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Element-ary Economics

Tweet [1]

Chris Meisenzahl alerted me to this prediction of doom [2] – to which I sent this response:

Your writer with the nom de plume “Metals Place” worries about a chronic shortage of rare earth elements: “According to information received by The Independent, by 2012 China may cease all exports of rare earth elements, reserving them for its own economic expansion.”

Mr. Place should chill out.

The Chinese export large quantities of rare earth elements because such exports are profitable.  Therefore, if the Chinese stop exporting these elements in order that these elements be used only in China, the Chinese would sacrifice the profits that they now earn by exporting these elements.

Because the economic gain to China from exporting rare earth elements obviously outweighs the cost to China of doing so – for otherwise China would not profit by exporting them – were the Chinese to keep all of these elements in China, as Mr. Place fears, they would obstruct rather than promote the expansion of their economy.

Sincerely,
Donald J. Boudreaux

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