Since the people living inland could not live without it, the salt monopolist could charge quite high prices—a “trade” arguably not so different from threatening inland farmers with death if they did not pay up.
Especially given that you speak of the British and India, it seems like you ignore the political factors that come with the salt. It’s no historical accident that Ghandi picked his fight with the British over salt. If salt would all be about comparative advantage it doesn’t explain why Ghandi was forbidden from picking up salt by British law.
Since the people living inland could not live without it, the salt monopolist could charge quite high prices—a “trade” arguably not so different from threatening inland farmers with death if they did not pay up.
Farmers have no problem storing unprocessed wheat for longer periods of time without salt. They are not threatened with death. On the individual level they just have to suffer tasteless food which means that they are willing to buy the salt even with salt taxes.
Beyond the individual they can’t feed an army because an army that travels around can’t carry wheat and process it to feed itself while it’s moving. Control over the salt is control over the ability to feed a moving army and if the government has control over the flow of salt the inland farmers can’t raise an army to challenge the power of the government.
For more on the role of salt Salt: A World History by Mark Kurlansky was insightful for me.
To be clear, the claim in the OP is not that anything is all about comparative advantage. Comparative advantage is the main factor in pareto-optimal production; allocation (i.e. who gets the gains) is where other factors enter. Comparative advantage was a necessary element for anyone to make any profit from a salt monopoly, but they still had to enforce that monopoly in order to actually capture the gains.
(Also, I don’t know why people keep assuming I was talking about British India. The same dynamic was present in many places—e.g. the Chinese government profited from monopolies on iron and salt a millennium earlier.)
+1 to the Kurlansky recommendation—his book on Cod was excellent, and Salt has been on my reading list for a while.
The thing about the British monopol on salt in India is that it’s achieved by forbidden certain easy salt production like the one in which Ghandi engaged.
There’s artificial scarcity in India and I don’t think it makes sense to speak of comparative advantage when it comes to monopoly gains that are achieved by creating artificial starcity.
As far as I understand the Chinese situation the monopoly was a lot more natural in nature. In the Chinese situation it wasn’t possible for someone who didn’t like the governments control of the salt to walk a bit like Ghandi and pick up own salt from the ground.
I’m also not sure to what extend a goverment raising taxes from it’s citizens (what the Chinese did) should be called “making a profit”. Would you also call the US income tax “the US government making profits by exploiting comparitive advantage”? I see no reason to use that model over saying that the government raises taxes because of it using coercion.
For the US income tax example: generally speaking, (monetary) income comes from people trading with each other, and that generally wouldn’t happen without comparative advantage between the two people trading. No comparative advantage ⇒ no trading ⇒ no income to tax.
I think part of the confusion is that I am NOT claiming that the people/organizations making a profit have a comparative advantage. People can totally make a profit by seizing that profit from someone else. But without comparative advantage, there’s no profit to seize (relative to a world where goods never change hands). If the profit requires goods moving bidirectionally between people, then there must be an underlying comparative advantage.
Now, it’s possible to find someone operating in isolation (i.e. collecting their own salt) and seize part of what they’re producing. Then comparative advantage won’t play a role. (Of course, that’ll be hard to enforce—it’s not easy to prevent people from producing things for their own consumption in secret.) The key point is that this scenario does not increase the total amount of goods produced relative to everyone operating in isolation. Comparative advantage is about changes in total production, not changes in distribution.
But without comparative advantage, there’s no profit to seize (relative to a world where goods never change hands).
Just because there’s no profit to seize doesn’t mean that goods won’t move from one person to the other if the person who wants to use the goods uses coercive force.
While I’m not certain to what extend it’s true, from time to time I heard the claim that the British didn’t get net profit from colonization. It’s possible that they still did it because they believed it would be good for them even when it wasn’t profitable.
Just because there’s no profit to seize doesn’t mean that goods won’t move from one person to the other if the person who wants to use the goods uses coercive force.
Right, this is exactly why I talk about goods moving bidirectionally. If someone is just straight-up seizing goods by force, then there’s no reason for goods to move back in the other direction. So, if the profit requires goods moving bidirectionally, then that indicates some relative advantage is involved somewhere.
Especially given that you speak of the British and India, it seems like you ignore the political factors that come with the salt. It’s no historical accident that Ghandi picked his fight with the British over salt. If salt would all be about comparative advantage it doesn’t explain why Ghandi was forbidden from picking up salt by British law.
Farmers have no problem storing unprocessed wheat for longer periods of time without salt. They are not threatened with death. On the individual level they just have to suffer tasteless food which means that they are willing to buy the salt even with salt taxes.
Beyond the individual they can’t feed an army because an army that travels around can’t carry wheat and process it to feed itself while it’s moving. Control over the salt is control over the ability to feed a moving army and if the government has control over the flow of salt the inland farmers can’t raise an army to challenge the power of the government.
For more on the role of salt Salt: A World History by Mark Kurlansky was insightful for me.
To be clear, the claim in the OP is not that anything is all about comparative advantage. Comparative advantage is the main factor in pareto-optimal production; allocation (i.e. who gets the gains) is where other factors enter. Comparative advantage was a necessary element for anyone to make any profit from a salt monopoly, but they still had to enforce that monopoly in order to actually capture the gains.
(Also, I don’t know why people keep assuming I was talking about British India. The same dynamic was present in many places—e.g. the Chinese government profited from monopolies on iron and salt a millennium earlier.)
+1 to the Kurlansky recommendation—his book on Cod was excellent, and Salt has been on my reading list for a while.
The thing about the British monopol on salt in India is that it’s achieved by forbidden certain easy salt production like the one in which Ghandi engaged.
There’s artificial scarcity in India and I don’t think it makes sense to speak of comparative advantage when it comes to monopoly gains that are achieved by creating artificial starcity.
As far as I understand the Chinese situation the monopoly was a lot more natural in nature. In the Chinese situation it wasn’t possible for someone who didn’t like the governments control of the salt to walk a bit like Ghandi and pick up own salt from the ground.
I’m also not sure to what extend a goverment raising taxes from it’s citizens (what the Chinese did) should be called “making a profit”. Would you also call the US income tax “the US government making profits by exploiting comparitive advantage”? I see no reason to use that model over saying that the government raises taxes because of it using coercion.
For the US income tax example: generally speaking, (monetary) income comes from people trading with each other, and that generally wouldn’t happen without comparative advantage between the two people trading. No comparative advantage ⇒ no trading ⇒ no income to tax.
I think part of the confusion is that I am NOT claiming that the people/organizations making a profit have a comparative advantage. People can totally make a profit by seizing that profit from someone else. But without comparative advantage, there’s no profit to seize (relative to a world where goods never change hands). If the profit requires goods moving bidirectionally between people, then there must be an underlying comparative advantage.
Now, it’s possible to find someone operating in isolation (i.e. collecting their own salt) and seize part of what they’re producing. Then comparative advantage won’t play a role. (Of course, that’ll be hard to enforce—it’s not easy to prevent people from producing things for their own consumption in secret.) The key point is that this scenario does not increase the total amount of goods produced relative to everyone operating in isolation. Comparative advantage is about changes in total production, not changes in distribution.
Just because there’s no profit to seize doesn’t mean that goods won’t move from one person to the other if the person who wants to use the goods uses coercive force.
While I’m not certain to what extend it’s true, from time to time I heard the claim that the British didn’t get net profit from colonization. It’s possible that they still did it because they believed it would be good for them even when it wasn’t profitable.
Right, this is exactly why I talk about goods moving bidirectionally. If someone is just straight-up seizing goods by force, then there’s no reason for goods to move back in the other direction. So, if the profit requires goods moving bidirectionally, then that indicates some relative advantage is involved somewhere.
You need to go to another place to loot the place and that usually involves transporting personal, weapons and equipment.
Most wars where there’s no net profit but a lot of capital lost include some bidirectional flow of goods.