Tuesday, September 7, 2010

Myths about Exports

Don Boudreaux at Cafe Hayek had a very useful post a couple days ago. It was a letter he sent to The Washington Post regarding a recent article. The article itself is interesting and useful. If you want to help your students understand exports and be able to counter various myths about exports, it's just the thing.

But as Boudreaux points out, it has a misconception - a myth if you will - of its own and he is as eloquent as ever in explaining it. And in the process reminded me of the dual nature of Gross Domestic Product. I look forward to your comments.

1 comment:

Rdan said...

Hi Tim. I don't envy explaining this one to beginning students.

Neither post speaks to recent data showing that the rise in GDP was mainly due to penetration of imports (about 88% of value) into American markets and not exports. Spencer notes this in a post.

Another issue is that as manufacturing bases decrease in the States and increase elsewhere, the expertise migrates as well not only in the labor aspects but also R and D and innovation, or to compete processes are automated so while contribute to GDP do not help with jobs. Examples are easy to find.

Bordeaux makes the point that trade flows, capital flows and nationality doesn't matter in economics. But nations remain the sole leverage citizens have to impact trade decisions...how do you ignore that without simply dismissing factors important to trade but do not concern a company's bottom line planning? Or quality, for instance? (substitution)

Also, labor mobility is resticted severely, and gov. policies can have big impacts on winners and losers. etc.

Also, any study of WTO rules, for instance, are all about nations and mainly about capital flows.