Wednesday, January 31, 2007

Trade = New Technology to Increase Productivity

Beyond myth and emotion, here’s the truth about our trade deficit. It’s big, but it’s not necessarily bad. In fact, it may be helping us live better, now and in the future. Rutgers University economists Chad Bown and Rachel McCulloch explain in "Question & Answer: The Trade Deficit."

Here is an excerpt:

"It’s helpful to think of trade as representing a kind of new technology that allows us to get more or bet­ter output from the same available inputs—which is the definition of increased productivity. There is a clear overall benefit, but trade, like improved technology, does hurt some people in the process. Over time, how­ever, our rising standard of living depends on higher productivity—whether achieved through improved technology or gains from trade."

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