First, watch this short video: “Make Progress, Not Work”
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Looking at Table 1
A new free trade agreement allowing more imports causes 10,000 people in the U.S. to lose their jobs, wages lost $500 million, each worker loses $4167 per month.
But the new free trade agreement allows 10,000,000 consumers in the U.S. to save money, dollars saved $10 billion, each consumer gains $83 per month.
Which group would loudly complain about the situation? Workers.
Which group would smile and consider it a nice situation? Consumers.
Which group would politicians and the media would focus on? Workers.
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Now, substitute “new production technology” for “new free trade agreement.”
The effect and results are the same if trade has been increased or a new production technology is implemented.
Studies show, of manufacturing jobs lost:
88% are lost due to productivity increases from new technologies
12% are lost due to increased imports
Yet more attention is paid to jobs lost to imports, largely because of the “us against them” nativist-tribalist instinct.
Throughout history people move up to better and higher-paying jobs and become better off because of new technologies and increasingly freer trade.
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A parable summarized from the Mankiw Economics Principles textbook:
Suppose the government of “Isoland” ignores the pro-free trade advice of their economists and decides not to allow free trade in textiles, because it would result in imports of low cost textiles hurting Isoland’s textiles companies and their workers’ jobs.
Soon after, an Isoland inventor discovers a new way to make textiles at very low cost and is able to keep his method a secret.
Surprisingly, the inventor doesn't need regular inputs such as cotton or wool, the only material input is wheat.
He needs little labor to manufacture textiles from wheat with this new method, in fact he himself can do everything.
The inventor is celebrated as a genius.
With the new lower cost of textiles prices of clothing go down, and all Isolandians enjoy a higher standard of living because they have extra money to buy other things.
Textile workers experience some hardship when their factories close, but eventually find employment in other industries.
Some become farmers and grow the wheat the inventor turns into textiles.
Others find jobs in new industries that emerge as a result of the higher Isoland living standards.
Several years later a newspaper reporter investigates this mysterious new textiles production process.
She uncovers the truth: the inventor is a fraud.
His method does not involve making textiles.
Instead, he has been smuggling wheat out of the country and smuggling textiles in from other countries.
The inventor’s only discovery: the gains from international trade.
The Isoland government then shuts down the inventor's operation.
The price of textiles and clothing rise, and workers return to textile jobs.
Isoland living standards fall back to their previous lower levels.
The inventor is jailed and publicly ridiculed, “he is no inventor, he’s just an economist!”
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