Anyone Want to Buy Me This? :)

Friday, 24 June 2011

Milanovic defies the typical image of an economist by presenting research overlaid with humor, literary insights, and fully imagined portraits of daily life as he examines inequality across time and continents. He weighs the wealth divide between Elizabeth Bennet and Mr. Darcy of Pride and Prejudice as well as Anna Karenina’s financial prospects had she married Vronsky. He ponders John Rawls, Alexis de Tocqueville, Karl Marx, Max Weber, and others to explore theories regarding the rich and the poor. Using complicated economic models that he explains very well, Milanovic breaks down incomes to make comparisons between the haves and the have-nots within nations, between nations, and among citizens of the world. He offers vignettes that make his concepts all the more accessible and entertaining as he explains the errors of Marxism and why a person’s relative wealth is determined more by their country of origin than by their family’s wealth. Milanovic writes as much like a philosopher as an economist as he ponders the growing trend of inequality in income around the world and answers questions many readers likely ask themselves about their economic prospects. (Vanessa Bush)


Comparative Advantage Analysis: Marriage of a Man and a Woman

Tuesday, 21 June 2011

When the trade goes into the things that are considered as taboo, yet they are essential for life.

We should know upfront. That I put a word “man” in the first order does not indicate that it is more respectful than the other one. It is only because “m” letter appears earlier than “w” in the alphabet order. It is such an unnecessary explanation indeed, just in case if there is a feminist or masculine (I could not find the exact antonym for feminist, could you?) minds this one.

This writing analyzes the form of comparative advantage in the case of a married man or woman. Sperm and ovum play their respective roles as its terms of trade. Furthermore, we use reproduction cells as the man’s and woman’s resources. As we are pursuing to considering whether the comparative advantage is still valid to create gains from trade in the form of a marriage, though we confine our analysis until the equilibrium of this marriage market. It is not because we could not find the answer, but it requires more assumptions and appropriate condition.

Maybe I will start from the definition of comparative advantage itself. Based on the Ricardian Model in Krugman (2009), a country has a comparative advantage in producing a good if the opportunity cost of producing that good is lower in the country than it is in other countries. For those who are not familiar with the opportunity cost, this is a cost of not being able to produce something else because resources have already been used. So, a country with a comparative advantage in producing a good uses its resources most efficiently when it produces that goods compared to producing other goods.

For instance, the US has a comparative advantage in spare parts production since it uses its resources more efficiently in producing spare parts compared to other uses. In contrast, Indonesia has a comparative advantage in textile production since it uses its resources more efficiently in producing textiles compared to other uses.

When we are trying to orchestrate this theory into the case of marriage, then we should formalize these ideas by constructing a slightly more complex model using the following simplifying assumptions:
1. There are only two admitted sex types; man and woman. This is not a kind of discrimination or I undermine the rights for people to consider which type of sex that fit for themselves, but it means to make it simpler
2. If the two countries in the theory are domestic (Indonesia) and foreign (the US), then “countries” regarding this case are man and woman
3. As only two goods which are textiles (Indonesia) and spare parts (the US) that important for production and consumption, in this case, man will have sperm as his product and woman will have ovum as her product
4. If labor services needed for Indonesia and the US to produce textiles and spare parts, then reproduction cells are the only resource important for the production of sperm and ovum
5. Reproduction cells productivity varies across sex types, usually due to differences in food substances, but the productivity and its supply in each country is constant across time
6. A marriage only happens between the different sex types. It is not a kind of discrimination or I undermine the rights for bi-sexes, lesbians, gays, or you name it. But rather because this is a “common type” of marriage and as we know that the assumption is needed just for the sake of making it easier to be analyzed.

Since there are no other issues about the economics of marriage that I have learned unless the one from Becker (1973), then I am using his theory of marriage (part 1) to support this theoretical analysis. In his paper, Becker stressed that there are two basic assumptions; each person tries to do as well as possible and that the “marriage market” is in equilibrium.

If I may assume that the sentence of “each person tries to do as well as possible” as a characteristic of this trade that man tries to sell his produced sperms to woman and woman tries to sell his ovum to man as well as possible, then the “marriage market” is in equilibrium.

Unfortunately, comparative advantage theory has its confusion. The trade (marriage) will only be beneficial if the man and woman quite productive in facing the competitiveness of trade. The benefit of competitiveness from trade does not only depend on the relative productivity to foreign, but also to the price of domestic production factor function (price of reproduction cells) relatively to the price of foreign production factor function. It means that the reproduction cells of man and woman should be able to guarantee that they may produce the healthy sperm and ovum.

The second one is that the competitiveness is not tantamount and creating disadvantage to either man or woman if the trade happens only based on the low price of reproduction cells. It means that the domestic industry should not be fooled by the foreign industry, or we used to avoid the appearance of violence against the marriage.

The third one is that there is an unequal trade in a marriage. Once, either each man or woman may exploit their reproduction cells in excessively producing either each sperm or ovum. And it may lead to the hurting each other.

In a nutshell, the comparative advantage does create gains from trade but the gain to a man and woman from marrying (doing the trade) compared to remaining single (keeping it autarky) is shown to depend positively on other factors such as affectionate feelings, incomes, human capital, and relative difference in their reproduction cells to produce the healthy sperm and ovum. Or in other words, marriage is not as easy as returning another palm side if you want to benefit each other.

Another conclusion is, since this is only a theoretical analysis (not empirical), so the tendency to be proven wrong remains possible.


  © Mayang Rizky The Remedy by Mayang Rizky

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