Consumers Harmed by Free Trade?

by Don Boudreaux on July 20, 2011

in Other People's Money, Seen and Unseen, Trade

Here’s a letter to the Allentown, PA, Morning Call:

Praising Sen. Bob Casey’s opposition to freer trade, Nancy Tate regurgitates in one letter the entire smorgasbord of noxious protectionist gruel swallowed today by many “Progressives” (Letters, July 19).  Among Ms. Tate’s projectiles, for example, is her assertion that free trade is “an assault” on “consumer rights.”

How, exactly, are consumers’ rights assaulted by a policy that gives them greater freedom to spend their money as they choose?  In what ways are consumers harmed when the range, variety, and quality of goods and services available to them expand while the prices of those goods and services fall?

As trade scholar Dan Griswold wrote in his book Mad About Trade, “If one of our children grows up to invent a way to move goods and bits of information even more rapidly around the world, we rightly call that ‘progress’; if another child grows up to become a populist politician who advocates raising trade barriers to slow the movement of those same goods and data across borders, we perversely call that ‘progressive.’”*

Perverse indeed.

Sincerely,
Donald J. Boudreaux
Professor of Economics

* Daniel Griswold, Mad About Trade (Washington, DC: Cato Institute, 2009), p. 172.

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{ 121 comments }

Speedmaster July 20, 2011 at 9:03 am

I am continually dismayed at the profound ignorance shown by so many allegedly educated people.

Jim July 20, 2011 at 2:28 pm

I see around the Internet a growing tendency to refer to Progressives as Regressives. Surely this is a more accurate term and ‘statists’ does not entirely capture it either.

vikingvista July 20, 2011 at 2:45 pm

Temporal labels are always a bad choice for posterity. At first they seem youthful and avant gard, but before long they become forever anachronistic. “Modernist” is another example.

vikingvista July 20, 2011 at 3:26 pm

garde

kyle8 July 20, 2011 at 3:47 pm

Progressives became Liberals after the public rejected them, then they became progressives again after the public rejected liberalism. I propose they call themselves “Nicey people”. Maybe that will buy them a few years.

Emil July 20, 2011 at 4:06 pm

intentionists would probably be better

Steve Turetzky July 22, 2011 at 11:01 pm

“Progressives became Liberals….” Such use of the word “Liberal” would have (and probably did) horrified the true liberals, those who believe(d) in limited government and individual liberty.

kyle8 July 20, 2011 at 4:29 pm

The progressives became liberals when the public rejected them, then they became progressives again when the public rejected liberalism.

Single Acts Of Tyranny July 20, 2011 at 2:43 pm

Many of ‘em know the truth, they simply want to control the world and create reliance upon themselves, thus free trade creating cheaper goods outside of their control, is seen (by them) as bad. Forget the fact that the 50 cents an hour machinist either starves or is a child prostitute without the Walmart sourced job.

Chucklehead July 21, 2011 at 2:10 am

Well said.
Look at the language of the article: elite, detrimental, opposing, resistance, resistance, lost, deficit, privileges, evasion, killed, serious, & overwhelm.
A blockade is a act of war, unless you do it to yourself. The result is the same.

Frederic Conokoehn July 20, 2011 at 9:40 am

Usually, though unintentionally due to ideology, my poli-economical postions tend to side a little leaning to the left. But one area when I generally disagree is free trade. As you stated, there is no way free trade by definition hurts consumers, per se. If there is anyone “hurt” by free trade it is the worker who is inefficient in comparison. I think this is where when one is a politician their ideology clouds the big picture…a “progressive” will mistake their ‘sticking up for workers’ for ‘sticking up for the consumer.’ There are some complexities to where one becomes the other, but taken together, keep free trade to help consumers and if workers are “harmed” let’s find ways to make them more efficient!

vikingvista July 20, 2011 at 2:50 pm

Saying free trade hurts a displaced worker is to ignore the benefits to that worker as a past and future worker and consumer.

Darren July 20, 2011 at 7:15 pm

Just a thought, but it seems to me that the problem is an individual does not gain as much as a consumer as he loses as a displaced worker. That where the whole gains, the gains are distributed. Where the whole loses, the losses are concentrated. The focus is usually on the concentrated losses (worker displacement, failed businesses, etc.) despite net gains.

vikingvista July 20, 2011 at 9:22 pm

Actually, even excluding his gains as a consumer, he still gains much more than he loses. Those things he gains: the employment he had, the employment he family has/had, the productivity his labor has, the future employment he will have, the employment choices he has had.

Cursing free markets because one has lost one’s job, is like a stock trader who builds a billion dollar fortune from nothing, and then curses trading because one year his portfolio drops 20%. Actually, it is even less insightful, because the loss of jobs in a free market system is one of the very reasons for the great bounty–via creative destruction.

That being said, nobody likes to lose anything, even if it is the reason for everything he has.

kyle8 July 20, 2011 at 3:51 pm

To expand upon what viking just said, I am cognizant of the fact that free trade may cause some displacement, and I am not opposed as some are to things like retraining tax credits and the like.

But everyone, even the displaced worker is better off in the long run with free trade. Greater efficiency, caused by comparative advantage increases the overall wealth of everyone.

Don Boudreaux July 20, 2011 at 4:15 pm

Well said.
But it’s vitally important to keep in mind the true cause of worker ‘displacement’ and job ‘destruction’ – namely, consumer choice. What people who wish to restrict trade really wish to restrict is consumer choice; what people who applaud programs such as Trade Adjustment Assistance really applaud are government subsidies to people who, although those people freely choose to enjoy the benefits of an economy that is more productive the greater is the freedom of consumers to choose, wish to off-load some of the (relatively modest) costs of being part of such a society onto others.

muirgeo July 20, 2011 at 9:03 pm

But everyone, even the displaced worker is better off in the long run… kyle7

How about the ones who are murdered for opposing free trade… do they benefit??

“. According to the non-profit labor rights group U.S. Labor Education in the Americas Project, 51 Colombian unionists were killed last year and 338 received death threats. The country generally accounts for about half of the unionist murders worldwide these days.”

http://www.huffingtonpost.com/2011/07/20/colombia-free-trade-agreement-violence-jobs_n_904495.html

The Other Tim July 20, 2011 at 9:30 pm

Martyrdom doesn’t absolve one’s dumb beliefs from being dumb.

muirgeo July 20, 2011 at 11:30 pm

Opposing the ruling class is dumb??? I think the complacent ones are the dumb asses.

The Other Tim July 21, 2011 at 12:15 am

So last week it was “shut up and obey our enlightened masters,” and this week it’s “ruling class is evil!” Ever heard of consistency? I actually see you in a post below trying to out-libertarian the libertarians by proposing it’s anti-liberty to allow people to buy foreign goods unmolested. This is not a way to impress critical thinking.

brotio July 21, 2011 at 1:15 am

Oh, I guess you’ve never seen what American unionistas do to people who cross picket lines?

anthonyl July 24, 2011 at 8:46 pm

Free trade is not the cause of murders and death threats- criminals are.

Chucklehead July 21, 2011 at 2:20 am

Creative destruction is not fun, but necessary for society to advance by spending less resources for the things it needs or wants.
The problem with retraining programs are the government never knows what jobs are going to be needed to fill when the training ends. As far as tax credits go, if the company found someone already trained to do the job, they would have hired them, rather than retrain someone. Therefore, the credit is a waste. All companies should be allowed to expense training costs rather than depreciate them, for both new and existing employees.

Joshua Ulrich July 20, 2011 at 9:48 am

To be fair, Nancy Tate was critiquing the “free trade” agreements currently working their way through legislature. I’m not familiar with these 3 pieces of legislation but I would guess their main aim is to benefit special interests, not consumers.

Don Boudreaux July 20, 2011 at 9:57 am

Freer trade brought about by such agreements isn’t as desirable as free trade, unilaterally adopted without condition. But it IS freer trade, better than not-freer trade.

Bret July 20, 2011 at 11:56 am

You’ve misrepresented what Ms. Tate said. She did not assert that free trade is an assault on consumer rights. She asserted only that the South Koreans believe that.

Surely, you must be able to find examples where you don’t have to put words in people’s mouths?

John B July 20, 2011 at 12:22 pm

I don’t think it’s that much of a stretch to say she obviously agrees with that assessment, though. Yeah, she never technically stated the position for herself, but she’s using said South Korean belief as an argument against the S.K. pact (since, unlike the other two pacts, she doesn’t actually make any direct argument against it)

Given that the following paragraph relates the horror of Columbians being able to buy grain for 50-70% less than they currently pay, I have a hard time buying that she’s just commenting on South Korean beliefs.

Bret July 20, 2011 at 1:52 pm

You can believe whatever you want, it’s still fairly poor form to assign an assertion to someone when they didn’t actually assert that.

Let me give you an example. I recently wrote in an email to progressive friends that “it’s not necessary to have the government take care of the poor”. This is true because I believe that private local charities funded with voluntary contributions is far preferable than government intervention for many reasons. My statement was turned into “Bret believes the poor should be left to starve” and their claim was that it wasn’t much of a stretch to believe the assertions are equivalent.

It’s just poor form to put words in others’ mouths, even if it seems clear that they believe those words.

John Dewey July 20, 2011 at 2:06 pm

Bret,

Get real! Nancy Tate clearly intended that readers believe she agrees with the argument. By including that statement in her letter, she implies exactly that unless she specifically states otherwise.

What Don wrote is hardly “poor form”. he didn’t put words in Nancy Tate’s mouth. Don merely responded to the argument she put forth in her letter. She’s the one that included that argument. She’s the one who must either distance herself from it or else defend her inclusion of it.

Ken July 20, 2011 at 3:20 pm

Bret,

Grow up! This is exactly like the phrase “people say” that politicians and journalists and many others use. It’s a way of weaseling out of saying whatever mealy mouthed bullshit they are about to say. “Oh no, I didn’t say that. I was merely saying this is what other people say.”

Regards,
Ken

muirgeo July 20, 2011 at 9:12 pm

“But it IS freer trade, better than not-freer trade.”

Yeah as long as not TOO many people are murdered for opposing “Free” Trade. Because then as long as the number murdered is low enough then we can assume the dictators and the CEO’s and the bought politicians have come to make a reasonable and fair agreement??

Don .. your position is bizarre… these agreements are made between bought government officials and super wealthy people representing the interest of multinational corporations NOT the interest of workers or consumers.

Either you stand for liberty or you don’t… I personally do not think liberty is something that can be compromised in trade negotiations that lopsidedly represent the interest of the powerful and the wealthy.

In theory and principle you are supposed to be a libertarian in practice and the real world ( which you seem to put secondary to theory) you are NOT.

matt July 21, 2011 at 12:10 pm

Blah. Blah blah, blah blah blah, blah. Blaaaaaaaaaaaaaaa.
hoopidy filoopijy noopijy ploody flooby.

muirgeo July 21, 2011 at 12:26 pm

Reduced you to babble did I?

Jack Burton Mercer July 22, 2011 at 2:59 pm

Do you, or do you not, support free trade? You try to change the subject by talking about the murder of protesters, but you have not clearly stated a position. If free trade is worse than restricted trade, say so and provide a reason. Regarding your change of subject, if you were consistent, you would condemn the destruction of private property by the anarchists who riot in opposition to free trade during the international trade meetings. Is that true or not?

tdp July 22, 2011 at 4:55 pm

@YASAFI
Union members in Colombia have 1/6 the murder rate of the general population, so yes, people are totally being murdered for opposing corrupt governments and organized crime, I mean free trade that makes them wealthier. Why don’t you stop running your ignorant mouth and go read Johan Norberg’s In Defence of Global Capitalism. It is irrefutable proof that free trade makes EVERYONE richer, freer, and upwardly mobile, especially the poor.

anthonyl July 24, 2011 at 9:13 pm

So you don’t agree with Don? Or do you agree with him but just hate the fact that there are nasty people in the world that would resort to violence to get their way? Don had clearly stated he doesn’t like trade deals. Here he was stating that unilateral free trade is better than no trade or trade with silly agreements or pacts.

Mark July 20, 2011 at 10:09 am

Give it up Boudreaux. Free trade is where the high value currency in terms of purchasing power parity buys the low value currency in order to acquire all the land and assets.

Thereby, purchasing power parity in terms of currency is roughly equal. With the U.S. Owning all the land in China.

If that is not what we have then it’s not free trade.

Don Boudreaux July 20, 2011 at 10:12 am

I haven’t the foggiest idea what you’re trying to say.

Greg Webb July 20, 2011 at 1:00 pm

Don’t worry, Mark doesn’t either.

Bruce July 20, 2011 at 1:25 pm

I think he might have spilled a box of Alpha Bits on the table and just posted what came up.

Ike July 20, 2011 at 2:47 pm

No, no, those are very clearly WORDS in there. The odds of random Alpha-Bits spilling forth and forming nothing but words are astronomical.

I believe he instead put a rational sentence through Google Translate, taking it from English to French to Greek to Swedish to German, back through Greek on the way over to Dutch before translating back to English.

That many passes through nations with little concept of free trade would render the sentence meaningless.

kyle8 July 20, 2011 at 3:55 pm

Obviously this is the beginnings of some sort of conspiracy theory having to do with trade, China, and probably the Bildebergers. No doubt either the Jews or the Jesuits are at the bottom of it.

kyle8 July 20, 2011 at 4:31 pm

The site is strangely recording posts up to an hour after they are posted.

brotio July 21, 2011 at 1:18 am

I have found that if I refresh the page, the post usually (but not always) shows up.

John B July 20, 2011 at 12:08 pm

I can’t seem to open the link to the letter.

Would anyone be willing to quickly post what it says?

Don Boudreaux July 20, 2011 at 12:10 pm

I had the same problem when I tried to open the link in Firefox. I then pasted the link into Safari and it opened just fine.

John B July 20, 2011 at 12:11 pm

Yeah, I got it open.

Nevermind.

Tim July 20, 2011 at 12:26 pm

Don,

The problem with these letter is that “progressives” dispute your central claim. So while you repeat over and over that free trade expands consumer options, the other side denies this. The challenge you face is to continually show (via concrete example) how this is wrong, not merely state it. I think first and foremost, progressives think free trade is a race to the bottom designed to exploit the poor in other countries while “stealing” American jobs. Sorry to be critical again. I agree with your letters, I just think you could do better presenting your case.

The Other Tim July 20, 2011 at 1:26 pm

If the left is suggesting that allowing consumers more choice and cheaper goods is anti-consumer, I don’t really see why proponents of free trade need to give much of anything in the way of a well-argued retort. The notion that a greater variety of cheaper goods is bad for the consumer is prima facie stupid. If the left really wants to get hitched to this idea, the onus is on them to show us why not to reject it out of hand.

Ben Hughes July 20, 2011 at 1:46 pm

“The Other Tim” already pointed out that the argument cuts both ways. Why is the burden of proof on free traders to prove this and not the other way around?

One difficulty is the asymmetry: by its very nature it’s much more difficult to “show (via concrete example)” that benefits accrue to a large number of people, small in magnitude, than it is to “show (via concrete example)” that costs are concentrated among a relatively few number of people in a specific industry.

Hence the non-intuition of free-trade and the propensity for economic illiteracy to drive understanding like that of Nancy Tate.

Jim July 20, 2011 at 2:47 pm

Hence the non-intuition of free-trade and the propensity for economic illiteracy to drive understanding like that of Nancy Tate.

Not to be obtuse, but free trade is totally intuitive to me. I partly enjoy reading Don’s letters because I am generally confused by the assertions that free trade is harmful; their assumptions seem self-destructive and backwards.

I_am_a_lead_pencil July 20, 2011 at 2:28 pm

“So while you repeat over and over that free trade expands consumer options, the other side denies this.”

Tim,

A proof? Isn’t his like having to “prove” that 10 people in a room that are willing to trade with me is better than 5 people? By definition it “expands consumer options”.

Still, I think that the best arguments for trade are simply arguments against tariffs. Mark Perry had a great post some time ago about tariffs on clothes hangers from China – which nearly doubled their price and made dry cleaning more expensive.

Tim July 20, 2011 at 3:32 pm

Precisely the type of concrete example I’m talking about. Same thing for Jim’s comments. All I am saying is Don’t letter would have been better by including such examples.

Jim July 20, 2011 at 2:37 pm

Well, almost a billion Chinese are crawling into the middle class despite not having the benefit of our foreign aid.

I see that as proof that trade works. What do the Progressives call it?

DG Lesvic July 20, 2011 at 12:42 pm

I think you may have just coined a new term for the progressives.

The perversives.

Or, just perverts.

Greg Webb July 20, 2011 at 1:01 pm

“Progressive” is just another example of today’s “double speak.”

DG Lesvic July 20, 2011 at 2:01 pm

Thanks for telling us, Hatchet Man.

Greg Webb July 20, 2011 at 2:07 pm

LOL, DG! You said that you were “The Terror of the Austrian School”. LOL! Really, you are merely an angry weasel.

vikingvista July 20, 2011 at 2:23 pm

“merely an angry weasel”

Come on, Greg, that is not fair. He is not MERELY an angry weasel.

Greg Webb July 20, 2011 at 2:41 pm

You are right, Vikingvista. In the last few days, DG has:

* Made absolute promises that he did not keep,
* Weaseled out of keeping said absolute promise when the demanded example was provided,
* Maliciously and falsely accused others of character assassination,
* Pretended to be a victim of the character assassinations that he was committing,
* Sleazily edited comments to mischaracterize what someone else said,
* Made silly personal attacks implying others are subhuman, and
* Demeaned his wife by saying that she is an “unreasonable and illogical creature.”

I know there is a word to describe such despicable behavior, but it is just not coming to me right now.

Ken July 20, 2011 at 3:24 pm

Schmuck? Douche-bag? Ass? Clown? Fool? There’s not just one word to describe such despicable behavior, Greg, but a veritable cornucopia to choose from. Get creative!

Regards,
Ken

Sam July 20, 2011 at 3:33 pm

Very good Ken. Gold star in potty mouthery to you! Maybe after nap time you can have a lolly pop!

Ken July 20, 2011 at 4:31 pm

Ooohh, potty mouthery! Burn!!

Greg Webb July 20, 2011 at 6:58 pm

Thanks for the excellent choices, Ken. There really are so many…it is difficult to choose just one.

DG Lesvic July 20, 2011 at 4:13 pm

Greg,

The hatchet is getting a little dull. You should watch Viking more closely. Now, there’s a real pro.

Greg Webb July 20, 2011 at 7:01 pm

Not at all DG. All I have to do to accurately describe your behavior. For example, your current silly tactic is to pretend to be the victim, while weaseling out on your absolute promise.

vikingvista July 20, 2011 at 9:41 pm

I was thinking more along the lines of clueless, perseverating, pathetic, …

muirgeo July 20, 2011 at 8:54 pm

So is it still considered “Free Trade” if they have to murder citizens who oppose it?

USLEAP campaigns to end killings of trade unionists …

http://usleap.org/usleap-campaigns/colombiamurderandimpunity

You free traders are of such high theoretical moral standing. If you just ignore the real world us protectionist look like such asses… theoretically.

The Other Tim July 20, 2011 at 9:37 pm

There’s nothing in that link about trade unionists being killed for opposing free trade agreements.

You protectionists look like asses because you unconditionally support domestic free trade and have a problem with it only when it crosses national borders. If you don’t have a problem engaging in free trade with your local grocer, but do have a problem engaging in free trade with Colombia, you don’t have a problem with free trade. You have a problem with Colombia.

muirgeo July 21, 2011 at 7:47 am

TOT,
You mentioned something about critical thinking above but here you talk as if there is no difference between interstate trade and cross border trade.
THAT’S you..thinking critically???

What about labor laws , minimum wagges laws , environmental laws, law laws like child labor laws ect… Your’s is a position of selling out principles to save a few cents on cheap plastic things while empowering despots and others in the political class. ( We have a different idea of who is in the political class… you seem to blame the puppets while for me it’s the hands that moves them.

dsylexic July 21, 2011 at 8:00 am

on the other hand if you had not bought from them,these despots would have simply killed off those useless children and slaves who cant even produce anything saleable to the righteous americans

The Other Tim July 21, 2011 at 9:47 am

In the first place, said laws violate the most foundational right of workers, freedom of contract, and accordingly should be abolished.

In the second place, nations are not economic entities and cannot project lines on the earth which magically convert trade which crosses them from something beneficial into something negative, any more than, say, religion could. If you suggested that Medieval Jews and Catholics shouldn’t engage in free trade with each other because they have different laws over, say, usury, it’d be recognized immediately as incendiary bigotry. Alas, for some reason, it’s much harder to make someone who wants to segregate America from economic interactions with foreigners to realize what a xenophobe he’s being.

In the third place, http://www.slate.com/id/1918/

Dan J July 21, 2011 at 5:21 pm

Sellout?!?! Didjya happen to think critically of those laws and whether they have the same shared value you have placed on them?

The Other Tim July 20, 2011 at 9:42 pm

Oh, and as a reminder, your beloved Krugman thinks you’re a fool as well.

The Other Tim July 20, 2011 at 9:43 pm
cmprostreet July 20, 2011 at 9:44 pm

So your argument is that because the Columbian government is corrupt and does not protect its citizens, the United States government should impede attempts of Americans to trade with those Columbian citizens?

Do you similarly kick to the curb any potential patients of yours which seem to be victims of domestic abuse?

muirgeo July 21, 2011 at 7:54 am

And your argument is .. ” Look how many pennies I saved buying this stuff from murderers, rapist and slave owners…. isn’t “free trade” great. I am a libertarian don’t you know!” Did I get that right Mr. Liberty?

dsylexic July 21, 2011 at 7:58 am

then stop buying from other americans .you are buying stuff from the descendents of those who colonized and murdered natives and spread small pox and alcoholism amongst them.if you had any conscience,you’d have strangled yourself by now.

Dan J July 21, 2011 at 4:39 pm

Govt is corrupt and does not protect it’s citizenry from others enforcing their will upon them?
Then we should not trade with ourselves.

muirgeo July 20, 2011 at 8:57 pm

Like some economists and global trade experts, Olaya expects to see workers displaced and smaller operations swallowed up as multinational companies take on a larger footprint in his country. Olaya also anticipates more subcontracting in Colombian industries — an already-prevalent practice that leaves workers with few benefits and little recourse when it comes to wages and working conditions.

“It doesn’t favor our people in Colombia or in the United States,” Olaya says of workers and the trade deal. “The people that it does favor are multinationals and large investors.”

http://www.huffingtonpost.com/2011/07/20/colombia-free-trade-agreement-violence-jobs_n_904495.html

jon July 20, 2011 at 9:34 pm

time to take your pills muirgeo

muirgeo July 20, 2011 at 11:36 pm

yep…

ArrowSmith July 21, 2011 at 3:35 pm

Riddle me this. What’s the point in having all this wondrous variety of consumer goods at low prices if you don’t have a good paying job?

The Other Tim July 21, 2011 at 4:30 pm

If you mean to suggest that free trade causes wages to fall further than prices, you are mistaken. Certain industries, through protectionist schemes, allow their workers to collect economic rents greater than the advantages they would individually receive from free trade. However, consumers as a whole necessarily gain more in inexpensive goods than workers as a whole lose in nominal wages – if they truly lose anything at all. With the exception of those wages that have been artificially inflated by economic rents, wages are determined by the average level of productivity within a labor market. By focusing only on industries wherein your region has the comparative advantage in global trade, you increase, not decrease, productivity and therefore average wages.

ArrowSmith July 21, 2011 at 4:39 pm

Tell that to unions workers who made $40/hour on the line, now making $10/hour at Wal Mart. Before they could afford a house, now they can afford cheap Chinese crap imported to Wal Mart.

Dan J July 21, 2011 at 4:45 pm

$40 an hour in an unstable and doomed position.
You cant stop the world from applying some form of capitalism to advance their economies. That is the only way to keep businesses from investing in opportunities. Creating a more business friendly environment that does not have govt picking winners and losers or having favoritism will incentivize more investment here, rather than there.
The line workers were being paid more than the market could bear. They gambled and lost.

The Other Tim July 21, 2011 at 5:01 pm

I made clear qualifications that people who seek economic rents will find their privileged position compromised by free trade. I don’t have a problem with that. Economic rents in all their forms should be destroyed.

The average worker hasn’t seen his wage collapse from $40 an hour to $10 an hour. The average worker has seen his purchasing power shoot up due to the availability of more inexpensive goods. The question then becomes: why would we ever want to protect a class of privileged elite workers by victimizing workers as a whole?

Also, “cheap Chinese crap” is jingoistic. You have no justifiable reason to imagine that if Americans were making the same product it would be of any higher quality. Just because you have a worldview where economies are at war with each other and we have to defend ourselves against the threat posed by foreigners doesn’t mean you can make xenophobic statements about workers in countries you judge to be economic threats.

Dan J July 21, 2011 at 5:18 pm

In a sense, we have seen prices of products and services decrease and availability of those very products and services increase to all levels of income. But, with the decrease of pricing and greater availability comes less necessity of increased wages, especially of those above the market. Union wages are not the avg market wage, but above market wages. Does it surprise anyone to find their wages hitting a brick wall.

Nemoknada July 22, 2011 at 12:32 pm

So let’s suppose:

Portugal can make wine for $5 a barrel and wool for $5 a bolt

England can make wine for $20 a barrel and wool for $6 a bolt.

Classic Ricardian principles tell us, I think, that the parties will trade on the basis of their comparative advantages, even thought Portugal has an absolute advantage in both goods.

As I understand the theory, the extra money that the Portuguese wine merchants get for their wine enters the economy and raises wages sufficiently to more than offset the extra $1/bolt that Portuguese consumers pay for wool.

But what happens if the Brits don’t want any wine? It seems to me that no trade happens, because the $6 British wool cannot undercut the existing $5 Portuguese wool, and the Portuguese capitalists won’t allocate capital to produce a product that they cannot sell, as there is no opportunity cost to an opportunity that does not exist.

Now suppose the same facts except that British wool is only $4. In that case, the Brits can sell their wool in Portugal, putting Portuguese wool makers out of business but with only the $1 of savings available to circulate and create new opportunities for the displaced workers. I would argue that this is not “trade” at all, free or otherwise, that it is competition from a low-cost source, which is a wholly different phenomenon.

There is no doubt that competition, from any source, lowers prices to consumers, but there is no reason at all to believe that the savings realized, which may be razor thin in order to dramatically affect market share, equal anything like the frictional cost of transition to other work by displaced workers, and, if we assume that everyone was already employed at his best use, AND there is no trade-created NEW opportunity with a HIGHER opportunity cost, a reduction in standard of living seems the logical consequence.

It all starts, I believe with the distinction between “trade,” which is based on comparative advantage and mutual demand, and “foreign competition,” which is based solely on absolute advantage and, therefore, may not offer any of the classic virtues of “trade.”

Surely, some for-real economist has dealt with this distinction if only to dismiss it. I’d be interested in citations.

The Other Tim July 22, 2011 at 1:19 pm

You’ve seriously misunderstood comparative advantage.

If a Portuguese worker can make one two units of wool or two units of wine in an hour, and an English worker can make two units of wool or one unit of wine in an hour, the Portuguese must sacrifice the opportunity to make one wine in order to make one wool, or one wool in order to make one wine. The English must sacrifice the opportunity to make two wool to make even one wine, but only half a wine to make one wool. Therefore, to maximize the amount of both wine and wool that can be consumed in both countries, Portugal makes the wine, England makes the wool, and they trade at a ratio of something like 1.5 wool to 1 wine. England now sacrifices only 1.5 wool to get 1 wine, which is better than the 2:1 ratio they would be looking at if they didn’t trade, and Portugal now sacrifices only two thirds of a wine for every unit of wool they import, which is better than the 1:1 ratio they would be looking at without trade.

Or, put another way, comparative advantage notes that workers can only do one thing at a time and it doesn’t matter how spectacularly superior your country’s ability to produce good X is if your workers are tied up in industry Y, where your workers are less comparatively superior.

Can you rephrase your argument to address trade not in dollar costs per unit but opportunity costs per unit?

The Other Tim July 22, 2011 at 1:21 pm

Fair warning: I’m sick and don’t have faith in my present ability to do math. If someone else can check my numbers to make sure I didn’t screw them up, I’d appreciate it.

Nemoknada July 22, 2011 at 2:44 pm

“Can you rephrase your argument to address trade not in dollar costs per unit but opportunity costs per unit?”

Yes, but I won’t, because my argument, which is based on my second hypothetical, assumes that the Brits don’t want wine, so there IS no “trade”. All that happens is that the Brits show up in Portugal with wool at 80% of the domestic price, all Portuguese wool consumers become British wool consumers, and the Portuguese wool workers go looking for work WITHOUT the benefit of an expanding wine sector to employ them at better wages.

All the Portuguese economy has to show for this is the money saved on wool and slightly cheaper capital on account of the trade deficit money being invested by the Brits in Portugal, whether they need more capital or not (i.e., a distortion of Porugal’s capital markets rather than an improvement in them).

I apologize for not making clear that “Assume the same facts” means the facts of the second hypothetical, in which the Brits don’t want wine.

The Other Tim July 22, 2011 at 3:55 pm

Well that’s a silly hypothetical.

Surely you’re aware that comparative advantage applies to resources other than wine and wool. If for some bizarre reason one country has absolutely no demand for resource X, substitute resource Y and move on. If Britain has no desire for wine, then analyze the comparative advantage between wool and steel. Or wheat. Or any other good under the sun. If England wants any of those, then your objection doesn’t hold. England would have to have no demand for any resource whatsoever in order for it not to be worth its while to import from Portugal.

Let me also rephrase my request. You *cannot* create scenarios like the one you have created where you examine trade dynamics in terms of dollars. Goods are paid for with goods. Portugal and England don’t even use the dollar, they use the Pound and the Real (at least when Ricardo wrote the England-Portugal cloth-wine example), the exchange rate between the two being determined based ultimately on the usefulness of the currency in acquiring goods, which is based on the productivity of the various countries, which is based on the degree to which they use their comparative advantage. In other words, dollar costs are determined by and do not themselves determine the benefits of trade. The benefits of trade are determined by opportunity costs.

Lastly, to shamelessly steal from Bastiat, when the British in this scenario dump their wool on Portugal, if the benefits of money saved on wool and cheaper capital are to be regarded as less than the damage done to the woolworkers’ industry, why do we not equally seek to protect, say, the light bulb workers’ industry by blotting out the sun, which shamelessly dumps its light on us at unfair below-market prices?

Nemoknada July 22, 2011 at 4:42 pm

” If for some bizarre reason one country has absolutely no demand for resource X, substitute resource Y and move on. ”

What’s silly is insisting on a hypothetical in which trade is balanced. Our trade with China is not balanced. There IS no resource Y in which we can conduct balanced trade with China. If there were, we would have balanced trade with China.

“England would have to have no demand for any resource whatsoever in order for it not to be worth its while to import from Portugal.”

That’s what protectionism is about – eschewing cheaper things from abroad, rightly or wrongly, sanely or insanely. It is done all the time, and the Chinese are doing it now.

“Goods are paid for with goods. ”

A trade deficit arises when goods are NOT paid for with goods, but with a promise of goods, should the seller actually ever want some. If the seller never shows up with his gift card, the goods are never paid for, the profit on those goods is never made, and the advantages of trade never accrue.

In trying to express the matter in terms of opportunity cost, you overcomplicatr the question. Assume that the Brits show up on the shores of Portugal one day and offer to accept payment for British wool in Portuguese money at 80% of what domestic Portuguese wool costs. They don’t want wine, they don’t want resource Y, they don’t want anything. They absolutely forbid imports into England. But their cloth, in Escudos, is 20% cheaper than domestic wool. Why would they do that? For the same reason that the Chinese are doing it – to nurture a manfuacturing base that is learning how to function. We did it in the nineteenth century, too. If I say that I don’t care why they do it, I do not mean that we could ignore the fact that no sane country WOULD do it. I mean that history tells us that sane countries DO do it, so the possibility has to be regarded as real.

So, tt may well be that the Brits are foregoing the obvious benefits of trade, but the reigning thesis in these parts is that we don’t care what our trading partner does so long as we get cheaper goods. If you buy that argument, you cannot solve Portugal’s problem by imposing any level of rationality on the Brits. Indeed, the only argument that fits the logic of the situation is the one from Bastiat.

As regards that sainted but way over-rated sage, the sunlight is free, so the savings from using it are dramatic, whereas I am hypothesizing a narrow margin with major market share consequences. Moreover, sunlight creates opportunities unique to sunlight, like growing plants and working outdoors. Marginally cheaper imported cell phones do not create the same chances vis a vis what might be their domestic competition. If you were actually to deconstruct ALL of the things sunlight provides that candlelight does not, AND imagine that we could provide all of those things at nearly no cost, so that sunlight’s aggregate cost advantage is inconsequential, it might indeeed be worth asking whether we should forego the sunlight. But of course, we can never create jobs selling something for free – except for ad-driven things, which don’t come to mind in thinking about sunlight – so the example has no application to a case of marginal cost savings.

It is the absurdity of thinking candles could replace sunlight at anywhere near the same (zero) cost, and not the mere fact that sunlight is cheaper than candlelight (without regard to by how much), that makes the example work.

Bastiat always worked in an assumed world of infinite opportunity. The money not spent on glaziers could be spent on shoes, the money not spent on imported iron could be spent on something else. There is no analog to that assumption in a world where the Chinese also sell all of the something elses for which we will pay a living wage.

The Other Tim July 22, 2011 at 5:11 pm

As I said below, trade is tautologically balanced. There is always a good we can export to China. Otherwise, Chinese “trade” is just “here, America, have free stuff.” What we export to the Chinese are capital goods, and I rather expect it to have the same effect that our capital surplus with Japan did during the 80′s.

Opportunity cost isn’t an overcomplicated, it’s the only standard by which comparative advantage can be examined. What you’re objecting to no longer seems to have any tangential relationship to Ricardo. If that’s the avenue you want to pursue, so be it, but it’s got nothing to do with comparative advantage. Comparative advantage is a comparison of the opportunity cost ratios of two countries producing two goods.

Your response to Bastiat indicates your thinking falls into the same trap as many protectionists fall into. Wealth is consumption. If China or Britain or the sun give us cheaper/free things that increase the quantity of goods we consume, we are richer. If said trade has any impact on nominal wages, it cannot drive down the real wage, since whatever one gets paid, one’s consumption has to go up if more goods are being consumed. The fact that China denies us the privilege of paying for these goods by likewise working long hours to make goods which we will never be able to benefit from in order to ship to China, well, I don’t see this as a serious problem. I wouldn’t mind it if someone else volunteered to do all the work so that I could enjoy all the benefit, and I certainly wouldn’t be any poorer for it.

Ken July 22, 2011 at 2:32 pm

Nemoknada,

“But what happens if the Brits don’t want any wine?”

This is a bad assumption. The point is to pick two commodities that will be traded. It is no special insight to recognize that if A builds X, but no one wants X (like hybrids, ethanol, wind power), then one one will buy X.

What you’ve developed is this tautology then drew a conclusion completely independent of your assumptions.

Regards,
Ken

Nemoknada July 22, 2011 at 2:37 pm

Ken -

What I have described models US-China trade. If you assume balanced trade, you can hardly hypothesize a trade deficit. But we have a trade deficit. So someone must be selling and not buying, and someone else buying and not selling.

The Other Tim July 22, 2011 at 4:06 pm

Trade is tautologically balanced. Trades are exchanges wherein both parties receive something they believe justifies giving up something. If one party does not receive something of sufficient value in return, it’s not a trade, it’s a wealth transfer.

What you are complaining about seems to be the fact that free people agree to trades wherein goods of a foundationally different kind are exchanged: manufactured goods for capital goods or currency or specie. If you think that’s a problem, fine, but at least be consistent and try to try to pay for your groceries with other groceries instead of cash or credit.

Ken July 22, 2011 at 11:22 pm

Nemaknada,

“What I have described models US-China trade.”

No you didn’t. We have enormous comparative advantage on designing nearly all new technologies over China. Steve Jobs and his team at Apple designed the iPhone. But the iPhone is made in China. I’m pretty sure Steve Jobs and his Apple team are somehow made worse off that Chinese manufacture a product they designed, particularly in light of the fact that it was Steve Jobs and Apple that set China up to manufacture the iPhone.

Do you even know what the trade deficit means? I’m guessing not since you seem to think it’s something bad. When I bought my Toyota Matrix, my two TVs that were made in China, my iPod (made in China), my office chair, I paid cash for them. The trade deficit increased, though. You probably think that this means someone went into debt, but it doesn’t. It simply means Americans bought more from the Chinese than the Chines bought from Americans.

I have an enormous trade deficit with the people from whom I bought my house. I have a pretty big trade deficit with Toyota, Giant, Shoppers, amazon, Wal-Mart, Walgreens, Exxon, and so forth, since I buy things from them on a regular basis, yet have never sold them a thing.

You see, Nemoknada, trade imbalances are not a bad thing. It’s merely an accounting artifact that means something far different than what you think it means. It is not a deficit in the sense that someone is going deeper into debt the larger the trade deficit gets. It merely means Americans are buying more from foreigners than foreigners are buying from Americans. It says nothing about the enormous trade going on between Americans themselves and the enormous wealth surplus that generates to allow them to buy more from foreigners than foreigners buy from Americans.

Regards,
Ken

Ken July 22, 2011 at 11:23 pm

Edit: “I’m pretty sure Steve Jobs and his Apple team are NOT somehow made worse off that Chinese manufacture a product they designed, “

Nemoknada July 22, 2011 at 5:32 pm

“Trade is tautologically balanced. Trades are exchanges wherein both parties receive something they believe justifies giving up something. If one party does not receive something of sufficient value in return, it’s not a trade, it’s a wealth transfer.”

Precisely, which is what China has been doing but DB et al. have been defending as “free trade.” My whole point is that it is NOT trade, so I’m not sure what you are disagreeing with.

The harder question is whether a wealth transfer can have negative externalities greater than the transfer. I am saying that displacing American workers by transferring wealth to American consumers may be such an instance. Displacing candlemakers by providing free sunlight is not such an instance. But the difference is not one of logic; it is one of magnitudes. Which is why the former is not instructive regarding the latter.

Nemoknada July 22, 2011 at 6:10 pm

“Which is why the former is not instructive regarding the latter.”

I mean t’other way round. This place really does need an edit button for poster’s remorse!

The Other Tim July 22, 2011 at 6:50 pm

It is not trade for a Chinese man to sell an American man a manufactured good in return for money? I don’t see how you arrive at that. We give them money, they give us stuff. That’s trade.

You also seem to hold that common misconception that jobs are good and we don’t want to get rid of opportunities to work. Jobs are costs in order to consume. To whatever extent we can get rid of the requirement that we have to work to eat, that’s a good thing, not a bad thing.

Accordingly, I find your notion that we want free sunlight but don’t want cheaper consumer goods problematic. If it’s a problem for you that we aren’t paying enough for consumer goods then it has to be a problem for you that we aren’t paying enough for sunlight. Maybe we shouldn’t blot out the entire sun, but at least a tax ought to be levied on its use in places where it unfairly competes with light bulbs.

Nemoknada July 22, 2011 at 10:13 pm

“You also seem to hold that common misconception that jobs are good and we don’t want to get rid of opportunities to work. ”

Quite the opposite. I envision a post-scarcity economy in which very few of us have to work. The problem is deciding WHO will get to not work. Certainly, the workers who are displaced by foreign goods are not better off for it unless we give them money to live on now that we have been relieved of the need for their services. That is the delicious dilemma in which libertarians find themselves. They love consumers to save money, but they won’t share the savings with those put out of work in the process, as that would require statist intervention.

So, either you have to join your man Bastiat in believing that everyone put out of work by a cheaper competitor will find a BETTER job, or you have to join me in believing that it’s good that not all of us have to work. But in the latter case, you really really need to give the displaced workers a reason to share the happiness you feel for their good fortune. I have ideas on how to do that; I’m betting that you don’t.

The Other Tim July 22, 2011 at 10:19 pm

People aren’t entitled to economic rent. I see no reason to help a person regain a portion of the money they used to receive which is above the quantity required to move a worker into production.

Ken July 22, 2011 at 10:36 pm

Nemoknada,

Trading with the Chinese is NOT a wealth transfer. I buy Chinese products occasionally. I trade my $X for that product Y. I clearly value the product Y for AT LEAST $X, otherwise the trade would NOT have occurred, thus I gain in the trade.

In this trade both the Chinese and me gain. The Chinese values $X AT LEAST as much as he values Y, thus he gains.

This is not a wealth transfer.

Regards,
Ken

Dan J July 22, 2011 at 10:39 pm

If are money is inflated after the trade…….

Nemoknada July 22, 2011 at 8:32 pm

“It is not trade for a Chinese man to sell an American man a manufactured good in return for money? I don’t see how you arrive at that. We give them money, they give us stuff. That’s trade.”

A person who considers himself qualified to talk down to me once wrote “Goods are paid for with goods.” I’ll wait while you and he sort that one out.

“Maybe we shouldn’t blot out the entire sun, but at least a tax ought to be levied on its use in places where it unfairly competes with light bulbs.”

Every set of transactions and externalities is sui generis. In some cases the externalities are tolerable, and in some cases they are not. Size matters. If sunlight put 10% of the workforce out of work, you can damn well believe we’d tax it. You might as well argue that if I don’t like sticking my head underwater for ten minutes, I can’t like doing it for ten seconds.

The Other Tim July 22, 2011 at 10:09 pm

A trade is any exchange wherein both parties receive something they want. We are therefore trading with China when they give us stuff and we give them money. Ultimately money only has as much value as it allows you to buy, therefore goods are paid for with goods. Where you seem to be going wrong is that you don’t distinguish “goods” from “manufactured goods.” America buys manufactured goods to China and exports to China an almost exactly equal quantity of capital goods, not by accident, nor by design, but due to the fact that trade is always tautologically balanced.

As far as taxing sunlight use, if sunlight put 10% of the workforce out of work the only legitimate response is for the country to rejoice that a fortuitous exposure to a beneficial mass of fusing interstellar gas happened to come along and volunteer to do give us the output of 10% of our workforce for free. Now we can rededicate those 10% to manufacturing other goods for us and increase our consumption and thus wealth by 10% over what it used to be. Any set of transactions and externalities may very well be sui generis, but you’re missing the point. For the economy to shed jobs without shedding productivity is an unqualified good, i.e., cannot have negative externalities.

Consider the possibility our benevolent sun decides not merely to illuminate our ground, which drives 10% of the workforce that would exist on a lightless planet out of their jobs, but also decides to build our houses, make our cars, grow our food, sew our clothes, and electrify our power grid. Now we don’t need workers to do any of those jobs either, and we can dedicate them to increased production in other new sectors. You expressed skepticism above at the idea that there are infinite opportunities of industries to dedicate our workforce towards, so let’s hypothesize the sun continues displacing more and more workers until the sun is doing everything – absolutely everything – we could possibly desire of it. Now there are no jobs, because humans can no longer compete in a single industry against these externalites caused by the sun in the labor market.

There is a word for such a situation, wherein we can consume everything our heart desires but there’s a 100% unemployment rate.

Heaven.

Nemoknada July 22, 2011 at 10:17 pm

“Ultimately money only has as much value as it allows you to buy, therefore goods are paid for with goods.”

And when, in that process, do we realize the benefits of trade that come from selling something in which we have a comparative advantage? Now, or when the Chinese get around to spending them? Time is money. If you do all your opportunity cost math, but treat the sales by one side as occurring fifty years after the sales by the other, do you really reach the same policy?

The Other Tim July 22, 2011 at 10:26 pm

The Chinese seem to get around to spending them in short order. All accounts between the US and China have balanced themselves out over the past decades. They export manufactured goods, and we export capital goods, and trade balances itself out quite exactly every year.

Ken July 22, 2011 at 10:42 pm

“f you do all your opportunity cost math, but treat the sales by one side as occurring fifty years after the sales by the other, do you really reach the same policy?”

If the Chinese sell me something for $50 today, in 2011, and wait 50 years to use that $50 to buy something else, clearly they have lost out. Inflation, by some calculations, is all ready over 10%. But lets assume 3% inflation. What would that $50 be worth in 50 years? In 2061, that $50 is worth only $10.90 in 2011 dollars. In other words, I gained whatever was sold to me by the Chinese and avoided losing almost $40 in the process.

Regards,
Ken

Nemoknada July 22, 2011 at 10:21 pm

“Now we can rededicate those 10% to manufacturing other goods for us and increase our consumption and thus wealth by 10% over what it used to be. ”

Oh, so now they ARE finding better jobs. I thought they were being relieved of having to work.

The thing that makes sunlight worth having is that it creates opportunities inherently, like the internal combustion engine. The engine put horsemen out of work, but it created opportunities for millions. The point is not that it frees up workers; it’s that it enables new industries. The sun does that, too, as there are things we can do because we have free light that we could not do if we had to pay for it. Marginally cheaper cell-phones paid for in goods to be delivered someday maybe, not so much.

The Other Tim July 22, 2011 at 10:29 pm

“Enables new industries” and “frees up workers” are not different.

Ken July 22, 2011 at 10:51 pm

Nemoknada,

“Oh, so now they ARE finding better jobs. I thought they were being relieved of having to work.”

Of course. Very few people leave the cities for the farm, but tons of people leave the farm to find jobs in cities. Very few people quit being a doctor, lawyer, financier, or engineer (all dreaded service jobs) to work in a factory or some other blue collar work. However, many in those blue collar jobs yearn to have a service sector job.

As technology improves making it easier to produce agriculture and material goods, the labor that used to be used in those jobs can be directed to more valuable work. Service jobs are the most valuable jobs and they always have been. The primary product of service jobs is human capital, the most important of which is knowledge.

As the old fable goes it is far more valuable to know how to fish than actually having a fish – give a man a fish and feed him for a day, but teach him how to fish and you feed him for a lifetime.

“The point is not that it frees up workers; it’s that it enables new industries.”

The Other Tim nailed it. Freeing up workers and enabling new industries are the same thing.

Regards,
Ken

Nemoknada July 23, 2011 at 1:04 am

“As technology improves making it easier to produce agriculture and material goods, the labor that used to be used in those jobs can be directed to more valuable work. ”

Not always. The USA is becoming more capital intensive, because capital intensive production is where our comparative advantage lies. A capital intensive trading partner needs fewer workers to have balanced trade with a labor-intensive one. Thus, even if our trade with China were balanced, we would employ fewer people in the process.

So our excess labor will have to do non-tradable things – construction, service jobs, etc. That is not “more valuable” work. It is less valuable, because it isn’t very challenging, and many people want to do it (because there are few manufacturing jobs).

The irony is that Tim put his finger on the right question and then gave a nonsense answer. The question is “How do we distribute the prosperity that comes from balanced trade with fewer workers?” The answer he gave is that we don’t, because we see no reason to help a person regain a portion of the money they used to receive which is above the quantity required to move a worker into production. So he has us losing jobs, rejoicing over the opportunity to not work, and then telling the guy with that opportunity to get off his ass and get to work for whatever carrying bed pans pays.

“If the Chinese sell me something for $50 today, in 2011, and wait 50 years to use that $50 to buy something else, … I gained whatever was sold to me by the Chinese and avoided losing almost $40 in the process.”

In other words, the thing you called a “trade” was a wealth transfer after all. You guys are too much!

I’ve had my fun for this thread.

Ken July 23, 2011 at 1:14 am

Nemoknada,

Your comment is complete rubbish and the question is NOT “How do we distribute the prosperity that comes from balanced trade with fewer workers?” The question is and has always been what can YOU do to make YOUR life better. Your lame attempt to rope me into giving you something by using “we” is pathetic. We don’t have to decide anything about my life and wealth or your life and wealth. I have to decide everything about my life and wealth and you have to worry abour your life and wealth.

“So he has us losing jobs, rejoicing over the opportunity to not work”

So you would rejoice over losing wealth and having to work long days and weeks? Due to the things you hate so much Americans enjoy a LOT more personal time than even 30 or 40 years ago, yet our standards of living have increased dramatically.

“In other words, the thing you called a “trade” was a wealth transfer after all.”

No.

Regards,
Ken

Nemoknada July 23, 2011 at 12:42 am

“I see no reason to help a person regain a portion of the money they used to receive which is above the quantity required to move a worker into production.”

Of course, you don’t. But you say it is good for us to get rid of opportunities to work. So how does the person who has got rid of that opportunity live? Do you want him to go to work at a market-clearing price, or do you want to get rid of his opportunity to work. Did you ever meet a self-contradiction you didn’t like?

Ken July 23, 2011 at 1:07 am

Nemoknada,

“But you say it is good for us to get rid of opportunities to work.”

No one’s saying “get rid of opportunties to work.” What’s being argued is new technologies and trade that reduce demand for labor in one industry or company is good because now this labor is released to work in more valuable industries and companies.

Regards,
Ken

Nemoknada July 23, 2011 at 12:51 am

“‘Enables new industries’ and ‘frees up workers’ are not different.”

Of course they are. The iPhone enables an app industry without freeing up people. The hacking scandal at the News of the World frees up people without enabling any new industries. So the two things must be different. Foreign competition frees up people. Foreign demand FOR GOODS enables new industries. Foreign demand for dollars pending demand some day does not. You need to get off the idea that we “trade” with anyone. We import and we export. If the two balance, the aggregate gains are excellent. If the two do not balance, then the benefits are less, with the surplus side getting the lion’s share.

Ken July 23, 2011 at 1:05 am

Nemoknada,

“The iPhone enables an app industry without freeing up people.”

Incorrect. Many apps now provide services that were previously provided by people.

“The hacking scandal at the News of the World frees up people without enabling any new industries.”

Incorrect. The people that worked at News of the World will go to work elsewhere, many of whom will be involved with the next iteration of information delivery, i.e., a new industry.

“So the two things must be different.”

False assumptions lead to false conclusions.

“Foreign demand FOR GOODS enables new industries.”

AND services, which Americans provides better than almost all people in the world.

“Foreign demand for dollars pending demand some day does not. ”

Of course it does. Expectation of tomorrows returns and products drive today’s prices.

“You need to get off the idea that we “trade” with anyone. We import and we export.”

Importing and exporting is trade, dummy.

“If the two balance, the aggregate gains are excellent. If the two do not balance, then the benefits are less, with the surplus side getting the lion’s share.”

False, as I’ve all ready explained.

Regards,
Ken

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