Imagine a farmer destroying 10 percent of his crops after
harvest. We produce to consume. The farmer gets nothing to
consume from the crops he destroys. He wastes effort
destroying the crops. This costs even more of his leisure time
and other resources.
The farmer would be better off if he planted 10 percent
less. He wouldn't have wasted his time and other resources
producing the extra crops.
If the farmer gave away 10 percent of his crops, he
would be in the same boat. The recipients of the gifts would be
better off. The farmer's loss would be their gain.
Consider another farmer. His neighbors give him goods
equivalent to 10 percent of his harvest. He has goods to
consume that cost him nothing. It doesn't require advanced
math to figure out which farmer is better off and has the higher
standard of living. The farmer who imported and didn't export
was far better off than the one who only exported.
For some reason common sense tends to vanish when we
substitute the word "nation" for "farmer." Keep in mind, nations
don't export and import. All actions are by individuals.
Individuals in one country may import from or export to
individuals in another nation. We can add up all of the imports
or exports to calculate the net imports or exports by people of a
nation.
The individual or nation whose exports exceed its imports
ends up poorer. From the point of view of the exporter, exports
are a waste. Imports are beneficial. We can't export our way to
prosperity.
If exports are a waste, Why are many people so fond of
them? Some individuals do benefit from exports. Suppose we
make automobiles, load them on ships and dump the autos in the
ocean. To the exporter those dumped autos are no more of a
waste than they would be if we exported them to someone who
gave us nothing in return.
The workers who make the autos gain paychecks. Their
efforts are wasted. No one gets to consume anything they
produced. Those workers might better have dug holes and filled
them up. At least this wouldn't have wasted the materials and
equipment used to make the autos.
Why would anyone pay workers to make something and
destroy it, or to make nothing? Making autos and destroying
them is no different from other make work jobs. Union
featherbedding, government subsidies, banning of efficient ways
to produce, all make work and paychecks without adding to
consumable production. This wasteful work continues mainly
because many people fail to recognize the waste.
If exports are a total waste, Should we end all exports?
Exports are a total waste only if we get nothing in return. The
only gains from exports are the things we get in exchange for
the exports. The reason we call exports and imports trade is
because we are trading.
Why trade one thing for another? Trade happens because
each party to the trade values what he gets more than he values
what he gives up.
Why doesn't each party produce for himself and skip the
trade? Another way to state this question is, Why don't you
produce everything you consume? The answer is obvious. How
much would you have if you had to produce everything you
consumed?
Consider an example. Individuals in Michigan may grow
apples and trade them to people in Indiana for eggs. If egg
production in Indiana is more efficient than in Michigan, and if
the opposite is true of apple production, both parties gain. If
they don't both gain, the trade will end.
Neither state exports jobs. Jobs making one product
replace jobs making the other product. Some workers have to
change jobs. Those job changes are the price we pay for
increasing our standard of living. If we keep all of the old,
inefficient jobs, our standard of living will never increase. It
isn't coincidence that along our road to prosperity workers have
endlessly lost jobs and found new ones.
* * * * *
* * * *
* * *
* *
*
Copyright 2012
Albert D. McCallum
18440 29-1/2 Mile Road
Springport, Michigan 49284
harvest. We produce to consume. The farmer gets nothing to
consume from the crops he destroys. He wastes effort
destroying the crops. This costs even more of his leisure time
and other resources.
The farmer would be better off if he planted 10 percent
less. He wouldn't have wasted his time and other resources
producing the extra crops.
If the farmer gave away 10 percent of his crops, he
would be in the same boat. The recipients of the gifts would be
better off. The farmer's loss would be their gain.
Consider another farmer. His neighbors give him goods
equivalent to 10 percent of his harvest. He has goods to
consume that cost him nothing. It doesn't require advanced
math to figure out which farmer is better off and has the higher
standard of living. The farmer who imported and didn't export
was far better off than the one who only exported.
For some reason common sense tends to vanish when we
substitute the word "nation" for "farmer." Keep in mind, nations
don't export and import. All actions are by individuals.
Individuals in one country may import from or export to
individuals in another nation. We can add up all of the imports
or exports to calculate the net imports or exports by people of a
nation.
The individual or nation whose exports exceed its imports
ends up poorer. From the point of view of the exporter, exports
are a waste. Imports are beneficial. We can't export our way to
prosperity.
If exports are a waste, Why are many people so fond of
them? Some individuals do benefit from exports. Suppose we
make automobiles, load them on ships and dump the autos in the
ocean. To the exporter those dumped autos are no more of a
waste than they would be if we exported them to someone who
gave us nothing in return.
The workers who make the autos gain paychecks. Their
efforts are wasted. No one gets to consume anything they
produced. Those workers might better have dug holes and filled
them up. At least this wouldn't have wasted the materials and
equipment used to make the autos.
Why would anyone pay workers to make something and
destroy it, or to make nothing? Making autos and destroying
them is no different from other make work jobs. Union
featherbedding, government subsidies, banning of efficient ways
to produce, all make work and paychecks without adding to
consumable production. This wasteful work continues mainly
because many people fail to recognize the waste.
If exports are a total waste, Should we end all exports?
Exports are a total waste only if we get nothing in return. The
only gains from exports are the things we get in exchange for
the exports. The reason we call exports and imports trade is
because we are trading.
Why trade one thing for another? Trade happens because
each party to the trade values what he gets more than he values
what he gives up.
Why doesn't each party produce for himself and skip the
trade? Another way to state this question is, Why don't you
produce everything you consume? The answer is obvious. How
much would you have if you had to produce everything you
consumed?
Consider an example. Individuals in Michigan may grow
apples and trade them to people in Indiana for eggs. If egg
production in Indiana is more efficient than in Michigan, and if
the opposite is true of apple production, both parties gain. If
they don't both gain, the trade will end.
Neither state exports jobs. Jobs making one product
replace jobs making the other product. Some workers have to
change jobs. Those job changes are the price we pay for
increasing our standard of living. If we keep all of the old,
inefficient jobs, our standard of living will never increase. It
isn't coincidence that along our road to prosperity workers have
endlessly lost jobs and found new ones.
* * * * *
* * * *
* * *
* *
*
Copyright 2012
Albert D. McCallum
18440 29-1/2 Mile Road
Springport, Michigan 49284
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