The trade deficit (A negative balance of trade, i.e. imports exceed exports. opposite of trade surplus.)
In the past, people strive to get more with less, ie. Machines, but it doesn’t mean jobs are lost.
The saving of this increased productivity, the acrument soon transferred to consumers and workers.
Why new jobs are created?
Eg. The reason we don’t have bankers is ATM.
A: Complement vs. Substitutes
*until machines can do everything labor can do, some jobs must exist to complement capital (ex. bank tellers and ATMs)
“Trade cost jobs”
When we find way to trade with other countries, it’s the same thing we find some new machine.
*The implication of trade is much smaller than implication of technology.
What matters is not the wage, but how much workers can produce relative to their wage
Wage/MPc(marginal product of labor) I China vs W/MPc I USA
($8/hr)/(4 shirts per hour) ($20/h)/(20shirts hours)
Should America produce shirt? What matters is the comparative advantage.
11:20
If trade deficit cost jobs, then trade surplus must create jobs! (but the reality says NO)
WHY? It ignores the dynamic nature of labor market.
i. Imports are paid with exports. (The jobs lost in trade is replaced by someone in the USA producing what Chinese want)
ii. Richer
*increased productivity is the cause of job losses in manufacturing, not globalization
*shouldn't the economy put people ahead of profits? -> it already does, competition leads to the cheapest and most efficient (best) outcome for consumers
*the only standard of how much to produce is how much we wish to consume
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