Bonus Quotation of the Day…

by Don Boudreaux on January 3, 2017

in Complexity & Emergence, Myths and Fallacies, Seen and Unseen, Trade

is from page 1 of Elhanan Helpman’s 2011 book, Understanding Global Trade:

41mnbnnel1l-_sx329_bo1204203200_Production networks are spread across countries and continents, making the supply of products in one country highly dependent on economic activities in multiple foreign countries.

DBx: As the economically uninformed man-in-the-street believes that market prices are arbitrarily determined (and, hence, can by legislative diktat be pushed up or down without unleashing any consequences other than transferring incomes from ‘the rich’ to the not-rich), the economically uninformed man-in-street also believes that patterns of trade are arbitrarily determined (and, hence, can by legislative diktat be changed this way and that without unleashing any consequences other than transferring incomes from ‘the rich’ to the not-rich).  Yet, like prices, patterns of international trade are emphatically not arbitrary.  These patterns largely reflect careful cost-minimizing production and distribution decisions by producers worldwide, each of whom is in incessant competition for consumers’ dollars (and pounds, and euros, and pesos, and won, and yuan, and yen, and you-name-the-currency).  The result of these countless decisions made in competitive global markets is an inconceivably complex and efficient network of production and distribution relationships.  This network results in nearly everything that we consume today being “Made on Earth.”

When economically ignorant brutes such as Donald Trump attempt with trade barriers to save some jobs that, for whatever reason, are highly visible today, they disrupt this extraordinarily intricate global network, causing it to become less efficient and less responsive to consumers’ demands.  Trump and other such economically uninformed people see only the jobs that are saved; their vision and their thinking stop there.  They suppose that trade barriers that artificially increase the domestic production of some good have no consequences other than this increase in the domestic production of that good.  They imagine that if even more trade barriers are used to increase even more domestic production of highly visible goods and services, that the only result is a further increase in domestic production and employment.  Nothing else, in their economically ignorant minds, occurs: ‘we’ produce more; ‘we’ have more jobs; ‘we’ (other than ‘our’ greedy fat-cat CEOs) are richer!  It’s all very simple when viewed through the distorted, blinkered, and myopic eyes of people such as Trump.

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