Indonesia | Economics

Saturday, November 17, 2007

FP: Why we trade

Once in a while, it's nice to get reminded for the reason we trade. From Foreign Policy:
The logic of “exports, good—imports, bad” seems straightforward at first—after all, when a factory closes because of foreign competition, there seem to be fewer jobs than there otherwise would be. Don’t imports cause factories to close? Don’t exports build factories?

But is the logic really so clear? As a thought experiment, take what would seem to be the ideal situation for a mercantilist. Suppose we only export and import nothing. The ultimate trade surplus. So we work and use raw materials and effort and creativity to produce stuff for others without getting anything in return. There’s another name for that. It’s called slavery. How can a country get rich working for others?

PS: I am back in school, which partly explains the sparse update. Hopefully, I can update slightly more frequently once things get back to "normal" -- whenever that may be.

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