Quote:
Originally Posted by JackS
Sigh... Ok, this will be watered down and not technically correct, but it'll get the point across. Imagine an economy where only two countries exist, the US and China, and each is operating under autarky (no trade/outsourcing at all.) Now someone in the US decides to have Good A made in China because it was cheaper. The Chinese worker produces Good A at instead of producing Good B. However, China still demands that Good B is produced. China doesn't have any option other than to have Good B produced in the US, so the person fired from producing Good A is now hired to produce Good B. Thus there is no change in the number of people employed.
Obviously we've made a lot of assumptions (perfect competition, no transport costs, homogenous workers, only two countries, etc.) But, it turns out that you can relax many of these assumptions and the model still works.
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Thank you for this. It might be helpful for some in this thread to read up on the theory of
comparative advantage. In short, it's quite possible for everyone to benefit when some work is outsourced.