Is the American middle class in jeopardy because modern communications technology enables U.S. firms to use workers in India for tasks such as call-center staffing and software development? Pundits appear to be divided on this issue. However, if you look closely, you will see that professional economists, regardless of ideology, all disagree with the claim that the American middle class will be impoverished by trade with India. We remain loyal to the analysis first propounded by David Ricardo, who would spin in his grave if he could see the contrarian views of outsourcing recently espoused by policy wonk Michael Lind or columnist Paul Craig Roberts and Senator Charles Schumer. 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. Taking Advantage |
