Microchips and potato chips AIER

Would we Americans be better off economically if the government successfully used “industrial policy” to create more microchips and fewer potato chips for us? To many, this question seems silly because the answer seems obvious.

But the answer is not clear at all.

There is no doubt that the US government can redirect more resources to the domestic production of microchips using tariffs, import and export quotas and subsidies. And the government may even arrange for a disproportionately large portion of these redirected resources to come from the snack-food industry. (I’m ignoring the fact here that, in reality, a disproportionately large amount of resources artificially directed at microchip production may be drawn from other high-tech industries, perhaps not from the choice of the snack-food industry.) Yet it is highly unlikely that Americans have fewer potato chips And success in arranging more microchip production will bring net economic benefits to Americans.

Not the cost of production. Increasing the domestic production of fewer potato chips and more microchips using tariffs, quotas and subsidies does not guarantee that Americans will be able to use more microchips. If the cost of producing these extra microchips internally exceeds the cost we were once able to import the same amount of microchips – and that, without tariffs, quotas and subsidies, we still want to import these devices – then these are domestically produced microchips. Less Our affordable. So, how can such results be said to work for our economic benefit?

Giving up a large amount of product X and service Y to get a certain amount of good Z means that a good Z is less affordable. In fact, we To produce Further Z does not imply that we can achieve through this and Use More Z. The reality is that “Z” stands for potato chips or microchips.

If you doubt me, ask yourself how affordable automobiles would be if you made your own automobiles instead of buying your own automobiles from companies like Toyota or General Motors. How affordable would an automobile be if you built your own car?

If the goal is to increase Americans Access In microchips – to improve our ability to acquire and use these high-tech devices – we must acquire them in the least costly way possible. And if foreigners are willing to sell us microchips for less than the cost of making these chips internally, our access to microchips will increase if we import them without producing them ourselves.

Wrong!“I’m already hearing anxious protests.”By importing microchips, we have placed ourselves at the mercy of foreigners who may restrict our access to this important product in the future. “

It is possible. But this possibility is not going to be mentioned as much as it seems at first glance.

Trade is not a one-sided gift-giving process. Trade is exchange. By exporting microchips, foreigners put themselves at the mercy of our Americans who may in the future limit their access to any important product they buy from us with the dollars they earn from selling their microchips. We Americans export large quantities of petroleum, pharmaceuticals, industrial machinery, agricultural products, and higher education – that is, we Americans produce and export many important products and services on which foreigners depend. Losing foreigners’ access to American exports will weaken their economy. Do we have enough reason to believe that foreigners will block our access to microchips because they will deprive themselves of access to petroleum and drug preferences?

As an answer, foreign suppliers of microchips will not do this to accurately indicate that they can acquire petroleum, pharmaceuticals, and industrial machine choices from countries other than the United States. First, foreigners now get the products and services they make from America because we Americans are the low-cost suppliers of these specific products and services. It follows that if the United States no longer exports these goods and services to China, say, China may acquire these goods and services from countries other than the United States at a price higher than China’s cost to obtain them only from the United States.

Second and more importantly, just as foreigners can import less drugs from America and make a difference by importing more drugs from other countries, Americans can make a difference by importing fewer microchips from China and making more difference by importing more microchips. Other countries. What is true for other countries is true for America, and the byword – almost (see below).

The “foreign” is not a single entity; There is no country called “foreign”. Microchips are now manufactured in Taiwan, Japan, South Korea, Germany and other locations in the Netherlands. And since microchips are manufactured by multiple companies in many countries, the number of different companies producing microchips is even greater than the number of countries producing these mini marbles. So for American-based microchip users to be held hostage in an economically meaningful way by foreign microchip makers, various companies based in different countries must conspire to successfully isolate Americans from microchip. ‘It’s possible, but it’s highly unimaginable.

In the paragraph before the end I qualified with “almost” and vice versa. There is really a way that the United States is unique today: The US dollar is the global reserve currency.

The US dollar is the ‘product’ that foreigners want to get from Americans in exchange for what they export here. As is true of any and all money, no one wants to earn a dollar without a miserable miser. The US dollar is in demand because it can be easily exchanged for petroleum, pharmaceuticals, pinewood, pork, pretzel and all other salable products in almost any part of the world, most of which are priced in dollars in the international market. Because no other currency today is as widely and easily accepted as the US dollar worldwide, people around the world have a special demand for the US dollar.

And so, by the way, the Chinese may be able to replace American-supplied petroleum with petroleum supplied by Venezuela or Saudi Arabia, and with a little pain, the Chinese will not be able to replace it so easily from US dollars to bolivars. For China’s refusal to sell microchips to real Americans, China will have to get dollars to conduct world trade, and increase exports to countries other than the United States. But in order to increase exports to other countries, China needs to reduce the price it charges for its exports. The bottom line is that Beijing cannot reduce China’s exports to the United States without forcibly harming the Chinese people.

Of course, the thugs in power in Beijing, and the greedy mandarins below them, may be willing to pay the price for harming America (especially since the price has spread to billions of Chinese people). But acknowledging that the economic dependence of all free-trading countries is always on foreign markets Mutual Reliance should at least stay away from the myth that the so-called “supply chain” is easy to return, use industrial policies to ensure more internal production of ‘key’ products and reduce the production of our preferred potatoes. Chips so as to increase the production of our microchip choice.

Donald J. Boudrox

Donald J.  Boudrox

Donald J. Boudroux is a Senior Fellow at the American Institute for Economic Research and with an Advanced Study of the FA Hayek Program in Philosophy, Politics, and Economics at George Mason University’s Mercatas Center; A Mercatus Center board member; And Professor of Economics and former chair of the Department of Economics at George Mason University. He is the author of books The Essential Hayek, Globalization, Hypocritical and half-wittedAnd his articles appear in such publications The Wall Street Journal, The New York Times, U.S. News & World Report As well as numerous scholarly journals. He wrote a blog called Cafe Hayek and a regular column on economics Pittsburgh Tribune-Review. Boudreaux holds a PhD in economics from the University of Auburn and a law degree from the University of Virginia.

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