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A Tale of Innovation and Trade – And of Economic Error

Friday, October 21, 2016 11:55
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(Don Boudreaux)

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Suppose that vicious and venomous vermin, of mysterious origin, once annually infested the land, putting the comfort and even often the lives of hundreds of millions of people in danger.  Most people were saved from the scourge of these vermin, but only through the efforts of legions of skilled workers who toiled full time to track, capture, and kill these vermin.  Work in the large vermin-tracking sector of the economy was honorable.

And the wages paid to workers in this sector were steady and very good, although not astronomical.  These workers’ wages weren’t as high as the wages paid to Hollywood stars, to best-selling novelists, or even to doctors, lawyers, and business-school professors.  But these wages were indeed very good.  These wages were very good because of the combination of the high value that people put on having their and their loved-ones’ living quarters and lives protected from vicious and venomous vermin, with the reality that this work was often unpleasant, sometimes quite dangerous, and required some real skills.  (When the vermin-tracking sector long ago first arose, sensitive writers penned many novels meant to expose the terrors and terrible toils of working in this sector, and the appalling greed of the entrepreneurs who organized large venomous-vermin-tracking workforces.)

Then starting a few decades ago, entrepreneurs developed robots to track, capture, and kill these vicious and venomous vermin.  Also, at about the same time, foreign producers began to sell in the domestic market low-priced products that were quite effective in helping to protect ordinary people from the vicious venomous vermin.

The once-proud domestic venomous-vermin workers saw the number of jobs open to them and their children at their traditional very good wages shrivel.  These workers, along with pundits and politicians who identified with them, were displeased.  They complained loudly.  They worried about the disappearance of “good paying jobs.”  They argued that the steadily falling number, and even percentage, of jobs in the domestic vermin-tracking industry is conclusive evidence that ordinary people are poorer, as well as that government officials have done too little to protect the domestic economy from being impoverished.  They insisted that ordinary people in the country would once again be made as rich as they were in the heyday of the vermin-tracking sector if only there were a return of the large number of well-paid vermin-tracking jobs that existed back in the good old, golden days.

The fall in domestic employment in the vermin-tracking industry is wrongly interpreted by many people as evidence that the amount of successful vermin-tracking and killing in the domestic economy also fell.  But in fact the amount of successful vermin-tracking and killing continued to increase despite the fall in the number of domestic workers employed in achieving this happy outcome.  Indeed, the amount of successful vermin-tracking continues in the domestic economy to increase to this very day.  And so today, the masses are more abundantly and inexpensively supplied than they have ever been with sound, reliable protection from venomous vermin.

Nevertheless, many are the individuals who lament the innovations in technology and in trade that have decreased the number of jobs in the vermin-tracking sector even as these innovations have increased the people’s protection from venomous vermin.  These lamentations-filled individuals mistakenly believe that a society’s wealth is found in – or is even created by – the high wages paid to workers who help people who willingly incur high costs to get some further satisfaction of some of their ‘needs,’ such as the high prices that people once paid to each of many workers in the domestic vermin-tracking sector.  These lamentations-filled people miss the fact that precisely because the people are now much better supplied with lower-cost vermin-tracking services, the society is richer, not poorer.

These lamentations-filled people do not realize that the fall in employment in the vermin-tracking sector of the economy means that the economy is wealthier, not poorer, for now the people in this society are better supplied with reliable vermin-tracking services while many workers and other resources once used to meet this demand are now free to be used to satisfy other, previously unmet desires.  These lamentations-filled people, were they consistent in their economics, must also believe that the society would become richer if nature were to somehow increase the infestation of venomous vermin that she visits on this society – if nature ensures that, absent an increase in the number of people paid to track and kill vermin, a larger number of people will be discomfited and even killed by venomous vermin.

Those who lament the loss of manufacturing jobs to market-driven innovation and to trade are akin, in all essentials, to those who, in the above tale, lament society’s success at making venomous vermin less of a threat to ordinary people.  Those who lament the loss of manufacturing jobs (or, for that matter, of any jobs) to market-driven innovation and to trade mistake one of biting-scarcity’s effects – namely, high wages – as being a cause of prosperity.  Yet because prosperity increases only as human being’s succeed in making consumer goods and services less scarce, it is clearly erroneous to interpret a market-driven fall in the number of high-wage jobs in any one sector of the economy as evidence of economic impoverishment.  Such a trend, instead, is evidence of economic enrichment.

….

If a Pres. Trump (or a Pres. H. Clinton, or a Pres. Whoever) genuinely succeeds in bringing high-wage manufacturing jobs back to America, he (or she) will succeed only in making Americans poorer no less than if that president succeed in bringing back to America the best-paying agricultural jobs of the early 19th century.

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