<< Chapter < Page Chapter >> Page >

By the end of this section, you will be able to:

  • Asses the complexity of international trade
  • Discuss why a market-oriented economy is so affected by international trade
  • Explain disruptive market change

Economists readily acknowledge that international trade is not all sunshine, roses, and happy endings. Over time, the average person gains from international trade, both as a worker who has greater productivity and higher wages because of the benefits of specialization and comparative advantage, and as a consumer who can benefit from shopping all over the world for a greater variety of quality products at attractive prices. The “average person,” however, is hypothetical, not real—representing a mix of those who have done very well, those who have done all right, and those who have done poorly. It is a legitimate concern of public policy to focus not just on the average or on the success stories, but also on those have not been so fortunate. Workers in other countries, the environment, and prospects for new industries and materials that might be of key importance to the national economy are also all legitimate issues.

The common belief among economists is that it is better to embrace the gains from trade, and then deal with the costs and tradeoffs with other policy tools, than it is to cut off trade to avoid the costs and tradeoffs.

To gain a better intuitive understanding for this argument, consider a hypothetical American company called Technotron. Technotron invents a new scientific technology that allows the firm to increase the output and quality of its goods with a smaller number of workers at a lower cost. As a result of this technology, other U.S. firms in this industry will lose money and will also have to lay off workers—and some of the competing firms will even go bankrupt. Should the United States government protect the existing firms and their employees by making it illegal for Technotron to use its new technology? Most people who live in market-oriented economies would oppose trying to block better products that lower the cost of services. Certainly, there is a case for society providing temporary support and assistance for those who find themselves without work. Many would argue for government support of programs that encourage retraining and acquiring additional skills. Government might also support research and development efforts, so that other firms may find ways of outdoing Technotron. Blocking the new technology altogether, however, seems like a mistake. After all, few people would advocate giving up electricity because it caused so much disruption to the kerosene and candle business. Few would suggest holding back on improvements in medical technology because they might cause companies selling leeches and snake oil to lose money. In short, most people view disruptions due to technological change as a necessary cost that is worth bearing.

Now, imagine that Technotron’s new “technology” is as simple as this: the company imports what it sells from another country. In other words, think of foreign trade as a type of innovative technology. The objective situation is now exactly the same as before. Because of Technotron’s new technology—which in this case is importing goods from another county—other firms in this industry will lose money and lay off workers. Just as it would have been inappropriate and ultimately foolish to respond to the disruptions of new scientific technology by trying to shut it down, it would be inappropriate and ultimately foolish to respond to the disruptions of international trade by trying to restrict trade.

Questions & Answers

Why wont the app just let me look at other comments?
aaa Reply
Never mind i found out how lmao
aaa
the difference between microeconomis and macroeconomics
Prince
what is economics
KENESA Reply
ecnomics is the study of how society use there limited resources according to their unlimeted wants
Aj
some time it is also called the science of choice
Aj
You are right. I thing Economic is a world wide thought because we know that Economics is related in everywhere in our daily life.
Abdul
Where are you from?
Abdul
Me?
rajat
Lol
rajat
What is lol, man? And why?
Abdul
Lol means laugh out loud
aaa
Lots of love from India 😁😁😁
rajat
Where are you from?
aaa
From India
rajat
I am from Bangladesh.
Abdul
but why is economics considered as an inexact science
Prince
What do you do?
Abdul
I am a student of Economics Department at Dhaka University Final year.
Abdul
Im from UK
aaa
What do you do?
Abdul
Economics is considered as a social science because itbuses scientific methods to build up theories
aaa
what are disadvantages of government interacting with private sector to solve economic issues?
TUMUTUNGIRE Reply
There's going to be heavy labour expectation of labour from both the private and public sector
ADEYEMI
It depends how they interact
aaa
They good use price ceilings, price floors, taxes and VAT
aaa
They all have adv and disadvantages for both consumers and producers
aaa
what is arc method
Sandeep Reply
what is unitary elastic demand
Sandeep
what is low of demand full info?
Sandeep
Law of demand says that as price increases demand will decrease
aaa
And unitary elastic demand is when percentage change in the price of a commodotiy is equal to the percentage change in quantity demanded
aaa
law of demand States the higher the price the lower the quantity demanded and vice versa all other things being equal
Prince
what's the 7th law of demand and supply
Neba
what is shortrun
Rejoice Reply
short run is when at least one factor of production is fixed for example land
Nigel
explain the various de terminates of own price elasticity
Kwotega Reply
what do you understand by competitive firm?
Nisha Reply
yea
Tinashe
yoo
Issah
these things really confuse me a lot
Tinashe
it's very sample but i don't know how can i halp you
Moraswi
ya these are all confusing
Yuva
Therefore a competitive firm is whereby two or more firms produce a particular goods or are engaged in the same business.
Kusi
A competitive firm aims at profit and it can only be achieved based on the demand curve
Kusi
theoretically the PC firm can make no economic profit on the LR
Nelsonomics
Definition of government budget
Anand Reply
what is inelasticity
Alfayo Reply
what's utility ?
Ilyass Reply
Utility means to get satisfaction from the goods which are consuming. And it can not be measure in numerical terms
rajat
when we are buying some goods and these goods gave us satisfaction this kind of satisfaction are called utility
rmaan
Hmmmm
rajat
it is the satisfaction derived from goods and services
Emmanuel
hi i am new and i am student ecnomics 1st semester
Aj
i would like to learn from you people some thing special
Aj
it can assume by Calculating Marginal utility
bechar
it is the happiness business
Aj
how to determine total utility
Annette Reply
total utility = average utility *quantity
Mate
discuss various types of equilibrium
George Reply
when the price and quantity intersect each other in graph
Abul
what is Quantity Supply?
Nhoraine Reply
It is the amount of good's the supplies are willing to supply with a certain price
Alfayo
to the market
Alfayo
*"Goods the suppliers are willing to supply at a given price" (sorry, auto-'in'correct)
Nelsonomics
definition of microeconomics
Marion Reply
Branch of economics that deals with micro behaviour of individuals in a society. It deals with theory of Demand, Production, Firm and Welfare
jUKUN
Is a branch of economics that deals with the individual agents in an economy or in a country.
ADEYEMI
The concept of monopoly
Francis Reply
Ed Afrah
Ed

Get the best Microeconomics course in your pocket!





Source:  OpenStax, Microeconomics. OpenStax CNX. Aug 03, 2014 Download for free at http://legacy.cnx.org/content/col11627/1.10
Google Play and the Google Play logo are trademarks of Google Inc.

Notification Switch

Would you like to follow the 'Microeconomics' conversation and receive update notifications?

Ask