More on the Non-uniqueness of International Trade

by Don Boudreaux on June 24, 2018

in Myths and Fallacies, Trade

Here’s a letter to my persistent correspondent Nolan McKinney:

Mr. McKinney:

You protest my claim that imports differ in no relevant ways from any and all other economic changes at destroying particular domestic jobs. Your reason is that “when we save money by eating more leftovers the assumption is [the] money saved is spent on US-made goods.” You go on to write that this “assumption does not hold for imports since foreigners don’t have to buy US-made goods.”

With respect, you are mistaken on at least three counts.

First, there is no assumption that any money that Americans save by doing the likes of eating leftovers or buying used (rather than new) cars is spent on U.S.-made goods. The money that your neighbor saves by buying a used car instead of a new one might just as easily be spent, say, on a vacation in Italy as on a vacation in Hawaii.

Second, even if your said assumption were correct, it would still be true that some Americans lose their particular jobs and suffer just as much as do those who lose particular jobs to imports.

Third, dollars earned by foreigners on their exports to America continue to be used in the U.S. economy no less than do dollars spent by Americans on U.S.-made outputs. You’re correct that foreigners do not have to buy U.S.-made goods (or services); foreigners can instead, and often do, invest in the U.S. Either way, these dollars return to the U.S. And they continue to circulate here no less surely than do dollars earned by Americans who sell goods or services to other Americans. (As an aside, we Americans would be made even richer if foreigners truly did want nothing from us other than smallish monochrome portraits of dead American statesmen. Alas, foreigners are no more interested than are we in possessing dollars for the sake of possessing dollars.) Dollars are useful to foreigners – as to us – only because dollars can be spent or invested in the U.S.

My foundational point stands: all economic change destroys some particular jobs in the U.S. economy and creates others here. Jobs destroyed by imports are unique or special in no ways whatsoever.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030

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