But the analogy is, frankly, shallow and demonstrates a lack of understanding with regard to trade, in my opinion. Trade is not about what you can export; it's about what you can import -- knowledge and technology, most importantly. The situation of the Asians and the American on the island is not one involving trade. (What are the Asians getting in exchange?) So, no, economists would not say, "This is great. Otherwise the Asians would have nothing to do!" They would say, "Jesus Christ, these Asians are dumber than a box of rocks. They're just giving stuff to the American!"
The analogy completely ignores the concept of incentives and is, therefore, useless in any discussion of economics. If this is what "modern economists" would say, then the field of economics is doomed, as are the (apparently retarded) Asians. Conservatives want live babies so they can raise them to be dead soldiers. - George Carlin
The analogy also assumes the American produces nothing. He is simply endowed with his wealth (the tree). In reality, as I said above, the American's output is growing at about 3-3.5% every year -- less than the Asians', but still at a respectable pace.
You would also have to take into account the American's (and, if we chose to add him, the European's) incredible advantage in human capital -- an advantge that is slowly declining, yes, but no less still there.
That's not to say this all isn't a problem. It is, as people in America's Mid-West, England's North, and Scotland (along with many others in areas of Europe and America) can tell you.
Eventually, China is going to let its currency float, and the sooner it does so, the better, as far as I'm concerned. Will it be a tough adjustmen period? Perhaps. But perhaps not. Economics is not an exact science -- and I'm thankful for that, since it's impossible to divorce the field from politics -- and no one knows how the adjustment is going to hit. Conservatives want live babies so they can raise them to be dead soldiers. - George Carlin
