The Choice

Read an article by Russell Roberts or a chapter from his book and you will start thinking twice before terming economics as a mundane subject.  The humorous and light-hearted way Mr. Roberts writes makes you gulp down the whole material in one setting and yet he never fails to make a strong case for his arguments. “The Choice” is yet another typical Mr. Roberts stuff.

The story follows the time-traveling journey and conversation of Ed Johnson (a businessman looking for protection form Japanese competition) and his guardian angle David Ricardo (modeled after the little-known economist.) Together they travel to the future, back to the past, and through alternate timelines to demonstrate Robert's point.

Through this journey, Ricardo corrects some critical mistakes in economic theory; such as the `zero-sum theory', misconceptions on the nature of supply and demand, the role and meaning of wages and `real' wages, the mythical "dangers" of a trade deficit, what imports and exports really are, and most of all, dismisses the myth that trade with other countries hurts the American worker overall (which he admits, in a smaller sense, it sometimes does.)

Ed Johnson, CEO of the Stellar Television Company is facing increased competition from lower priced Japanese televisions. Johnson is a generous man who wants to see his employees protected. His solution is a tariff on Japanese televisions.

In 1960, Johnson persuades his local Congressman to sponsor a ban on foreign televisions. In the wake of positive fall out from such protectionism, the Congressman, Frank Bates, moves on with a protectionist agenda, and potentially election as U.S. President.  The tariff passes and employees of the Stellar Television Company continue to prosper but this tax puts America down a dangerous path and it’s up to nineteenth-century economist David Ricardo to show Ed why.

Roberts’s view of trade is anything but naive. Sometimes a few people are made worse off when their job moves overseas, but most people’s lives are enriched. The foreign worker now has a job much better than what was available before. Everyone now has access to a more affordable product. And the displaced worker is freed to pursue other opportunities that might pay more or be more rewarding.

Ultimately, the next generation has more money and more choices that were simply unimaginable when the jobs initially moved.

Roberts shows readers how trade does not affect the number of jobs, instead it affects the types of jobs people work.

Specialization of production is yet another key role in the path towards wealth and prosperity. Roberts coins this theory, "Round about way to wealth".

Robert's makes a good case that dumping is not really practical for anybody, that the `dumper' would have to make up for lost profits from lowering their prices.

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