I once suggested that the reason economists are such grumpy people is that they can’t read their morning paper without running into two or three economic fallacies. I was exaggerating, but only by a bit. Consider, for example, this doozie in today’s Globe and Mail – a column by Gary Mason, entitled “How does Canada compete paying wages this high?” He doesn’t exactly say what we are “competing” for, but suggests that somehow because Canadian wages are high, compared to those in China (!) and the United States, that our “long term economic growth” is at risk.
Anyone who has taken an introductory economics course will be able to see already that the column is going to be train wreck. Just from the headline, it’s obvious that Mason does not understand the concept of comparative advantage and the logic of international trade, confuses business competitiveness with national competitiveness, and plans to commit the pauper labour fallacy.… Continue reading