Economists accuse me in vulgarization of their science, so I'll edit the text from the very beginning to remove the inaccuracies.

## Main question

I have just read the book by a norwegian economist, Erik Reinert, "How Rich Countries Got Rich… and Why Poor Countries Stay Poor". I think it is very interesting for people who want to understand how modern economics works, and, in particular, where poverty comes from. And, what is unexpected, the problem, as Reinert it presents, seems to be not so complicated from the point of view of a mathematician.

Reinert blames in everything the Ricardo theory of comparative advantages. He writes that it is exactly this theory that justifies poverty in the modern world. He gives numerous examples, when arguments based on the Ricardo theory made some countries extremely poor, without hope for correcting the situation in future. He paints horrible pictures of the situation in Mongolia, Peru, Equador, Haiti, Russia, etc. Simultaneously, from what he writes it becomes clear why there are so many migrants in the modern world, so many jobless people, so many refugees, etc. -- so I recommend his book to everyone.

My main question is what I wrote in the title:

What are Reinert's reproaches to the Ricardo theory?

## Ricardo examples

This question was in the previous version of the text, and since nobody answered yet, I think that this must be difficut. That is why I want to add another question that I believe is much easier and can clarify the situation:

In which extent the Ricardo examples (without further theory, just examples) explain the problems?

This needs explanation. First, I foresee new accusations in vulgarization from economists. So I think it will be useful to remind that vulgarization is a standard trick in mathematics: when people are trying to understand a problem, they often remove something from the theory (or replace this detail with something else), and look what happens then. A classic example is the Parallel postulate: in attempts to understand what is wrong Lobachevsky replaced this axiom in the theory and looked what happens after that. In modern mathematics this trick is widely used, since all axiomatic theories are based on this idea.

Second, I have to explain to mathematicians what is meant by the Ricardo examples.

**The classic Ricardo example** (I change the numbers for simplicity). Suppose we consider two countries, $A$ and $B$, and each of them produces two goods, $G_1$ and $G_2$, and the table of expenses is as follows:
$$
\begin{matrix}
& G_1 & G_2 \\
A: & 1 & 1 \\
B: & 2 & 4 \\
\end{matrix}
$$
(this means that in the country $A$ one unit of $G_1$ costs 1 man-hour, and the same for $G_2$, and in the country $B$ one unit of $G_1$ costs 2 man-hours, while one unit of $G_2$ costs 4 man-hours).

Both goods, $G_1$ and $G_2$, are cheaper in the coutry $A$, so it seems evident, that it is more profitable to produce both $G_1$ and $G_2$ in the country $A$. But Ricardo notices that the difference in the comparative expences changes the situation: if the country $A$ conveys the production of $G_1$ to the country $B$, while $B$ conveys $G_2$ to $A$, and they begin to trade, this becomes more profitable for both countries, since

in $A$ each man-hour still gives one unit of $G_2$, but when selling it to $B$, $A$ takes two units of $G_1$ (instead of one unit of $G_1$, as it was when they did not trade),

in $B$ each man-hour still gives $1/2$ unit of $G_1$, but when selling it to $A$, $B$ takes $1/2$ unit of $G_2$ (instead of $1/4$ of $G_2$, as it was when they did not trade).

This justifies the following observation

If in a given country $A$ the expences in the production of a good $G_2$ in comparison with another good, $G_1$, is less than in a country $B$, then it is more profitable (for both countries) to produce $G_2$ in the country $A$ (and to trade).

The examples like this do not exhaust the Ricardo theory, of course, but I suspect that the essential effects can be explained with their help. As illustrations I suggest to consider the following two situations.

**Example #1.** Consider three countries with two goods and with the following table of expences:
$$
\begin{matrix}
& G_1 & G_2 \\
A: & 1 & 1 \\
B: & 2 & 4 \\
C: & 4 & 2 \\
\end{matrix}
$$
Here, according to Ricardo,

the least comparative expenses for producing the good $G_1$ are in the country $B$, so the good $G_1$ must be produced in the country $B$,

at the same time the least comparative expenses for producing the good $G_2$ are in the country $C$, so the good $G_2$ must be produced in the country $C$.

And the Ricardo trick gives the conclusion that

the country $A$ must abandon the production of both $G_1$ and $G_2$.

**Example #2.** In the Ricardo example nothing prevents us to consider workforce as another, third commodity in this situation, and to look at the comparative expences in its production. We can just change the unit of measure, and use the good $G_1$ instead of "man-hours", then the table of expenses becomes the following:
$$
\begin{matrix}
& \text{workforce} & G_2 \\
A: & 1 & 1 \\
B: & 1/2 & 2 \\
\end{matrix}
$$
(this means that in the country $A$ one man-hour costs one unit of $G_1$ and the same for one unit of $G_2$, and in the country $B$ one man-hour costs $1/2$ unit of $G_1$, while one unit of $G_2$ costs 2 units of $G_1$).

And the Ricardo trick gives the conclusion that

the country $A$ must abandon the production of its workforce (i.e. make all its citizens jobless, and import the workforce from $B$).

## Qualitative differences

This trick with the Ricardo examples seems to be an easiest way to explain the problem to an outlooker. That's why I ask specialists what I wrote above: in which extent these examples explain the situation? My question is, if it is possible that the general theory prescribes qualitatively the same conclusions as in these examples (i.e. the calculations just change the quantitative answer from $0$ to a little $\varepsilon>0$, and that's all)? In particular,

Is it possible that in Example #1 the countries $B$ and $C$ take off all (or most of) the production from the country $A$, even if in $A$ it is more effective?

Is it possible that in Example #2 the country $A$ comes to a situation when it must discharge all (or most of) its citizens, even if the production there is more effective than in the other countries?

Reinert's criticism inspires this suspicion.

## Experiments

One more question:

Do economists use experiments in this field?

(I asked this in economic forum without success.)

virtualstuff, e.g. market expectations. $\endgroup$ – joro Sep 16 '15 at 14:32