Mental Experiment

by Russ Roberts on March 28, 2006

in Standard of Living

A lot of people are worried about China as an economic threat to the United States. I’m not. China’s economic success is good for Americans. When Americans buy toys and clothes and iPods made in China it means that we have more people and capital available to make other things.

A variation on the Chinese threat is that someday, if they keep growing, they’ll pass us. This is the view that economics is like the Olympics. If you don’t finish first, you’re stuck with the bronze or silver medal or worse, you don’t even get to the medal stand. But economic success is not like the Olympics. It’s not a zero sum game. I care about my children’s opportunity to live a fully human live, choosing to use their skills as they see fit. A successful China enhances that. I hope China does great in the meanwhile. The Chinese are desperately poor. Who would be so heartless as to hope that they stay that way?

So here’s a mental experiment. Even with China’s tremendous growth over the last 20 years, America’s per capita income is many times higher than China’s. What if you woke up one more morning and discovered the whole thing was a lie. The Chinese had mismeasured their national income information and it turned out that the Chinese, in fact, had a per capita income many times that of the United States. It could be true, you know. Maybe they really are really, really, really rich. How would it change your well-being? Would it make any difference whatsoever?

Footnote: I am deliberately ignoring China as a military threat. Some people argue that China isn’t just competing with us economically, but militarily. Could be that China has militaristic and territorial ambition, whatever that means. On military grounds, it would matter if China is really, really, rich. That’s because military competition is a zero sum game. Winning a war usually means that the other side loses. And being rich might make China a more potent military threat. But I actually would argue that Chinese economic growth reduces the chance of military conflict. The more we trade with them and the more our people’s interact economically, the less likely we are to fight a war with them.


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