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Quotation of the Day…

… is from page 4 of the 1976 second edition of my late, great teacher Leland Yeager’s magisterial International Monetary Relations: Theory, History, and Policy (original emphases; footnote deleted):

Our opportunity for gain is genuine regardless of why foreigners sell so cheaply. Perhaps the foreign widgets are cheap because the climate is ideal for their production in foreign countries, or because the land or capital used in widget production is especially abundant there, or because a broad home market there gives scope for cheap mass production, or because foreign producers have skills stemming from a long tradition of widget production. Perhaps general wage levels in the widget-producing countries are lower than ours or perhaps foreign widget-workers in particular are shamefully underpaid even in relation to the generally low wage levels of their own countries. Perhaps the exchange rate translates prices in the foreign currency at an “unfairly” low value, whatever that might mean. Perhaps foreign governments are subsidizing widget exports. Perhaps widgets grow wild on bushes abroad and need only be gathered at slight expense. What difference does any of this make to us? How can it matter why the foreign widgets are so cheap? What matters to us is whether prices in our own country correctly indicate realities – whether our prices correctly indicate how much each product costs in required sacrifice of others, given the state of technology and the demand on and scarcity of our resources. The opportunity that foreign prices offer to us is genuine from our point of view, regardless of whether any “distortions” in the foreign price system may be causing foreigners to offer to us this opportunity. Refusing this opportunity is the same as refusing any other kind of opportunity for making or getting goods more efficiently or cheaply than before.

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