The Panama Canal Project Facilitates World Trade.

World Trade Spin

by Elaine Schwartz    •    Jul 17, 2012    •    258 Views

We might be able to divide the world between economic thinkers and everyone else.

I noted yesterday that economist Gregory Mankiw, as President Bush’s Council of Economic Advisers chair, said that outsourcing was probably a plus in the long run. Hearing his statement, reporters divided into 2 groups.

1. Economic Thinkers: Those from the FT, Wall Street Journal, and a Washington Post reporter who had an economics degree heard what they learned in Economics 101. Trade leads to specialization which means efficiencies that generate higher living standards and incomes. It was a typical economist’s statement about world trade. Nothing out of the ordinary.

2. Everyone Else: The other reporters sensed a big story. They had a viscerally negative response to anyone who said sending jobs elsewhere could be good. For them, the quote was about jobs leaving the country.

You can see the dichotomy. One group thinks more growth while the other sees unemployment. The unemployment group dominated the headlines. Political damage control immediately followed the press conference.

1. Economic Thinkers: It has also been suggested that there is a difference in our response to the word protectionist. Remembering Adam Smith and David Ricardo, people who think economically believe protectionist policies are bad. They cite the Corn Laws in 18th century England that increased the price of domestic corn by taxing imported grains. They think of the Smoot-Hawley tariffs that fueled the severity of the 1930s depression by diminishing international trade.

2. Everyone Else: For many other people, though, protection does not conjure up the negatives. After all, protecting someone can be good.

As a result, the Business Roundtable suggests a new trade lexicon:

Negative Connotation Positive Connotation
Competition Growth
Retool Re-make
Protectionism Isolationism
World trade Working with the world
Long term growth Sustained growth
Global trade Trade
Cheaper Specialized
Forced to Take charge
Cost efficiencies Meeting customers
Making our budget Meeting our needs
Do less with more Do more with more

 

From money (not just currency) to free lunches (there are none), economics is everywhere. Your opinion about how to help everyone think economically?

The idea and most of the information for this post came from Gregory Mankiw’s co-written paper, “The Politics and Economics of Offshore Outsourcing.” It also takes us to a wonderful Teaching Company course, “Thinking Like an Economist,” from Randall Bartlett.

 

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