Ricardo's Friends

hand shake Thinking about Evolution & Economics and Some Notes on the Natural Selection of Ideas

Part 3 - Trade and Technology - The strange tale of Ricardo’s friends and the arrogance of intelligent design

The principle of comparative advantage and gains from trade is the most important result in economics yet thousands of intelligent men have not been able to grasp it even after it was explained to them

Now God said, and I agree with him, ‘all things bright and beautiful, the Lord God made them all …'

Once upon a time everyone was in awe of the Peacock’s magnificent tail and ‘pecking orders’ were everywhere.

Some time after Mitochondrial Eve’s mysterious presence in Africa one of her descendants was blessed. Dominant was a remarkable specimen, one upon whom nature had smiled. He waxed strong and brainy. He was not only outrageously handsome, he was also the best fighter, the best runner, the best at spears & clubs, the best at counts and he made the best bread. Nobody could compete with Dominant he was simply the best at everything, he was top peck.

Inevitably Dominant's house was full of gold and he had the pick of the girls. Lots of beautiful girls had lots beautiful babies all sired by the great Dominant. There was a profusion of young Dominants wallowing in the lap of luxury, some said this profusion was just reward for prowess ... everybody loved him, he was a natural leader defending his flock against all manner of parasites and predators ... it seemed cream was always rising to the top ... Dominant wanted for nothing and smiled slightly at the poor folk below him ...

But why did the all Dominants, wherever in the world they lived, always seem to maintain their exalted position of privileged power by pecking? Did power always eventually corrupt and did absolute power always eventually corrupt absolutely? Was tyranny and oppression inevitably Joe Sixpack's destiny? Much later in 1776 Tommy Jeffers and his pals thought long and hard and invented some papers which helped with 'checks & balances' and 'separation of powers'?

So it came to pass that even with his great staying powers Dominant couldn’t service all of the girls and some of the plainer girls became available for the also-rans to entertain. Ricardo was quite ordinary but he did manage to breed slowly with one of the girls who had been left out of the Dominant rampage. In fact he thought she was quite beautiful.

Ricardo was in respectful awe of the great Dominant who proved adept at defending against the Belligerents from afar who were constantly foraging and on the steal for girls and gold. Ricardo couldn’t possibly compete and he didn’t even try to steal gold or strut for the girls. He would lose at everything that’s for sure. However he did bake small passable bread, it took him a long time and often he worked through the night. His bread was wholesome but it was not as tasty and not as light as the barrow loads of bread from Dominant’s palace.

Dominant it seemed had organising powers with great banks of clerks and runners who marshaled the work of the bread making gangs and his cavernous ovens. It seemed Dominant could not only fight, he could also organise and he operated on a massive scale. Ricardo hadn't got a chance ... he was stymied.

But he kept trying and slowly it came to pass that Ricardo proved to have some clever aptitude for bread making but he seemed to have monstrous bad luck in the fields. His grain harvests were poor and he never had enough flour for his bread, and some of his flour was taken by Dominant to help pay for the spears and the palace.

Ricardo was subsisted and cowed. However he had many friends who had also been eclipsed by the rampage and some of them grew inferior grain in inferior fields with inferior waters but they still managed to produce a little.

Ricardo found his bread making skills were capable of taking inferior grain and producing passable bread.
So he encouraged his friends to grow the grain for him so he then had more time to bake more passable bread.

In this way he was starting to spend more and more of his time with his dough and his ovens and less time in his failing fields. Soon his friends were growing all the grain for him and he was making passable bread for the whole village.

And lo his bread was getting better. As he was now able to devout all his time to the big bake he learned new tricks and his bread was now always fresh.

The villagers loved it.

Similarly, relieved of the onerous task of bread making some of his friends spent more of their time in the fields ... and they too learned new tricks with the ploughs and the weeding and even the dung ... they all wallowed in hard work, honesty & thrift.

In this way folk mulled over the possibilities, investigated their ideas & learned a trade ... this would have been quite impossible if they had had to rush back to their ovens ... think about it ... learn your trade?

In time they discovered new fields with richer soil a distance away, the yields seemed to be higher and the grains bigger. Furthermore Ricardo was discovering that their new grain was making much finer bread. Ricardo was excited and was soon accumulating more special grain and was teaching his sons his skills.

The planters were also making special hay in their new fields and their sons were thinking about better ways of hauling the grain to the bakery. Instead of their sore bent backs they started using wheeled trucks and everybody seemed to be busier.

Some of the new fields were a distant distance away but it was worth the trek. In any case Ricardo was building ovens on the fields close to the village and in any case the new trucks were making the mileage manageable and in any case Ricardo paid them well, his bread was very nourishing. Otherwise they wouldn't have been so eager would they?

It was thus the specialised bread makers, the specialised planters and the specialised truckers had more time to discover new tricks - clever new ways of doing things ... and productivity zoomed.

Folk mulled over the possibilities, investigated their ideas & learned a trade ... this would have been quite impossible if they had had to rush back to their ovens ...

Shortly, the great unwashed in the village realised that everything was getting better as more and more specialisation led to more and more new discoveries ... and more and more nourishing bread.

And best of all the nourishing bread was helping sons to become strong and daughters to become beautiful.

Dominant of course was still making bread and harvesting grain but he only had time to bake once a week and his bread was often stale ... and strangely the queues had disappeared ...

But Dominant was still the best fighter and was envious of Ricardo’s bread. He demanded a ‘share’ for his pleasure. Ricardo was sorely taxed and unnerved but he was hopeless at fighting so it came to pass that some of his bread was diverted to feed the Dominant entourage. Ricardo was sad; as his taxes went up his sales & output mysteriously went down ... his enterprise was humbled but he coped and thought harder.

Dominant had a Financial Adviser, Mercantilo, who had a reputation as a wizard with cowry shells and had eyes that could see round corners. Mercantilo held Dominants ear and policy, his great idea was to grab Ricardo's ovens & recipe, why should this common serf have all these ill-gotten gains? And had not Ricardo deliberately reduced his output so he paid less tax, and not paying your taxes was 'immoral'? A siren call and Dominant loved it. He set about and sent slaves to demolish Ricardo's ovens and steal the recipe and he built great new Ovens of State in the metropolis and smiled at all the trimmings. But scribes had trouble translating the recipe and they suspected that Ricardo's user manual did not mention his best tricks ... and Ricardo himself was unsure how & why his kneading technique 'worked' ... it 'just happened' to make good bread so he kept at it. Wotever Dominant's bread turned out to be dirt poor and lousy.

Undeterred and omnipotent Dominant decreed that his bread was a national asset and draped the loaves in his very own National Flag. He decreed that Ricardo's delectable bread was now 'Illegal Tender' and banned.

Ricardo was bludgeoned, but somehow he had to put a crumb on the table for his family so he thought and imagined what to do next ... he knew from last time the best thing to do when you're in a hole was to stop digging. Dominant could do all sorts of mighty things with his spears & clubs but he found it impossible to stop Ricardo from thinking! Ricardo mulled and decided to start experimenting with cakes and discover how the cookie crumbled. His friends organised supplies of the best cream from their cows and smuggled in some new fangled sugar from overseas and he put a chimney booster on his new ovens. The cakes turned out to be scrumptious, the queues got longer and Ricardo expanded his production into neighbouring villages and his friends talked about the new ideas which had overcome the rigours of reality and were now special and they imitated their mate with gusto in other villages.

Mercantilo was well fed up & drunk, he guessed Ricardo was a magician who did strange maths making 2+2=5, he created wealth 'out of nothing' and only the Gods could that, Ricardo had to be witch hunted. But eventually an old sage in Edinburgh, Adam the Smith, wrote extensive wisdom and it was Mercantilo who was rumbled, he seemed to be doing stupid maths making 2-2=0, starting off with Ricardo's riches and ending up with MT coffers, the other palace fellow travellers began to call him 'Misfit'.

And other things didn’t stand still. Remember the planters were also special, they had special fields and had asked their sons to carry the special grain to the special bakery in special trucks.

Folk mulled over the possibilities, investigated their ideas & learned a trade ... this would have been quite impossible if they had had to rush back to their ovens ... think about it ... learn your trade?

The planters now had the time to experiment with the strange wild ‘cotton fluff’ which grew on wasteland in far away lands where it was rumoured that Dominant had fought belligerents for his gold. And lo there was more, the women folk were also experimenting and discovered they could spin this cotton fluff into yarn and weave it into cloth. The men were quietly proud of this interesting ‘know how’, especially as it came most unexpectedly from the girls who were different and always seemed to dance backwards. The prowess of Dominant had made it easy for him to steal his gold from the belligerents but the planters discovered that this cotton was a weed and of no use to the belligerents. In fact they were pleased to see it go. Especially if they were given nourishing bread in exchange!

The girls were now sewing beautiful gowns from the cotton cloth which they could easily wash. Especially as one clever planter had had the time to experiment and discover soap amongst the ashes from his hog roast.

Folk mulled over the possibilities, investigated their ideas & learned a trade ... this would have been quite impossible if they had had to rush back to his ovens ... think about it ... learn your trade?

All this ‘know how’ that Ricardo and his friends were accumulating seemed very strangely to be changing a weed into a ‘valuable’ crop and waste ashes and waste drips into a ‘valuable’ raw materials for soap. It really was a puzzle?

But Dominant, of course, was far too busy playing with his girls and polishing his treasures to bother about contemplating his ashes. In any case he considered them dirty and a nuisance, and, of course he had proved to everyone many times that he was the best 'designer' and he was always 'right' and he didn't need new fangles.
Dominant, of course, still had his gold and his girls but they were no longer the most beautiful and certainly they were not sewing beautiful cottons.

Dominant’s girls were still in their woolly knickers which were beginning to smell somewhat and some even thought they harboured The Clap. For certain the woolly knickers of the rampage were no longer the finest in the land, Ricardo’s cotton dainties were not only beautiful they were also clean. And strangely his girls were Clap free. Dominant tried placating his own rampage by further discriminating taxes on the cotton cloth but it was difficult and very expensive to collect and there was crowd trouble and restlessness. It seemed everyone now resented Dominant.

Moreover very soon Dominant became dependent on the taxes he extracted from all Ricardo’s tricks. And strangely it seemed Dominant was now using Ricardo's taxes to buy Ricardo's cottons. What stupidity was this? Ricardo mulled and investigated his thoughts. The taxes had already reduced his output and his enterprise and then his own money was being used to buy his own output to pleasure the rampage? Was Ricardo paying twice, another double whammy?

Things got worse for Dominant. Although his girls were now arrayed in Ricardo's cottons and the Clap seemed to have disappeared, Dominant himself became infected with The Creep. The symptoms were insidious, he couldn't be bothered if it didn't matter and grew fat and slothful. More stealing, more taxes, and quotas and rents and regulations, from High Command and all sorts of inspired interference and redesign didn't seem to help. Problems, it seemed, queued up.

And worst still Ricardo’s friends were always experimenting and finding new sharper arrows and new stronger bows … and it came to pass that Dominant was no longer dominant, Dominant became Sub-Dominant. The light was shining as neither Dominant, nor Bishops, nor Princes, nor Generals nor bureaucratic majorities were able to hinder Ricardo and his friends for long as they discovered & accumulated more and more new tricks ... nobody it seemed could stop folk from thinking ... and some of the thinks of folk 'worked' when they were tested out in the rigours of reality.

They even discovered a 'cure' for The Creep and, of course, they passed this ‘know how’ on to their sons and daughters. Quite unexpectedly this cure wasn't like the concoction of blue slime and old toad legs which Dominant had been trying nor was it like the 'rain dance' for the Gods which the Soothsayers had proclaimed. It was just a simple pattern of behaviour amongst friends which always seemed to work … who would have thought it? Tommy Jeffers, for one, thought it ...

So in this way evolution can never explain the short term, but in the fullness of time all is revealed –

everybody gains from specialisation and trade but gains from taxes and intelligent design are elusive

technological ‘know how’, 'tricks', clever new ways of doing things, determine which abundant ‘natural’ resources are valuable.

An Open University summary –

"The principles of comparative advantage and gains from trade are the most important results in the whole of economics. They apply at national, and also individual level. It maybe that Dominant was better than Ricardo at everything. But it does not follow that Dominant should do everything. If each specialises in the activity in which they have comparative advantage and engage in trade they are both better off than if each tries to be self sufficient".

The concept is counterintuitive, Nobel laureate Paul Samuelson –

"Thousands of important and intelligent men have never been able to grasp it or believe it even after it was explained to them" ...

NB Absolute advantage from technological 'know how' explains productivity and real wages.

NB Comparative advantage explains mutual gains from trade.

john p birchall

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