June 19th, 2009

The excellent New York Times op-ed piece by Matthew Slaughter, “What Is an ‘American’ Car?”, explores the very question raised in one of my previous Journal posts, “Buy Domestic” to replace “Buy American”?  Its straightforward thinking on the Law of Comparative Advantage (LoCA) prompts me to note here that that economic law lies at the heart of our Economic Theory of Everything (eTOE) / Progression of Economic Value (POEV).  The LoCA has traditionally focused on the wealth of nations being maximized if one nation is free to specialize in what it does best and then trades with other nations for what it does best.  The twist in our POEV is that what is true for nations is also true for individuals, who will find their wealth maximized if they specialize in what they does best and then trade with other individuals for what they does best.
 
Slaughter’s column is also useful in uncovering a number of polarities that would be far more useful to focus on than [domestic <—> foreign] and [American <—> Imported] which unduly dominates analysis of the U.S. auto industry. Consider for example:
 
[designed <—> assembled]

[insourced <—> outsourced]
 
[dynamic <—> static]
 
[robust <—> bankrupt]

I’d suggest it’s “American” to support that which is designed and insourced; such leads to a dynamic, robust economy.

I must also note my appreciation for Slaughter’s use of “goods and services.”  One can always gauge the soundness of thought, vis-a-vis the POEV, by the use of this construction — versus “product and services.” I often count how frequently a writer or author uses this unfortunate phrase in an article or book as a way to measure the lack of understanding that services, experiences, and transformations are distinct economic offerings. They’re all “products” too.