Monday, February 13, 2012

A PhD Thesis Bringing Together the Market Process Approach and the Concept of Comparative Advantage

"I thoroughly enjoyed and benefited from this outstanding PhD thesis “Linking Comparative Advantage, Supply Management, and Environmental Externalities.” Mr. Rajsic provides a rigorous discussion --- scholarship, analytically, and application --- of supply management in the Canadian context. I very much appreciated the way he both explores in detail the idea of comparative advantage at a foundational theory level, and strives to incorporate heterogeneity into the analysis. So much of economic analysis is based on models that assume a world defined by functions that are smooth and continuous and twice differentiable. But the world we live in as human beings is lumpy, and often discontinuous. The question remains how much of the orthodox conclusions about the division of labor and the exchange and production efficiencies of the market economy can be maintained once we depart from this world of smooth and continuous functions.

Once frictions are introduced into our positive analysis of the market, the existence of frictions cannot be assumed prima face to imply that market failures exist. The world is far more complex than the simple model suggest, but that complexity is not necessarily an indication of the need for external intervention to guide the pattern of resource use. Instead, the way production processes are coordinated through time is through mechanisms (namely the price system and entrepreneurial discovery) that cope with that complexity and our ignorance. Those mechanisms are necessarily under-explored, let alone under-appreciated, in the more standard neoclassical treatment of production and exchange. But as Mr. Rajsic points out, heterogeneity is not a complicating factor in a standard model, but a feature of the reality of markets. The bottom line is that Mr. Rajsic has produced an excellent study of supply management utilitzing the market process economics associated with Mises, Hayek, Kirzner and Rothbard." -- Peter J. Boettke

Link to thesis PDF

PDF of Dr. Peter J. Boettke's (External Examiner) review

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