Tuesday, September 14, 2010


Bill Easterly writes about trade. The story is one of my favorites in economics.

But it's incomplete. Some people think that if a country uses trade, e.g. grows food and ships it to Japan, then (some of) the people who make the goods that are now imported will be unemployed. In other words, the economy loses some of it's capacity because resources go unused. Most economists don't believe that story, or if they do think that it's just a temporary phenomenon and doesn't affect that many people (see Paul Krugman's old Slate columns).

Still, people have used this argument about idle resources to berate those who donate goods in-kind. I made a comment on Bill's blog saying this (in a snarky way with fewer words), wondering if he buys it since in the past he seemed to accept it.

1 comment:

  1. The two cases are not comparable. In Easterly's example Americans are trading, i.e. exchanging goods and services, wheat for cars. But in the t-shirt example the African is not exchanging anything for the t-shirts, he is simply asking that they be sent. Charity certainly has its place, but comparing it with trade doesn't work. Unfortunately the opportunities for intelligent snark are few, and this wasn't one of them.