A Note on Kleiman on Comparative Advantage

In Dr. Kleiman's article on linear analysis of comparative advantage,' Graham's familiar conclusions are examined and it is found that these (and Mill's conclusions) have to be modified when the number of factors of production is greater than two . (However, the reasoning in this article does not rest on there being more than two factors of production.) Some of the traditional conclusions are found to be valid in terms of activity analysis, though certainly modern technique makes the argument much clearer. (My own preference is for a fourquadrant exposition as used by Leontief.)2 Contrary to traditional theory, Kleiman asserts: The demand-determined price range is.. neither a unique nor an extreme case; except, perhaps, that the probability of equilibrium occurring in these ranges is smaller than that of it occurring in the cost-determined ones . The argument for this probability conclusion is set out in a footnote. Suppose that the probability of the demand ratio falling on any one point along the production possibility curve is the same; then the probability of its falling on a definite, and limited, number of 'kinks' is smaller than that of its falling on points along the straight line segments. As it stands, this is true. The probability of a demand-determined price range would, on this reasoning, be smaller than the probability of a cost-determined price-in fact the former would be zero and the latter would be one. But this argument is clearly unacceptable. It is a mistake, generally, to attempt to derive probability estimates from taxonomy.3 If a model turns up, say, six cases, it does not follow, usually, that the probability of any one of them occurring is one-sixth. In the present instance we could just as well argue that there are an infinite number of prices and a finite number of cost-determined prices, and that therefore the probability of a cost-determined price is zero. Equilibrium situations depend jointly on price and quantity, and from a model of this kind we cannot derive probability estimates about the various types of equilibria. The London School of Economics

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• Factor Proportions and the Structure of American Trade

  Wassily Leontief, Wassily W Leontief•The Review of Economics and…•1958

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• Comparative Advantage, Graham's Theory, and Activity Analysis

  Ephraim Kleiman•Economica•1960

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• The Taxonomic Approach to Economic Policy

  Harry G Johnson•The Economic Journal•1951

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