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Books: Reviews and Suggested Readings
Don Boudreaux talks about his new book, Globalization. He does not believe in “victims of trade,” “our collective trade deficit,” or other popular notions. If you digest his arguments, you will know more about the trade issue than most economists.
One drawback of Boudreaux’s book is that it is expensive. In contrast, the new Concise Encyclopedia of Economics is dirt cheap. The hardback edition retails for $45 and runs over 600 pages, in an unusually large 8-1/2 by 11 size. Contributors include Bryan and myself, but most of the authors are actually respectable. In fact, many are quite renowned. Although it is structured as a reference work, it can be fun just to read. But I don’t recommend taking it on your next plane trip.
READER COMMENTS
Paul
Jan 21 2008 at 5:44pm
And only $28 in paperback (presumably also lighter!)
Biomed Tim
Jan 21 2008 at 8:57pm
I got the paperback. It’s still pretty heavy.
Gary Rogers
Jan 22 2008 at 2:59am
Don Boudreaux and Russ Roberts make a great argument and are absolutely correct on most points. However, I think their faith in the power of markets blinds them to what is really going on. Basically, the prevailing attitude of most people is that jobs are being outsourced and that we need to do something to protect them. This produces both anti-globalization and anti-immigration sentiment as can be seen by the many statements to this effect from both Democrat and Republican presidential candidates. The argument that Doctors Boudreaux and Roberts present, that globalization makes us all better off, is absolutely true. What it misses is that the general population is also partially correct; the problems are just not caused by globalization or immigration. I would argue that we are losing both jobs and wealth to other countries through reckless government mismanagement. What both doctors casually dismisses as bad but another subject is actually what needs to be included in the discussion.
• There is a difference between investment and consumption. Investment in factories, equipment and other goods increases productivity and creates jobs while spending on consumer goods, health care and other non-investment areas does little to insure future prosperity.
• Since the depression, government policy has encouraged consumption over investment resulting in a dangerously low savings rate. Even with the current problems of foreclosed mortgages and credit card debt climbing to unsustainable levels, the government’s solution is to encourage consumer spending. There is something wrong with that thinking.
• Government borrowing comes disproportionately from foreign sources. Countries like China, Japan, South Korea and the Middle East are flush with dollars from selling us goods and are willing to loan the dollars back to our government, where we tend not to save and consequently would not do the same. This means that the dollars that come out of the money supply are almost exclusively the dollars that should be chasing our exports. It is true that this will reverse when we start paying back our debts, but after thirty years of constant borrowing the damage is already done, forcing many jobs overseas. What worries me most is that when we do have to pay back the loans we will just sell what assets we have left, leaving us with nothing.
• Doctors Boudreaux and Roberts talk like all the foreign money coming into our country is going to investment and the countries providing the dollars want to participate in the future prosperity. In fact, it is going to maintain our unfunded Medicare system and the countries expect to be paid back with interest. Compound interest is great when you are an investor, but when you owe nine trillion dollars and the interest rate goes up it is not that great.
I know this is a bit gloomy and I hate that, but if someone does not wake up and realize what we are doing to ourselves it is going to be too late. As it is, we have a difficult road ahead of us but still have an amazing economy that can pull us out of this provided we get control of our borrowing. Without the fantastic economic engine we have, we would be in the same situation as most third world countries.
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