Friday 7 April 2017

Are exports bad?

The Times thundered out this headline: "Foreigners dominate market for new homes"

"First-time buyers losing out to investors"

"The Times has established that more than 93 per cent of flats in one of Manchester’s biggest housing developments have been bought by foreign residents or companies registered overseas."

The tone of voice they're using, implies that this is a Bad Thing. But why?

I thought that it was generally agreed that exports are good. And if we don't export, we can't import - we need to import, because, for example, 40% of the food we eat is imported.

But exports aren't just goods; we also export services. And if we build a house and sell it to Johnny Foreigner, that's an export.

Let's consider a fictitious world, in which the number of houses built is fixed. Then each house sold to a foreigner, is one fewer for UK citizens, and we'd want to keep them for ourselves, obviously.

But this isn't the real world. In the real world, a builder makes as many houses as it thinks it can sell at a profit. The number of houses isn't a fixed-size cake.

House builders build as many houses as they can sell at a profit, constrained only by government restrictions on where you can build houses.

So the Times article, which seems to bemoan the fact that foreigners are buying many British-made houses, should instead be celebrating the fact that foreigners are buying many British-made houses.

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