9/11, Baudrillard and the Theory of Comparative Advantage

In an essay titled "The Spirit of Terrorism," published in Le Monde two months after 9/11, Jean Baudrillard wrote that the World Trade Center attacks were the consequence of a "terrorist imagination" bred by an "insufferable superpower," the United States of America. "In the end," he concluded, "it was they who did it, but we who wished it."

I will be using Ricardo's Theory of Comparative Advantage to illustrate what the hell he's talking about.

Let's say there are 2 countries, USA and Qaeda-land. And let's say this world of 2 countries only produces 2 items, Robots and Camel Milk.

If the countries were on their own without trade, this is what they would be able to produce if they dedicated all their resources to making either robots or camel milk:

Qaeda-land can make 100 robots or 100 tonnes of Camel Milk
USA can make 200 robots or 100 tonnes of Camel Milk

Now, it seems that the USA is better than Qaeda-land, and has an absolute advantage over it. The USA can make at least as much or more than Qaeda-land in both products. You would therefore think it has nothing to gain from trade with Qaeda-land.

But Ricardo's Theory says look at the opportunity costs of production: USA's opportunity cost of making robots is higher than Qaeda-land's. There is room for both to benefit from trade, if they choose to specialise.

If both countries did not trade and chose to split their resources equally between making robots and camel milk, then this is what would happen:

	Robots	Camel Milk
Qaeda-Land	50	50
USA	100	50

However, if they specialised in producing in the item which they had a comparative advantage in producing, then this is what they would produce.

	Robots	Camel Milk
Qaeda-Land	0	100
USA	200	0

Wow, it looks like given the proper exchange rate (to be precise, the proper terms of trade), both USA and Qaeda-land could benefit from increases in production!! Notice the exclamation marks?! This is the part where economists normally wet themselves with excitement at how surprising and non-intuitive the results of specialisation can be!!

To illustrate this, the examples of Ricardo's Theory typically use a "nice" exchange rate, for instance, 75 robots to 50 tonnes of camel milk, which yields the following consumption:

	Robots	Camel Milk
Qaeda-Land	75	50
USA	125	50

Why is it "nice"? Well, because the absolute gains from trade - 50 robots - are split evenly between the 2 countries, Qaeda-land and USA, resulting in both countries having 25 more robots than they would have had without trade and specialisation.

But what if we had a "not so nice" exchange rate, for instance, of 55 robots for 50 tonnes of camel milk:

	Robots	Camel Milk
Qaeda-Land	55	50
USA	145	50

One could argue that Qaeda-land is still better off than it would have been if it didn't trade - it got 5 more robots than it would have had if it made things by itself. Economists are content to end there. Everyone benefits from specialising under the theory of comparative advantage.

But you and I know that's not the end of the story. Because the people of Qaeda-land would be living in a world where the people of USA now had 145 robots, compared to their own measly 55 robots. They might even think that they were being suckers, having specialised in making camel milk so that the people of USA could enjoy the foot-rubbing, foie gras-making and general lawnmowing services of those additional 45 robots.

And if you believe that people measure happiness in relative rather than absolute terms, you'll see that there are people out there who prefer a world without those extra 50 robots and how to divide them up fairly. They'd prefer you not to build 100-storey skyscrapers when they can only afford 20 storey-skyscrapers (never mind that that couldn't afford a tent before trade occured). They would prefer not to be "suckers". They would prefer to take you down in a race, rather than run and lose.

And that is how - as I see it - Ricardo's theory, which is the theoretical foundation of modern international free trade (and therefore globalisation and the WTO), provides some nuance to what Baudrillard meant. "[It] was they who did it, but we who wished it." Who wished it? Anyone who felt a vague sense of dizzy wonderment at seeing those 2 buildings collapse on September 11th.

You know who you are.