Nobel gurus fear globalisation is going horribly wrong (technical) – Telegraph Blogs
David Ricardo’s Theory of Comparative Advantage has broken down after 200 years, or so I learned at the Lindau forum of Nobel laureates in Bavaria.
The theory published in 1817 has been a guiding principle of free trade, taken as a given by every student of economics in the modern era. It has served us well, but just as Newton’s theories ran into limits and were overtaken by Einstein’s relativity, comparative advantage no longer explains the world.
Under Ricardo’s model, inequality was supposed to narrow within countries as globalisation accelerated exponentially in the Nineties. Instead it is getting wider.
The Gini coefficient measuring the spread between rich and poor is narrowing between countries, but is widening almost everywhere within countries, leading to a corrosive concentration of wealth.