Foreigners Are Our Friends | Econ Chronicles

Release Date
May 21, 2014



Some people say technology is the driver of innovation, but society often takes great steps in prosperity by trading. Like technological shifts over history, trade is a powerful way of creating wealth for all parties. In one example, Professor of Economics Bryan Caplan imagines a machine that turned agricultural products directly into cars: it would disrupt the way we do business, but the US would be wealthier for it.
If, however, that machine was nothing but a freighter that exchanges corn for cars with another nation, many people think this is unfair. Whether in dislike for foreign trade or worry about immigration, Prof. Caplan calls this “anti-foreign bias,” and points out that most economists don’t share these concerns. Professional economists think trade and immigration benefit all parties involved – just like innovative technology. As we said before: trade is made of win!

1. See Bryan Caplan address three other commonly held biases:
a) Can Capitalism Save Lives?
b) Everything’s Amazing and Nobody’s Happy
c) Make Progress, Not Work
2. Desert Island Game (game, beginner): Can you learn something about trade and cooperation by being marooned on a desert island?
3. Trade Ruler (game, advanced): As the Supreme Ruler of an island, you want the country to prosper. By engaging in international trade, you can achieve this goal.
4. The Iowa Car Crop (article) Think cars don’t come from America’s amber waves of grain? Think again
5. Should America Open It’s Borders? (debate) Alex Nowrasteh, Bryan Caplan, and Mark Krikorian debate the merits of open borders
6. This Global Show Must Go On (article) Tyler Cowen argues that ordinary people’s fear of foreign relations is behind their aversion to free trade
7. Let Anyone Take a Job Anywhere (debate) Bryan Caplan, Vivek Wadhwa, Kathleen Newland, and Ron Unz debate immigration

Foreigners Are Our Friends | Econ Chronicles
Bryan Caplan: People often see international trade and immigration as a way that foreigners take advantage of us. But economists, whether they’re liberal or conservative, Democrat or Republican, see trade and immigration as good for us and them.
When we teach international economics to college students, economists invoke something called comparative advantage. Our best argument, though, is a story.
Imagine a visionary scientist announces that he’s discovered a way to turn corn into cars. Everyone laughs at him. His fellow scientists call him a crank. But he builds a factory in an abandoned port, and lo and behold, corn goes in, and cars go out.
The competition hurts existing auto workers. But Americans are clearly far richer as a result of the scientist’s amazing discovery. Cars that only the rich could drive before are now affordable for all.
One day, though, a journalist sneaks into the factory and discovers the scientist’s secret. A bunch of dockworkers are unloading cars from a Japanese ship and filling it with corn to take back to Japan. He snaps some pictures and frantically writes an expose. The next day’s headline reads, “Corn-Made Cars: A Fraud.” The government shuts down the company and sends the founder to jail for breaking every foreign-trade law on the books.
The point of the story is that the visionary scientist did have a way to make corn into cars. What difference does it make what’s inside the factory? For all practical purposes, foreign trade is a kind of technology — a creative way to reduce our cost of living and thereby raise our standard of living.
The fact that we keep looking for a dark lining in this silver cloud is a symptom of what I call anti-foreign bias — human beings’ tendency to underestimate the economic benefits of dealing with people from other countries.
Are there any important differences between technology and foreign trade? Absolutely. When Americans use new technology, we’re better off. When Americans trade with foreigners, we’re better off and so are they. From the American point of view, technology and trade are the same. From the human point of view, however, trade is better, because after all, trade is made of win.
The corn-into-cars story is the heart of the economist’s case for trade, regardless of other countries’ trade policies. When people say we can’t have free trade because other countries don’t, economists yearn to respond, “If all your friends were jumping off the Brooklyn Bridge, would you jump, too?”
The nineteenth-century economist Henry George mocked protection against foreign products as a self-enforced blockade. What protection teaches us is to do to ourselves in time of peace what enemies seek to do in time of war.
If that’s the economist’s case for trade, what’s the case for immigration? More of the same. Another name for immigration is trading labor. And as we’ve seen, trade is just a technology.
If a company invented a self-driving lawnmower, Americans would rejoice. From the American point of view, the immigration of gardeners from, say, El Salvador, has exactly the same effect as the invention of a self-driving lawnmower. Our cost of living goes down. Our standard of living goes up. As a happy side effect, the Salvadorians get a huge raise, a raise that allows them to give their families a better life.
This doesn’t mean that most economists want us to adopt free trade or free immigration overnight. The real world is full of complications. Nevertheless, almost all economists think that trade and immigration are greatly underrated.
When you make a deal with another person, both of you are normally better off. When you hire another person, both of you are normally better off. Does it really matter if the other person comes from another country?
That’s a summary of the anti-foreign bias that Americans are prone to. To learn about the three other biases common among voters, click on one of these links.