No Labels

by Don Boudreaux on December 18, 2010

in Complexity & Emergence, Curious Task, Trade

Washington Post reader Saul Hoch sampled his socks, his jacket, and a few other goods in his home and – having found them all labeled as being made outside of the USA – concluded that Americans no longer produce enough output.

Mr. Hoch is a victim of misleading labeling.  The U.S. economy is overwhelmingly a service economy, specializing in producing ideas and in performing high-skilled operations.  Yes, Mr. Hoch’s socks say “Made in Swaziland,” but who developed the computer software to operate the loom that wove the cloth used to make his socks?  Who designed the loom itself?  Who figured out how to transform crude oil into the elastic in the socks?  Who devised the method for pooling risks so that the Swaziland factory is profitably insured against fire and that the cargo ship carrying his socks to America is profitably insured against sinking?  Who supplies the banking services for the factory to receive and make necessary payments?  Who’s the architect that designed the department store where Mr. Hoch bought his socks?  The list of such questions can be greatly extended.

Most of these services were undoubtedly supplied by non-Swazis, including Americans.  Without them Mr. Hoch’s socks would be a darn sight more pricey.  But services, by their nature, don’t come with labels attached.  In fact, Mr. Hoch’s socks – and nearly everything else that he consumes – should be labeled “Made on earth,” for they truly are global phenomena.

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