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Quotation of the Day…

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… is one that is often attributed to Milton Friedman [2] (who was born 106 years ago on this date). In a popular version of the story, Friedman was visiting India sometime in the 1960s and was shown by proud Indian-government officials the construction of a canal. Observing the work in progress, Friedman turned to one of the officials and asked why the workers were using hand-held shovels and pick axes instead of bulldozers and other modern machinery. The official responded that the chief purpose of this construction project is to create jobs – which prompted Friedman then to ask a follow-up question:

If the purpose of this project is to create jobs, why are the workers using shovels and pick axes? You’ll create even more jobs here if you instead had the workers dig with spoons.

DBx: This story, maybe, is apocryphal. It has many versions [3]. But one can doubt neither that it is something that Friedman perhaps really did say (if not in the precise words ‘quoted’ above) nor that the important economic point conveyed by the quotation is one with which Friedman fully agreed.

Protectionists and others who cannot see much beyond the number of jobs that exist at any one time miss the insight conveyed by the above quotation. If the purpose of international trade is to create jobs, then why bother accepting anything in return from foreigners? As Bastiat pointed out, more jobs in export industries would be created if the government arranged for all workers in export industries to produce tons of goods, have all of these goods loaded on to ships, and then have all of these ships and all of their cargoes sunk in the middle of the ocean.

This ‘dig-with-spoons’ and ‘sink-all-fully-loaded-cargo-ships’ logic is the logic of protectionism – or, rather, the illogic of protectionism.

UPDATE: I’m traveling and so don’t have access to my Bastiat volumes. And I can’t now recall the details of Bastiat’s argument about sinking cargo ships. The logic of protectionism does indeed counsel that a nation whose outbound cargo ships sink in mid-ocean is made richer than it would be if those ships sailed safely to their destinations and returned with cargo supplied by foreigners. But an even better outcome for the protectionists of, say, the United States is that outbound U.S. cargo ships make it safely to their destinations and then, after being loaded abroad with cargo bound for the U.S., are sunk in mid-ocean while on their way back to America.

The reason the protectionist prefers this second option to the first is that, while in both options Americans are not burdened with additional abundance, only in the second option are foreigners visited with the curse of additional abundance! So in the second option – the protectionist believes – Americans become richer relative to non-Americans.

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