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Quotation of the Day…

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… is from page 119 of Paul Krugman’s May 1993 American Economic Review article, “What Do Undergrads Need to Know about Trade? [2]”, as it is reprinted in Krugman’s superb 1996 collection, Pop Internationalism [3] (original emphasis):

Probably the most important single insight that an introductory course can convey about international economics is that it does not change the basics: trade is just another economic activity, subject to the same principles as anything else.

DBx: Yes. Yes. A million-and-two times yes. Trade that is transacted across political borders has no economic consequences that differ in any economically relevant ways from trade that is transacted exclusively within political borders except this one: because specialization is greater the larger is the size of the market over which trade occurs, trade that crosses political borders encourages greater specialization and, hence, greater output and, ultimately, greater prosperity.

But contrary to the near-universal belief by non-economists, trade is unique neither at destroying particular jobs nor at creating particular jobs. As I write often, any change in consumer spending or in production processes destroys some particular jobs and creates other particular jobs. And so – to use one of my favorite examples [4] – if you believe that an American who buys a new car assembled in Japan, rather than a new car assembled in the United States, thereby contributes to American economic decline, you should also believe that an American who buys a used car rather than a new car assembled in the United States also contributes to American economic decline. Therefore, any protectionist who calls for tariffs on foreign-assembled cars but who opposes tariffs on used cars is inconsistent.

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