Tweet [1]
Commenting on this post [2] in which I try yet again to explain that exports are costs, the great Deirdre McCloskey writes:
Of course. The way I have always explained it to Sameulsonian economists is to tell them to think of the foreigners as an industry, like making steel, the input being exports and the output being imports, and the productivity of the industry being the terms of trade.
Yes. Brilliant.
Just as, say, an internal-combustion engine is a devise for transforming inputs (gasoline and motor oil) into a desirable output (motion of an automobile), trade is a process of transforming inputs (exports) into desirable outputs (imports). And just as an engine that generates more miles of automobile motion from a given amount of gasoline and motor oil is better than an engine that transforms the same amount of gasoline and motor oil into less automobile motion, trade that transforms a given amount of exports into a greater amount of imports is better than trade that transforms the same amount of exports into fewer imports.
Also, just as putting gasoline and motor oil into an engine is a cost incurred to achieve the goal of automobile motion (rather than being a benefit in and of itself), putting exports on outbound cargo ships is a cost incurred to achieve the goal of imports. And just as no one would put valuable gasoline and motor oil into an engine that generated no (or too little) automobile motion, no one would put valuable exports into cargo ships that generate no (or too little) ability to import – thus implying that exports are indeed costs.