Artificial Scarcities Are Not Wealth
27th September 2011
Don Boudreaux, Chairman of the Economics Department at George Mason University, takes some time to teach us a little economics.
In his essay that I addressed yesterday, Pat Buchanan writes:
You cannot have a rising standard of living when your highest-paid production jobs are being exported overseas.
I suspect that the above sentence strikes most readers as merely stating an obvious, indeed trivial, truth. But it’s wrong. And understanding why it’s wrong – why it’s wrong beyond its use of the familiar yet misleading notion that jobs are “exported” – is necessary to any informed discussion of trade.
Of course, what Buchanan means by writing “your highest-paid production jobs are being exported overseas” is that valuable tasks once done for domestic (say, American) consumers by fellow citizens are now done for domestic consumers by foreigners. And Buchanan likely agrees that the reason for such a switch of who performs these tasks is that foreigners can now perform these tasks at lower costs than can Americans.
Let’s call the good that high-paid American producers once produced, but are now imported from low-paid foreigners, a “doohickey.”
Americans can now get the same quantity of doohickeys that they value by at least $X per unit – where $X is the price they paid for each doohickey when fellow Americans produced doohickeys – for a price of less than $X. So Americans as consumers of doohickeys are clearly better off.
Also better off are those American producers who now sell more – or who fetch higher prices for their outputs – because at least some of the money American consumers now save when buying doohickeys is now spent on these other American-produced goods and services.
‘Jobs’ cannot be exported because ‘jobs’ are not things that can be physically moved — ‘jobs’ are temporary arrangements whereby money is exchanged for a service. The reason we purchase services is so that we will be left in a better state once the purchase is completed than before. When the ‘better state’ is the possession of a product, then whether we purchase the product itself or purchase the service that creates the product is a matter of relative price (all else being equal). When we buy a shirt from Sears rather than hire somebody to come to our house and make it for us, the reason is because we can get an adequate shirt at Sears for a lesser price that it would take to have somebody come to our house and make it for us — we are not ‘exporting the job of shirtmaking’ to Sears.