Don Boudreaux on the Realm of Economics
For NCFCA LD students researching the topic Resolved: In the realm of economics, freedom ought to be valued above equity, economist Don Boudreaux explains why an introduction to the “realm of economics” in undergraduate microeconomics class is so important.
…principles of microeconomics is the most important economics course any student can ever take. Ever. By far. If taught properly, and learned with an open and critical and attentive mind, a principles of microeconomics course will impart to the student more understanding of the operation of economies than will all other economics courses combined – and I include here even well-taught PhD econ courses.
Economics, Dr. Boudreaux argues, help prepare students for the economic fallacies so often presented as facts, and advocated by special interests. The fallacy of protectionism helping a country and protecting jobs, for example:
My goal – by teaching basic, foundational, principles of microeconomics – is to inoculate students against the bulk of the common economic myths that they’ll encounter throughout their lives – myths such as […] that exchange across political boundaries differs in economically meaningful ways from exchange that takes place within political boundaries – that the only consequences that occur or that matter are those that are easily anticipated and seen. [Source.]
In the LearnLiberty video, The Real “Truth About the Economy:” Have Wages Stagnated?, Dr. Boudreaux explains why most statistical measures claiming to show falling incomes in the U.S. are wrong or misleading.
In another LearnLiberty video Don Boudreaux discusses free trade vs. protectionism.
I argue the the free trade vs. protectionism debate is relevant for the LD topic because economic freedom allowing international trade reduces inequality (or the lack of equity) around the world in at least two ways.
By allowing companies to hire low-wage textile and electronic assembly workers in China, for example, to make goods for export to the U.S., these workers earn much higher incomes than they would if the U.S. blocked imports of clothes, computers, and smartphones from China.
Hundreds of millions of manufacturing and service jobs in China, India, Vietnam, Thailand and other countries have dramatically reduced international income inequality over the last twenty or so years. See for example in NYT, Income Inequality Is Not Rising Globally. It’s Falling, and in WSJ today, How the World is Becoming More Equal (search by title if link is gated), and from 2013, a post on declining world income inequality.
Higher worker productivity allows workers to earn higher incomes. But that higher productivity requires not only job skills, but access to capital investment for machinery that multiplies human labor. When goods and services from China, India, and other countries face higher taxes and other import restrictions, jobs and income for workers in China are reduced, plus prices in the U.S. increase. Lower-income U.S. consumers find their options limited when tariffs raise prices, and far lower-income workers in China suffer more when better paying textile and assembly jobs are reduced due to trade restrictions.
And when U.S. consumers pay less money for clothing, phones, and computers, they have more money left over for savings or to spend on other goods and services, which in turn create other enterprise and job opportunities. (Plus when workers in China and India are wealthier they are more likely to purchase U.S. created goods and services, which further boosts exports from the U.S. and international sales of U.S.-based companies.)
Less expensive clothes and gadgets reduce inequity or inequality in the United States. When low-income people can purchase clothes inexpensively, that’s not just convenient and comfortable, but also key for job interviews and starting off in various careers. Lower prices for computers and smartphone matters most to lower-income people and families.