Wednesday, November 2, 2011

“Buy American” -or- “Buy Union Assembled”?

John Stossel recently wrote an essay entitled The Stupidity of "Buy American". Link to the essay appears below:

Stossel is correct in that the rational consumer buys the best value regardless of the nation of origin. Many times the rational consumer buys American as it represents the best value. However, “buy American” is basically presented as a particular duty of the rational consumer to act irrational by limiting choice. That the irrational behavior will somehow, someway create American jobs. As pointed out by Stossel, if rational behavior yields basket of goods Y at price P, irrational behavior yields basket of goods Y at P+1 or basket of goods Y-1 at price P. In both situations, P+1 or Y-1 represents a value forgone by the irrational path. Where does this forgone value go?

One must think about who hypes “buy American”. Answer: unions and industry trade groups that benefit. The union wants artificially high wages and the trade group is having trouble competing. The forgone value of the irrational consumer is then transferred as artificially high union wages and supporting the uncompetitive trade group.

Taking this one step further, unions and trade groups are acting rational by advertising for the consumer to be irrational. Ah, the evil of it all!

Let us say one decides to “buy American”. Is the item 100% American? Are the machines, technology, capital, etc. that produce the product 100% American? In the main the answer is no.

Therefore, one may be able to translate “buy American” as merely “buy union assembled“.

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