To borrow shamelessly from a regular feature over at Marginal Revolution, here's the best sentence that I've read this week:
"As we point out below, the greatest expansions of world trade have tended to come not from the bloodless tâtonnement of some fictional Walrasian auctioneer but from the barrel of a Maxim gun, the edge of a scimitar, or the ferocity of nomadic horsemen."
-- Ronald Findlay and Kevin H. O'Rourke, "Power and Plenty: Trade, War, and the World Economy in the Second Millenium"
And yes, I was taken by that sentence without understanding half of it. After a little research, I liked it even more.
Léon Walras was a 19th century French economist considered by some to be the father of general equilibrium theory. If we define general equilibrium as the "equality of supply and demand in all markets of an economy simultaneously" then a Walrasian auction would be a theoretical process by which that state might be attained.
An "auctioneer" whose stock included all the possible goods in the world would announce tentative prices of such goods, and "agents" -- buyers and sellers -- would announce how much they would like to sell (supply) or buy (demand). The market clears -- and the state of equilibrium is reached -- when everything matches up so that there is no excess supply or demand.
Walras dubbed the process of figuring out prices by such gradual adjustment "tâtonnement," which, as best I can tell, is French for "groping."
With that in mind, one can now see that what Findlay and O'Rourke are trying to say is that, historically speaking, the evolution of trade between nations and peoples has not occurred as a result of forces of supply and demand groping their way toward blissful expression of Ricardian comparative advantage, but has instead been largely determined by war and conquest.
Or at least such appears to be the prime thesis of "Power and Plenty," a mighty tome that arrived on my desk this week. Aiming at nothing less than documenting the history of world trade over the last 1,000 years, "Power and Plenty" reeks of an ambition just a hair shy of Zeus-angering hubris. But for the purposes of better understanding how the world works, it appears to be required reading. Good thing I've got a holiday break coming up in a week.
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