Device A or Device B? Both!

by Don Boudreaux on May 12, 2020

in Myths and Fallacies, Trade

Here’s a letter to a rising senior at the University of South Alabama whose brother recommended that she read Café Hayek:

Ms. Burkett:

Thanks for your e-mail and your excellent question, which is: “While it’s probably ok for free trade to destroy low paying jobs, shouldn’t we protect high paying ones from imports?”

No.

A job that pays a high wage is one in which the worker produces outputs that are especially scarce relative to consumer demand for them. Consumers are especially eager – perhaps even desperate – to get the goods or services produced by such a worker, which is why such a worker commands a relatively high wage. By keeping out imports that compete with a high-wage worker’s output, the government therefore keeps out goods that consumers are unusually eager to acquire. Because the purpose of trade is to enable people to increase as much as possible their consumption – that is, their standard of living – such a policy makes no sense.

Think of the matter with this hypothetical: Suppose that a creative genius invents two new devices, each of which she is willing to make available, at no charge, to everyone in the country. Device A, when squeezed, instantly gives the person squeezing it his or her desired hairstyle. Device B, when squeezed, instantly cures the person squeezing it of cancer.

If you think that imports that destroy low-wage jobs are acceptable but those that destroy high-wage jobs are unacceptable, then you should advocate a policy of allowing this inventor to distribute device A but not device B. Device A, after all, would destroy only the relatively low-paying jobs of hairdressers and barbers, while device B would destroy the relatively high-paying jobs of oncologists and many other health-care professionals.

The purpose of all economic activity, including international trade, is to satisfy human wants. Because imports that destroy particular high-wage jobs are imports that satisfy especially intense human wants, to prevent such imports would be especially foolish and counterproductive.

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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