Amazing cargo ship | AER
When I introduce international trade economics to my (mostly) freshmen, I steal the idea I learned from David Friedman and Steve Landsburg.
I begin by showing my students a photograph of Thomas Edison. I then ask them to imagine a modern version of this inventor building a machine that turns corn into cars. Then I showed them a picture of a cornfield in Iowa, and then one of the big, humming cars. Pour corn into one end of this machine, push the button, wait a few hours for the machine to do its thing, and voila! – cars appear from the other end. The next photo I show is of a brand new and shiny Nissan Maxima.
“What would you think about someone inventing a machine that turns corn into cars?I ask my students. “Could you applaud this inventor? And don’t you understand that this wonderful machine is of great benefit to mankind?“
All my students nod in complete agreement.
Then I ask them how the existence of such a car will affect how we Americans should purchase our cars. I suggest to them that if the cost of growing all the corn needed to produce the desired number of cars, plus the cost of operating the machine, were lower than the cost of producing cars, as we do at the present time, that is, with workers. in factories – it wouldn’t be hard to make our cars by growing corn and then loading that corn into a car to make it work its magic.
While some students are understandably worried about the fate of today’s auto workers, workers who would actually lose their jobs in the auto industry if such a car were invented and used, I have yet to meet a student who believes that the American economy and people The invention and operation of such a corn harvester will not improve the situation.
Noting the unanimous agreement of the class on the quality of such a machine, and also noting that this agreement makes sense, I announce that I am going to show them a picture of a real machine that turns corn into cars. I declare that such a machine has already been invented and widely used, and express artificial surprising they never heard of it. This announcement is always skeptical.
But their skepticism is unjustified, because there really is such a machine. The photo I show them is of a cargo ship. The photo I’m showing is of a huge blue cargo ship moored in the port of Baltimore with cars rolling out of its hold.
“This cargo ship, ladies and gentlemen, actually turns corn into cars just as literally as the car I asked you to imagine earlier. In fact, the cargo ship is even more wonderful than the previous car! One reason is that the cargo ship, unlike the earlier machine, can create cars not only from corn, but also from wheat, soybeans, cotton, oil, pharmaceuticals, and many other American-made goods. Almost any product we want to produce can be loaded onto a cargo ship and turned into cars.”
I hope you will not consider me immodest if I say that by this example I firmly fixed the attention of my students. But I haven’t finished yet.
“The almost miraculous nature of the cargo ship does not end there. It could also turn American corn into things other than cars. He can turn American corn into Mexican tomatoes, Chilean grapes, Guatemalan coffee, French wine, Italian trousers, Malaysian textiles, Canadian lumber and South African diamonds. Or he brings out any of these things in us by feeding him also wheat, wheat, or whatever else we want to produce. In short, a cargo ship can turn almost anything into something else. It can turn everything we produce into almost anything we want to consume. The cargo ship is wonderful!”
At this point in my praise of the magnificent cargo ship, at least one student objects that this ship, unlike the hypothetical machine invented by modern Edison, does not Really turn corn into cars.
I reply by asking how a cargo ship is different from another vehicle. “Well,” the student usually replies, “in the machine invented by the modern Edison, the physical substance of the corn is actually rebuilt into cars, while the cargo ship only transports American corn to another country and then reloads.” with cars that are then transported to the United States.”
“So how is this different from what Edison’s hypothetical modern machine does?” I insist. “In the case of the Edison machine, no one cares what happens inside the machine that turns corn into cars. Of course, corn growers don’t care, and car buyers don’t care. The same is true for the cargo ship. No one cares how this ship leaves the US today loaded with corn and returns a few days later loaded with cars. All the corn growers care about is that they are being paid the asking price for the corn. In exchange for this payment, they hand over the harvested corn to exporters, who load it onto cargo ships. Nothing would change if farmers instead sold their corn crop to the owner-operator of a modern Edison machine.”
It’s the same with car buyers. They agree to pay certain prices for cars in exchange for actually receiving the cars. Whether the cars they buy come from the end of a modern Edison car or from the belly of a freighter, as long as the cars they receive are of the quality they expect, buyers are satisfied. From the point of view of both manufacturers and consumers, a freighter is a machine that is in no way different in essence from the modern Edison machine.
The cargo ship lesson applies more generally, and not just to trade that crosses political borders. Like trade carried out with the help of cargo ships, any trade, from the simplest to the most complex, works wonders. Trading allows each of us to turn our unique talents into the fruits of the talents of everyone we trade with.
All that I am, Don Boudreau, produce it’s an economics lesson. That’s all. And yet I consume an innumerable variety of goods and services, from food to pharmaceuticals, from housing to health care, from wine to weather applications, from clothing—and corn—to automobiles. Not only do I not produce anything I consume, I wouldn’t even be able to do so even in a million years. I acquire what I consume through trade, an institution that turns each of our talents into the fruit of the talents of our fellowmen.