Foreign Policy: Why We Trade

Professor Russ Roberts, host of the EconTalk podcast, has an essay in the latest issues of Foreign Policy journal titled “Why We Trade”. In this piece, Roberts defends the benefits of trade from a broad perspective, beyond the popular political view of trade, usually along the lines of “exports, good – imports, bad”. Roberts compares this line of thinking (characteristic of presidential candidates of both the Republican and Democratic parties), to the 14th century, pre-Adam Smith view of world trade, known as mercantilism.

Mercantilism was a view of global economic interaction that placed emphasis on the accumulation of gold and other precious metals from abroad in exchange for your country’s exports. The doctrine failed to recognize the importance of imports from abroad, as this was viewed as a loss of wealth to foreigners. Mercantilists viewed wealth in terms of bullion or the amount of precious metals a country owned. Today, of course, our understanding of wealth has evolved to account for the amount of output, or products (goods and services), we are able to consume. Herein lies the flaw in the rhetoric of modern politicians who, “are always talking about the necessity of other countries’ opening their markets to American products. They never mention the virtues of opening U.S. markets to foreign products.”

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Shanghai Daily, Oct 22, 2007: How happy are we?-Let’s measure Gross National Happiness

When I first talked to Mr.Welker about a writing a blog entry about an alternative measurement of well-being to GDP and GNP, called the Gross National Happiness quotient, he gave me one those “looks”. I perceived the look to mean, “you are like a peace loving, hippy dippy gal from the East Coast, Ms. Close… this is economics we are doing here!” Of course, Mr. Welker would never admit that was what he was thinking because he is far too nice for that. But, I am happy to say that I am finally writing this entry because I finally have Oxford University and Cambridge University in England to back me up on this, Happiness Research.

These famous educational institution have their economists developing new ways to measure well being from an holistic economic perspective. Economists and sociologists all over the world, especially those interested in international development models are seeking to, “establish scientific methods for finding our what makes us happy and why”.

Happiness and well-being are complicated. Researchers cite many factors, like education, nutrition, freedom from fear and violence, gender equality, and perhaps most important, having choices, write Authur Max and Toby Sterling.

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China Chokes – New York Times, August 26, 2007

This article, one in a series of articles yet to come, is a must read for all IB and AP Economics students. The particular article investigates the effects of China’s massive growth on its population, its environment. and on its pollution levels. The authors present videos, photographs, interactive maps in their article in order to graphically illustrate the many ways that China is affected by its rapid economic progress.

As economists, we all know that there are opportunity costs to all decisions and this article looks at the “costs” of China’s massive economic growth. One video includes information about China’s attempt to apply a Green GDP formula to its own growth and sobered by the outcome. Another interactive map compares economic growth rate of different countries around the world while another looks at the carbon emission rate of different countries. The point is that this article is meant to be very interactive so that the reader can experience how China is choking on its own growth. It is your turn to find out.