(1) A Puzzle: Exports = Cost, Imports = Benefit ?

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DRAFT 1

Bill Mitchell argues:

... exports are a cost and imports are a benefit.
Giving some real thing away is a cost. Getting some real thing is a benefit.

I beg to differ.

It is clearly not true that 

• (a) giving away some real thing is a cost, or 

• (b) getting some real thing is a benefit 

under all circumstances.

I may give away that old bicycle that clutters my garage and whose sight I loath and be the better off for it, as getting (or rather still having) it is a cost, i. e. something negative, something that reduces my wealth (i. e. my possession of something whose presence and availability to me creates an advantage or gain compared to it not being present or available to me). Giving the bicycle away is a benefit, something that increases my wealth (as defined above in the bracketed phrase).

I can "give away some real thing", creating thereby a benefit, as we have seen, and at the same time "get some real thing", creating thereby a cost. The complete reversal of Mitchell's tenet. For this is what happens when I trade the loathed bicycle in for beautiful flowers that, however, turn out to be of the instantly withering kind, smelly, dirty and poisonous, in short: just one hell of a cost.

It is immaterial that I may have misjudged, thinking I am getting a benefit by "importing" these real things, The fact is: I have got a real thing and thereby incurred a cost instead of reaping a benefit.

Consider the case of country A whose demand for X is satisfied, while the X-producing factories would be able to enhance the country's wealth by selling many more Xs before reaching their capacity limit. Clearly, in this case, giving away some real thing brings about a benefit.

Considering the case of exporting in order to be able to import it seems rather obvious to me that export is a benefit in so far as it facilitates another benefit (derived from importing some other real thing): if I wish to import Y, it is indispensable for me to export X. The benefit entailed in importing Y is not available unless one exports X. So clearly "giving away some real thing" produces in this case the intermediary benefit of being able to get what I want.

Imagine a country B where people are very healthy, in large measure because they do not consume the bad kind of sugar that makes so many people in the West unhealthy. B is developing fast and increasingly engaging in trade. At some point it begins to import bad sugar from the West, which proves to be in enormous demand. Soon per capita consumption of bad sugar in B is the largest in the world. Sugar-related diseases spread among the population. It stands to reason that in this case "getting some real thing" involves a cost. 

Conclusion

I think, what I have established is that "giving away of some real thing" (including the case of exporting some real thing) can be shown to produce a benefit/benefits, while "getting some real thing" (including the case of importing some real thing) can be shown to entail a cost/costs.

For him who wishes to take a look at exports and imports from the point of view of costs and benefits it would seem to be more fruitful to treat each category as a bundle of costs and benefits, rather than insisting that the category of cost can only be applied to exports (but not imports)  and the category of benefit can only be applied to imports (but not exports). After all both tend to be interdependent, being mutually beneficial while both also being capable of generating costs.

The propositions in question — (a) and (b) above — are special cases at best, they are not generally true.

The phrasing is therefore unfortunate in that it creates confusion, for it can be easily shown that "giving away something real" may be associated with a benefit, and "getting some real things" may come at a cost. 

The advantages and diadvantages (costs and benefits) of exporting and importing can not be exhaustively accounted for by concentrating exclusively on the question whether the domestic availability and the domestic use of domestic resources are increased (supposedly good) or reduced (supposedly bad). Why should one use domestic resources domestically, when they are more productively and profitably applied by producing export goods?

It is not clear to me what one hopes to gain by claiming that a proposition is more general than it actually is.

Also I do not see in how far these propositions are central to MMT or any of its main arguments.

PS

Writes Mitchell,

It just states the obvious fact that exports, by definition, involve sacrificing real resources and depriving a nation of their use.

Imports on the other hand clearly involve receiving final goods and services where the real resource sacrifice has been made by the exporting nation.

The propositions in question — (a) and (b) above — are special cases at best, they are not generally true.

The phrasing is therefore unfortunate in that it creates confusion, for it can be easily shown that "giving away something real" may be associated with a benefit, and "getting some real things" may come at a cost. 

The advantages and diadvantages (costs and benefits) of exporting and importing can not be exhaustively accounted for by concentrating exclusively on the question whether the domestic availability and the domestic use of domestic resources are increased (supposedly good) or reduced (supposedly bad). Why should one use domestic resources domestically, when they are more productively and profitably applied by producing export goods?

It is not clear to me what one hopes to gain by claiming that a proposition is more general than it actually is.

DRAFT 2 (for a different purpose)

The below propositions are special cases at best, they are not generally true.

... exports are a cost and imports are a benefit.
Giving some real thing away is a cost. Getting some real thing is a benefit.

...

It just states the obvious fact that exports, by definition, involve sacrificing real resources and depriving a nation of their use.

Imports on the other hand clearly involve receiving final goods and services where the real resource sacrifice has been made by the exporting nation.

The above phrasing is infelicitous, for it can be easily shown that "giving some real thing away" may be associated with a benefit, and "getting some real things" may come at a cost. 

On a more specific level: why should exports generate ONLY costs (in the form of sacrificing real resources)? Consider the case of cross-border know-how transfer: this kind of exporting may actually bring benefits to both exporter (learning experiences to be made use of domestically) and importer (enhanced knowledge) simultaneously, say: by solving a problem in the know-how-importing country, the exporter is able to figure out and instantly communicate back home how to finally solve a domestic problem. 

Exports need not require sacrificing real resources in the sense of these being no longer available to the exporting nation in a regrettable or disadvantageous way as in the case where (see above) domestic demand is insufficient to exploit increasing returns to scale. The resources are not wanted at home, while being able to generate more domestic wealth by being offered abroad.

The idea that every transfer of resources from an exporting country to an importing country has ipso facto an impoverishing and only an impoverishing effect on the former strikes me as unconvincing. These resources may well be put to better use as part of a roundabout and interdependent cross-frontier flow rather than remaining tied up domestically. Thus, the dichotomous perspective expressed in the above quote also ignores the dynamic gains from trade (stimulus to competition; the acquisition of new knowledge, new ideas and the dissemination of technical knowledge; the possibility of accompanying capital flows through foreign direct investment, and changes in attitudes and institutions).

For him who wishes to take a look at exports and imports from the point of view of costs and benefits it would seem to be more fruitful to treat each category as a bundle of costs and benefits, rather than insisting that the category of cost can only be applied to exports (but not imports)  and the category of benefit can only be applied to imports (but not exports). After all export and import tend to be interdependent, being often mutually beneficial with both also being capable of generating costs. 

Continued here.