Value and Exchange

The new protectionists, writes Sudha Shenoy, want to reverse the outflow of US capital to China and India. But it cannot be done, which is good in the long run for everyone.

Ryan Ford says he is glad to do the work others are unwilling to do at the going market wage. When one looks at the grocery workers who are striking for higher pay, their tactics and principles, he asks: is this consistent with freedom? Is this what free and fair trade is? To use coercion to force others to trade under your conditions is folly.

Recorded at Mises University 2001.

Microeconomics starts with the basic fact that each person has short term and long term goals, like buying a ham sandwich and graduating from college. People act in the world to accomplish something. Human action is purposive. You employ different means to achieve certain goals.

The Chinese "yellow peril" was the late nineteenth century menace. And today, write Cecil Bohanon and T.N. Van Cott, the menace is outsourcing. The Chinese and Indians are selling Americans things like computer software at bargain basement prices. But there is nothing special about outsourcing software technology. All that matters is whether the Chinese and Indians sell for less than what current American software producers could earn in their next most lucrative employment. If so, outsourcing enhances U.S. living standards.

The Center for Responsible Lending says that payday lending is a predatory business in that it lures borrowers into a "debt trap." Mike Foley says this view is all wrong: pay-day lending provides liquidity when it is most needed, and an an opportunity to establish a positive credit history.

The period from the onset of World War I until the demise of the Soviet empire in 1991 has been called the "great parenthesis" in western history, writes JG Hülsmann. The United States offered virtually the only safe haven for capital investments. Among the beneficiaries of this somewhat artificial increase of the capital stock were the American wage earners. Now this epoch is drawing to an end--to the ultimate benefit of all.

Trade with China is beneficial to the U.S. economy, writes Grant Nülle, but grave danger lurks in the area of monetary policy. Beijing is furnishing cheap credit to finance Washington's fiscal deficit and consumer indebtedness in America, accentuating a misallocation of capital and investment priorities propagated by the Fed-backed fiat money. Meanwhile, China's four largest state-owned banks, which together claim 61% of the country's loans and 67% of its deposits, are saddled with mounting bad debts.

If the benefiting consumers from an innovation are largely outside of a given country, writes Robert Murhpy, then it is indeed true that the people in that country might actually be poorer as a result of the innovation. But in that case, no trade policy can change things. On the other hand, if enough of the benefiting consumers are inside a particular country, then the people in that country are helped (on net) by the innovation.

Hal Varian doesn't tell us why the dollar bill in our pocket has value, writes Frank Shostak. To say that the value of money is due to social convention is to say very little. What Varian has told us is that money has value because it is accepted, and why it is accepted? Because it is accepted! Obviously this is not a good explanation of why money has value.