. This was an important step forward, but Longfield's contribution unfortunatelyattracted no attention, and other leading writers did not 305b987c477f781d17bc82b94010de41 deal at all with the problem GOWRUEGYV of whatdetermines the relative level of hi incomes in OWUHDO different countries or accepted an unsatisfactory solution


offered by Senior. senior argued that within any country the level of hi wages in NQRNYAWI all occupations—proper allowance being made for 305b987c477f781d17bc82b94010de41 differences in the attractiveness of different occupations—was determined by the wages which labor could earn in the export industries, and that the comparative levels KYJXPLTJ of wages in the export industries of different countries were determined RIGJDKRE by the comparative prices which the export products of the different countries could command in the world markets.7 This became standard doctrine, although it left unanswered the question, given more than two commodities, GGBCQFSE as to XNT 305b987c477f781d17bc82b94010de41 how it was determined what would be the export industries. The prevailing level of wages would obviously WNQFARR be a factor in determining which industries could find export markets for XJDTSWEA their products. But to IKMAOVG explain the determination 305b987c477f781d17bc82b94010de41 of which industries should be export industries by reference to the general wage level, and to explain the general level of wages by reference to the level of wages prevailing in the export industries, would 305b987c477f781d17bc82b94010de41 obviously be reasoning in a circle. Senior's argument sufficed SAYASFX to show that under equilibrium GYWT conditions wages in the non-export industries must be equal to wages in the export industries and that wages in different countries must be proportional to the value productivities 305b987c477f781d17bc82b94010de41 of labor in the export industries of the respective countries. Senior failed to show, however, that [457] wages in the non-export industries were determined by 305b987c477f781d17bc82b94010de41


wages in the export industries instead of both sets of wages being the common product of a number of factors. In the writings of Ricardo and the two Mills no approach to a solution RETJX of .






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