I’m borrowing this from Mike Moffatt, who got it from Stephen Gordon, who cut-and-pasted it from Stephen Landsburg, who was quoting David Friedman, but it’s precisely relevant to the current discussion about jobs and jets and whether we should build things here or overseas:
There are two technologies for producing automobiles in America. One is to manufacture them in Detroit, and the other is to grow them in Iowa. Everybody knows about the first technology; let me tell you about the second. First, you plant seeds, which are the raw material from which automobiles are constructed. You wait a few months until wheat appears. Then you harvest the wheat, load it onto ships, and sail the ships eastward into the Pacific Ocean. After a few months, the ships reappear with Toyotas on them.
International trade is nothing but a form of technology. The fact that there is a place called Japan, with people and factories, is quite irrelevant to Americans’ well-being. To analyze trade policies, we might as well assume that Japan is a giant machine with mysterious inner workings that convert wheat into cars.
Any policy designed to favor the first American technology over the second is a policy designed to favor American auto producers in Detroit over American auto producers in Iowa. A tax or a ban on “imported” automobiles is a tax or a ban on Iowa-grown automobiles. If you protect Detroit carmakers from competition, then you must damage Iowa farmers, because Iowa farmers are the competition.
…It is sheer superstition to think that an Iowa-grown Camry is any less “American” than a Detroit-built Taurus. Policies rooted in superstition do not frequently bear efficient fruit.
Sometimes economics makes me weep it’s so beautiful.
BONUS MORAL: Moffatt sums up,
“either way, the F-35s will be obtained with Canadian labour. The question is, will it be done directly or indirectly through trade?
And obviously we’d like to do as little work as possible to obtain them, right? Because with the time we save, we can be doing other things. So the notion that we should structure the contract in such a way as to “create” as many jobs as possible has it exactly backward.