Exports, Imports, and Green-Red Herrings

by Don Boudreaux on August 21, 2007

in Environment, Myths and Fallacies, Trade

Today’s Wall Street Journal published two letters defending free trade with China.  The first is written by me; I remind people that imports are benefits and exports are costs.  Seems to me to be a point too obvious to warrant mention, but the moment people start thinking of “national” economies, ability to think straight too often disappears.

The second is by my friend the excellent economist (and blogger at Division of Labour) Frank Stephenson who exposes green-red herrrngs.

Peter Navarro’s Aug. 13 letter to the editor accuses the 1,000-plus economists (including yours truly) who signed the petition opposing trade sanctions against China of overlooking Beijing’s beggar-thy-neighbor policies. Not so. Save for the counterfeiting of Western goods, every offense that Mr. Navarro accuses China of committing against Americans benefits Americans. If Beijing truly is, for example, subsidizing Chinese producers, the resulting lower prices are a gain to American consumers no less than if the lower prices stemmed from a technological breakthrough in China.

By failing to see that imports, rather than exports, are the ultimate goal of trade, it is Mr. Navarro who spreads beggar thy-neighbor fallacies.

Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Fairfax, Va.

………………………….

Mr. Navarro claims that 1,028 economists (including me) who oppose protectionist legislation against China ignore China’s “extremely lax environmental and health and safety regulations that encourage the rest of the world to export their pollution and sweatshops to China via offshoring.”

This argument is a red herring. Research on the environment and globalization by Jeffrey Frankel of Harvard’s Kennedy School of Government finds, “little statistical evidence, on average across countries, that openness to international trade undermines national attempts at environmental regulation through a race to the bottom effect. If anything, favorable gains from trade effects dominate on average, for measures of air pollution such as SO2 concentrations.”

E. Frank Stephenson
Chairman, Department of Economics
Berry College
Mount Berry, Ga.

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{ 16 comments }

Sam August 21, 2007 at 1:38 pm

Professor Bordreaux, I'm curious: what is your ratio of letters-to-the-editor written to letters-to-the-editor published?

I was thinking of starting myself, but was worried as to whether it was a futile task (especially with far inferior prose skills).

Don Boudreaux August 21, 2007 at 1:51 pm

Sam,

I write, on average, about one letter-to-the=editor per day. For the past two years my publication rate has been about seven percent; so far, though, 2007 is running at about nine percent.

The value of writing such letters, for me, isn't only in seeing them published — although I'd be fibbing if I denied that actual publication provides personal satisfaction. Part of the value in writing these letters lies in the discipline their composition imposes, forcing me to keep my prose sparse yet clear. Also, even for letters that aren't published, the author of the report or op-ed to which I respond sometimes writes to me and we strike up a useful e-mail conversation.

I encourage you to write letters-to-the-editor as the fancy strikes you.

Don

Troy Camplin, Ph.D. August 21, 2007 at 1:53 pm

People rarely think straight about economics in general. I cannot tell you how often people look at me with surprise (and like I'm crazy) when I tell them that it is consumers who drive up the price of goods. I then explain supply and demand, and they inevitably end up agreeing with me.

I think some schoarly work needs to be done on why it is that so much of the world as it really works is so counterintuitive. Economics, quantum physics, and biology would all benefit greatly from such work.

Eric August 21, 2007 at 2:20 pm

It is rather strange; people often advocate policies for states that they would never undertake in their personal or business dealings. Somehow, trade between countries is fundamentally "different" to most people. An us vs. them kind of thing, maybe?

ajoy August 22, 2007 at 5:51 am

short term perspective:
i think countries which dont recognize (or ignore) the cost of pollution are able to charge lesser and thus race to the bottom
vs
countries that include the cost of pollution.

Long term:
the cost is going to come around,and the cheque is goin to be large.

Per Kurowski August 22, 2007 at 9:23 am

I have no doubts of the benefits generated by trade with China, the issue though is whether those benefits are really floating freely to the America people or kept by someone else. When I see how much more of the world’s GNP goes to reward capital instead of labor I suspect that is because a lot of toll is being charged on globalization… among other by all those Intellectual Property Rights monopolies awarded and that are exploited without any regulation.

vidyohs August 22, 2007 at 9:23 am

Troy Camplin, Ph.D,

I suggest, sir, you answered your own speculation in your post.

People are ignorant, you educate them, and then they understand.

I don't believe that knowledge about economics is intuitive, it is learned. Therefore we look to our system of education, the public fool system being first on the list of suspects, for the spreading of false information.

I grew up in rural Texas, supposedly the home of the rugged individualist free entrepreneur, and it wasn't until 10 to 15 years after school and having been exposed to the real world that I realized just how thorough the indoctrination in socialism had been.

Case in point: As a young sailor in a rating that required exceptionally high GCT scores (IQ test) and demonstrated apptitude
I engaged with peers from around the nation in BS sessions the topic of which was serious proposal that the socialist system was equal, perhaps more worthy, of consideration to the capitalist system. The only explanation of this fact is that my socialist indoctrination was duplicated across the nation by our Federal fool system.

And, frankly sir, in my view, we have lost the battle to the fool system and can no longer talk of "fixing" it. We have to dismantle it and rebuild something entirely new that is honest, or else we will continue to suffer fools for eternity.

Sorry to be so dour, but I think it best to be honest.

Troy Camplin, Ph.D. August 22, 2007 at 11:09 am

No, I agree with you, vidyohs. I've been advocating on my own sites not tinkering around the edges of education any more, but revolutionary transformation.

I think scholarly work on why the world is counterintuitive to how humans think would be extremely useful in changing the way we educate people, to make it easier to teach them how the world actually works.

Per Kurowski August 22, 2007 at 12:31 pm

I agree with many of the previous opinions… which could explain why, and excuse me those present, I believe we need to urgently promote some universtites that are 100% guaranteed to be free of PhDs.

John Smith August 22, 2007 at 1:52 pm

I have a question:

Lets say country-A has an open door policy to trade and country-B does not. What is the best way to deal with situation?

(normally the industry(s) being shut out and unable to sell there goods in the closed country ask the government to get involved. Is there another way?)

vidyohs August 22, 2007 at 4:28 pm

John Smith,
I am not sure my answer is correct but I think that what I have learned over the last thirty years suggests that it would be best for country-A to go ahead and freely trade with country-B and not change their own methods in any manner. I believe that this is exactly what Don, Russ, Walter William, Thomas Sowell, and numberous others have been telling us for a long time that their research and data show that the restrictive policies of country-B hurt country-B and its populace more that it will country-A, who incidentally will reap the long term benefits of cheaper imports from country-B.

As a matter of fact I believe that Don's letter above says exactly that.

Some one, Don, maybe, correct me if I have misunderstood what has been said.

vidyohs August 22, 2007 at 5:04 pm

Just a slight deviation from the original topic, Dr. Camplin.

How far back in human history would we have to go to find an education system that was not as much about political indoctrination as it was education in life skills, knowledge, and science?

As long as humanity has competing nations, religions, scientific theories, and different standards for the definition and demonstration of character and behavior, how could one eliminate all biases from a system that attempts to educate?

I am not trying to put you on the spot and I am just taking the opportunity to get input from another who obviously has thought a lot on the subject.

Thank you

John Smith August 23, 2007 at 9:56 am

Vidyohs, based on how this FREE forum is designed, I’m not sure if you’ll be back to this thread, but if you are – Thanks for the explanation/education!

(I also emphasized “FREE forum” because I am grateful to the owners of this site and am not being critical.)

So Vidyohs you’re advocating “do nothing”. WOW that’s a whack on the head for me.

Although one would think I would intuitively know this. Being a business owner of a metal fabrication shop I can speak first hand that tariffs & regulation on foreign steel has hurt the majority of Americans.

The steel tariffs which were imposed to stabilize and strength the American Steel manufactures, did nothing of the sort.

Want to know the rest of the story? lol

American steel companies who made large profits during the imposed tariffs did NOT reinvested the majority of those profits back into steel production – BUT into other markets which have a higher rate of return.

And Americans who bought American made products with steel in them had to pay more.

And if that wasn’t bad enough, people are crying how manufacturing is leaving and how cheap imports are. Well duh!!!! We American manufactures have to pay more for our raw material. (besides a number of other cost issues)

And here we go again with the government and Publics solution to “help American companies” is to impose more tariffs.

Thanks again Vidyohs for helping me think through this.

“do nothing” – I like it!!!

Troy Camplin, Ph.D. August 23, 2007 at 10:02 am

We would never be able to find an educational system that was not about indoctrination at some level. The very idea that things like politics, religion, science, and education should be separate is an idea of the Modern Era, and came closest to being realized in the U.S. Still, in the U.S., religion and education have never been separated — it's just that the Christian religion has been replaced by various secular religions in recent decades. So long as there are biased people (we all are), there will be biased institutions. So indoctrination of some kind seems almost certain.

But we don't have to have things on such a depressing note. We can have an overall unbiased instutition by instituionalizing bias, by making sure that all biases are represented. If you want students to be exposed to all versions of economic systems, make them take sociology (where they will get socialist interpretations of the world more often than not), economics (where they will get free market explanations more often than not), comparative government classes and history classes. Throw in some psychology, particular more recent evolutionary and cognitive psychology, and you will begin to have students who actually know quite a bit, and may know enough to make a good decision or two. Further, I would make sure to emphasize biological science especially, as it is the study of very complex systems. In fact, the more comlex the systems are that we have students study, the more accurate a view of the world they will have.

We should also do away with age-based grading and instead have all students advance at their pace. Our schools need to worry more about educating than socializing (something humans do on their own, without anyone's help). Education should be based on the evolutionary processes of child development, psychosocial development, and historical development. Thus, using how students develop, we would teach them how knowledge developed.

John Smith August 24, 2007 at 5:21 pm

WOW talk about a global market, SPAM now comes in multiple langue’s just like the manual on how to operate the DVD player and many other products purchased.

Troy Camplin, Ph.D. August 25, 2007 at 12:02 pm

Yes, I love how it managed to annoyingly stopped all discussion on here.

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