PRESTOPUNDIT -- "It's a team sport, baby!"

Today's Jeopardy Daily Double: One is a giant in the history of human thought. The other is a pygmy in the second-hand trade of "popular ideas" ... In a related matter, Arnold Klung takes on the topic of job outsourcing and comparative advantage, with an emphasis on the role of mathematics in thinking about such things. Quotable:

What accounts for the persistent belief that trade with poor countries will make us worse off? Recently, it occurred to me that evolutionary psychology might provide the answer. Anthropologist Alan Fiske has pointed out that there are four ways in which humans transact: on the basis of authority; on the basis of communal sharing; on the basis of equality matching; and on the basis of market pricing. In the era of small hunter-gatherer tribes in which our brains evolved, only the first three were needed. Market pricing is required once you start to interact with strangers.

My hypothesis is that people are not "hard-wired" to understand market pricing, so that they often fall back on the models of authority ranking, communal sharing, or equality matching to guide them. Thus, people interpret trade with India as if it were communal sharing with India. It certainly is true that if we share with India, we will be poorer. However, it is not true that trading with India at market prices will lower our well-being.

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Posted by Greg Ransom | TrackBack