WASHINGTON—Amid concerns about a declining industrial base and outsourcing of high-tech jobs to low-wage countries, a bill to repeal both the Law of Comparative Advantage and the Law of Demand passed both houses of Congress Thursday with near-unanimous bipartisan support.
“The message is simple: freedom works,” a jubilant Republican House Speaker Dennis Hastert said Thursday. “Easing this onerous regulatory burden will allow American workers the freedom they need to compete and excel in the global marketplace.” Repealing the Law of Comparative Advantage means that American workers are no longer shackled by such considerations as opportunity costs and relative productivity, its supporters noted.
The Law of Comparative Advantage “is a 19th-century relic that has slowed American economic progress long enough,” said House Majority Leader Tom DeLay (R-Tex). “The game has changed dramatically, and the time was right to remove the cumbersome regulations that have crippled American business.”
“The notions of ‘gains from trade’ and ‘mutually beneficial exchange’ are voodoo economics, plain and simple,” said Congressman Barney Frank (D-Mass). “With the Law of Comparative Advantage out of the way, Americans no longer need to fear that they will wake up and discover that their job has been outsourced to India.”
Relative productivity will now be determined solely by country of origin, with the US expected to lead the way in virtually every category. This is expected to revitalize American manufacturing and to stem the tide of high-technology jobs flowing out of the country.
“America is open for work,” said President George W. Bush. “Your elected representatives have crossed party lines to ensure that the American Dream remains accessible to all. By repealing the Law of Comparative Advantage and the Law of Demand, this Congress has ensured that American workers have the tools they need to succeed in an increasingly competitive global marketplace.” The President is expected to sign the bill in a special ceremony on Monday. The bill passed the Senate by a resounding 100-0 margin and the House by a margin of 434-1. The lone dissenting voice was Congressman Ron Paul (R-Tex).
The bill that passed the Senate and House was a modification of an earlier bill that only sought to repeal the Law of Comparative Advantage. Critics of the original bill charged that the reversion to autarky following the bill’s passage would result in higher marginal costs, higher prices, and, therefore, lower domestic production. This concern was dealt with in short order when Congressman Bud Cramer (D-AL) proposed an amendment to repeal the Law of Demand, as well.
Under the Law of Demand, the quantity of a good demanded fell as its price increased. No more, according to the Cramer Amendment. “Repealing the Law of Demand is a milestone in American legislative history,” Cramer said in an address to an AFL-CIO rally in Huntsville. “People used to buy fewer goods as prices increased, but with this revolutionary repeal, prices can increase and the quantity demanded will stay unchanged. American workers, the days of nonzero price elasticities of demand for American goods and services are finally behind us.”
Chief economic advisor Gregory Mankiw could not be reached for comment.
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Art Carden is a Graduate Student in Economics at Washington University in Saint Louis.
