<p><strong>It Depends.</strong></p>

<p>We first need to decide on which country we are going to analyze. </p>

<p>1) If we look at the country producing the shirts, that country just spent the resources, labor, etc. to produce both types of shirts.  The industry could pile all the wrong shirts and burn them, but that would be a waste of the resources and labor that have already been used to produce the shirts.  <strong>Thus, it would be bad for the first-world nation to destroy the products.  It would be better to use the shirts in some capacity.</strong>  With other items, this comes in the form of selling the products to regain some of the cost of production.  </p>

<p>2) Now we will look at the third-world nation who is receiving the shirts.  You have already done most of the analysis.  The market is flooded with free shirts, no additional jobs are created in the shirt industry, local clothing industries don't get the business, and many of these shirt businesses go bankrupt.  All of this is true.  The question is whether it is bad for that country's economy.  <strong>Individuals from those countries would argue that it does harm the economy.</strong> One of the better resources describing this phenomenon is the book <em>When Helping Hurts</em> (there are starting to be many other resources, but this is the flagship).  The argument is that third-world countries are not able to develop certain industries naturally because the industries are competing with "free" goods from the first-world country.  </p>

<p>Let's look at an example.  Let's say another planet produces a lot of technology, finds that it doesn't need it, and, instead of destroying it, dumps it on earth.  The economy in any technology producing country on earth would suffer.  Why?  Because the country can't compete with free.  It wouldn't be able to compete even if it had comparative/absolute advantage in that industry when compared to the other planet.  <strong>Thus, the other planet would still produce technology despite the countries on earth being able to produce the same technology more efficiently and at a lower cost.  This is bad for both countries.</strong><br>
Notice the parallels between the example above and the scenario you mentioned.  A first-world country produces a lot of shirts and dumps them onto a third-world country at no cost.  The third-world economy suffers because, even if it could produce the shirts at a higher quality and at a lower cost, the shirt industry cannot compete with free.  Thus, the first-world country will still continue to produce the shirts even if the third-world country is more efficient.  This is bad for <strong>both</strong> countries.  </p>

<p>So, what is the solution?<br>
As stated above, there are three conditions that need to be satisfied in order for us to find the best possible solution.<br>
1) The first-world nation should use the shirts in some capacity.<br>
2) The unintentional "predatory dumping" of shirts into the third-world countries does harm their economies.<br>
3) Allow the most efficient country to produce the shirts.<br>
<strong>The solution would be for the NFL to <em>sell</em> the wrong shirts to the third-world countries.</strong><br>
The solution allows for the companies in the first-world country to regain some of the resources used to produce the bad shirts (1), stops the dumping of "free" goods into developing nations (2), and encourages competition between the industries of the countries so that the consumers purchase from the companies that produce the highest quality shirts at the highest efficiency and the lowest price (3).  </p>

CC BY-SA 3.0
2016-08-14T11:15:50.277Z
2016-08-21T18:39:19.690Z
2016-08-21T18:39:19.690Z
Mathematician
<p>This isn't the case, because in the clothing market (much like in other markets) there is   <b>Product Differentiation</b>. This is written on  <a href="http://www.investopedia.com/terms/p/product_differentiation.asp" rel="nofollow">Investopedia</a> as:</p>

<blockquote>
  <p>Product differentiation is a marketing process that showcases the differences between products. Differentiation looks to make a product more attractive by contrasting its unique qualities with other competing products...</p>
  
  <p>...Product differentiation can be as simple as packaging the goods in a creative way, or as elaborate as incorporating new functional features. Sometimes differentiation does not involve changing the product at all, but creating a new advertising campaign or other sales promotions instead.
  <b>Product differentiation determines what sets one product apart from other similar products, and it uses that difference to drive consumer interest</b>...</p>
</blockquote>

<p>In short, flooding the shirt market with the "losing NFL champion shirts" does not affect the market in any radical way, as NFL shirts are not substitutes for all other types of shirts as there are differences in styles of shirts. </p>

CC BY-SA 3.0
2016-08-14T04:24:33.877Z
I somewhat doubt that though. In places stricken by poverty, with families desperately in need, I'm sure they would be happy with whatever they could get, and many wouldn't seek to purchase a sweater or suit if they had free shirts given to them, at least not in the short term.
Kartik Chugh
CC BY-SA 3.0
2016-08-14T04:12:07.483Z
2016-10-10T21:18:13.820Z
2016-10-10T21:18:13.820Z
EconJohn
<p>My answer is no, it doesn't hurt the local economy. This seems like an example of the "<a href="https://en.wikipedia.org/wiki/Parable_of_the_broken_window" rel="noreferrer">Broken Window Fallacy</a>":</p>

<p>Suppose, when nobody is looking, I break all of the windows in my neighbour's house. This creates a bunch of work for a glazier who might otherwise have been idle. So it seems like, by going round smashing things up we can provide a boost to the economy. Surely this must be wrong!?</p>

<p>Indeed, the problem with this logic is that we have to think what would happen if I had not broken the windows. My neighbour, not having to incur the expense of replacing his windows, would have some extra money to spend on a hair cut or a new bicycle, creating work for a barber or a bicycle maker. If the windows are broken then those guys miss out.</p>

<p>So the glazier earns some extra income and gains; the barber earns less income and looses. But these two things "cancel out": this is just a transfer of wealth from one person to another rather than the creation of new wealth. My neighbour, on the other hand, definitely loses because he doesn't get a hair cut any more. So overall, the broken windows are a net loss to society.</p>

<hr>

<p>The reason I think this is relevant to your question is that we could reframe it as: "if we burnt the shirts [broke the windows] instead of giving them away for free, wouldn't that create work for a tailor and therefore make society richer?"</p>

<p>I think the answer is no because, freed from the need to buy a shirt, people have more income to spend on food, educating their child, taking care of their health, etc. All of these things create jobs in the local economy to replace the lost jobs in the clothing industry.</p>

<p>It is true that the tailors lose out at the expense of the farmer, teacher, or nurse. But over long time horizons people will adjust to this by training to do the jobs that pay. </p>

<hr>

<p><strong>tldr;</strong> Destroying real resources may create winners and losers, but is almost always bad for society overall.</p>

CC BY-SA 3.0
2016-08-18T19:58:30.617Z
I see your point, but wiping out an entire industry, even if the wealth were to be transferred to other industries or families' pockets, can't be good overall, correct? Long-term, doesn't an economy need to be diverse and thrive in all different industries?
Kartik Chugh
CC BY-SA 3.0
2016-08-19T06:55:50.207Z
@KartikChughヅ No. In fact, mainstream economics explicitly says that countries should *not* try to thrive in all industries. Instead they should specialise in the industries that they are most competitive in and then trade with other countries to get goods not produced domestically. This is one of the principles about which economists most strongly agree (http://www.igmchicago.org/igm-economic-experts-panel/poll-results?SurveyID=SV_0dfr9yjnDcLh17m). For more information, read about "comparative advantage".
Ubiquitous
CC BY-SA 3.0
2016-08-19T14:40:52.653Z
Thanks for the link, I understand now. Just out of curiosity, do you think Middle Eastern countries or perhaps Russia take this concept too far, by relying too much on oil revenue?
Kartik Chugh
CC BY-SA 3.0
2016-08-19T15:43:13.490Z
@KartikChughヅ Good question. The models that predict specialisation are, generally, a bit "naive" in the sense that they do not allow much role for fluctuating demand (and therefore fluctuating prices for the goods a country produces). Especially with a good like oil, whose price is quite volatile, being so heavily specialised indeed exposes a country to very large price fluctuations. In this respect, some diversification is probably a good thing: it trades some short-run efficiency in favour of long-run protection from price shocks.
Ubiquitous
CC BY-SA 3.0
2016-08-21T18:58:25.103Z
@Ubiquitous 1) In your example they don't "cancel out"; there is a net loss. We need to account for the labor to clean up the broken windows, the labor and resources to produce the windows, and the labor to install the windows.
2) You said the dumping of shirts does not harm the third-world economy but say in your above comment that countries should specialize in industries that they are most competitive. Let's say that the third-world nation has comparative advantage; doesn't the shirt dumping negatively affect the more efficient economy meaning that the answer is "yes"?
Mathematician
CC BY-SA 3.0
2016-08-21T20:33:15.163Z
@Mathematician On 1), you are repeating what I already wrote in my answer: there is a net loss to society. We are just accounting for the loss differently. The reason I wrote it this way is that it is important to keep track of the transfers that compensate the glazier for his time and materials if we are to determine who ultimately bears the net cost. On 2): from the perspective of the recipient, if someone will give you a good for free it is *as if* you had an extreme comparative disadvantage in that good. The result is that your feasible consumption set expands and you are better-off.
Ubiquitous
CC BY-SA 3.0
2016-08-22T21:20:36.843Z
@Ubiquitous 1) I don't see how the losses are the same. There is a specific cost to the neighbor resulting in a loss for him but society as a whole loses apart from that. The labor and resources I mentioned above could have been used to benefit society and not merely restore it to the previous pre-broken window state. 2) From the third-world perspective, yes. But, from the perspective of the whole system, there would be a net loss between both societies if the third-world nation has the comparative advantage.
Mathematician
CC BY-SA 3.0
2016-08-23T09:46:11.903Z
@Mathematician On 1) The neighbour has to pay the glazier at least enough to compensate him for the alternative use of his time and materials that is foregone. In any sensible general equilibrium model, this will mean that all of the social costs you are talking about are already reflected in the payment made by the neighbour.
Ubiquitous
CC BY-SA 3.0
2016-08-23T09:48:44.127Z
@Mathematician On 2), once the shirts are already produced there is effectively a marginal cost of zero so I don't agree that the third world can possibly have a comparative advantage in shirts at that stage. I *do* agree with you that, if we are also considering the decision of whether to produce the shirts in the first place, then global society is made worse off if they were produced in the US despite a comparative disadvantage. But that wasn't the question asked by the OP. The OP's question is specifically whether it is better to destroy the (already produced) shirts or to give them away.
Ubiquitous
CC BY-SA 3.0
2016-08-24T20:47:28.803Z
@Ubiquitous 1) For the most part, yes. But the cost does not account for the opportunity cost of the materials and labor. 2) Actually, I believe that that is the OP's question. Both countries are worse of because we don't follow comparative advantage. Comparative advantage is not followed because we have already produced the shirts. Why did we produce the shirts if we have comparative disadvantage? Because there are not many businesses in the third-world nation. Why? Because the business isn't profitable and can't compete with shirts given away for free. Free shirts do hurt the economy.
Mathematician
CC BY-SA 3.0
2016-08-14T08:21:23.547Z
2016-08-14T08:21:23.547Z
Ubiquitous
<p>I've recently become aware of the fact that the NFL prints both championship teams' shirts in advance to satiate incredible demand -- but instead of destroying the losing teams' shirts like they used to, they instead <a href="http://mentalfloss.com/article/29884/what-happens-losing-teams-championship-shirts" rel="nofollow noreferrer">donate them to developing countries</a>. But the thought of flooding these local economies with free shirts, which doesn't create jobs, GDP, and hurts local clothing business, seems like it would be terrible for the economy. Is this indeed the case?</p>

<gdp><subsidies>
Do the donated NFL losing team shirts destroy local economies?
Kartik Chugh
# Do the donated NFL losing team shirts destroy local economies?

(Asked by: username_0 on 2016-08-13)

I've recently become aware of the fact that the NFL prints both championship teams' shirts in advance to satiate incredible demand -- but instead of destroying the losing teams' shirts like they used to, they instead [donate them to developing countries](http://mentalfloss.com/article/29884/what-happens-losing-teams-championship-shirts). But the thought of flooding these local economies with free shirts, which doesn't create jobs, GDP, and hurts local clothing business, seems like it would be terrible for the economy. Is this indeed the case?

**Tags:** gdp, subsidies


---

## 3 answers

### Answer by username_3 on 2016-08-14. Score: 5 | Accepted answer

My answer is no, it doesn't hurt the local economy. This seems like an example of the "[Broken Window Fallacy](https://en.wikipedia.org/wiki/Parable_of_the_broken_window)":

Suppose, when nobody is looking, I break all of the windows in my neighbour's house. This creates a bunch of work for a glazier who might otherwise have been idle. So it seems like, by going round smashing things up we can provide a boost to the economy. Surely this must be wrong!?

Indeed, the problem with this logic is that we have to think what would happen if I had not broken the windows. My neighbour, not having to incur the expense of replacing his windows, would have some extra money to spend on a hair cut or a new bicycle, creating work for a barber or a bicycle maker. If the windows are broken then those guys miss out.

So the glazier earns some extra income and gains; the barber earns less income and looses. But these two things "cancel out": this is just a transfer of wealth from one person to another rather than the creation of new wealth. My neighbour, on the other hand, definitely loses because he doesn't get a hair cut any more. So overall, the broken windows are a net loss to society.

---

The reason I think this is relevant to your question is that we could reframe it as: "if we burnt the shirts [broke the windows] instead of giving them away for free, wouldn't that create work for a tailor and therefore make society richer?"

I think the answer is no because, freed from the need to buy a shirt, people have more income to spend on food, educating their child, taking care of their health, etc. All of these things create jobs in the local economy to replace the lost jobs in the clothing industry.

It is true that the tailors lose out at the expense of the farmer, teacher, or nurse. But over long time horizons people will adjust to this by training to do the jobs that pay.

---

**tldr;** Destroying real resources may create winners and losers, but is almost always bad for society overall.

> **Comments:**
> **username_0**: I see your point, but wiping out an entire industry, even if the wealth were to be transferred to other industries or families' pockets, can't be good overall, correct? Long-term, doesn't an economy need to be diverse and thrive in all different industries?  
> **username_3**: @KartikChughヅ No. In fact, mainstream economics explicitly says that countries should *not* try to thrive in all industries. Instead they should specialise in the industries that they are most competitive in and then trade with other countries to get goods not produced domestically. This is one of the principles about which economists most strongly agree (http://www.igmchicago.org/igm-economic-experts-panel/poll-results?SurveyID=SV_0dfr9yjnDcLh17m). For more information, read about "comparative advantage".  
> **username_0**: Thanks for the link, I understand now. Just out of curiosity, do you think Middle Eastern countries or perhaps Russia take this concept too far, by relying too much on oil revenue?  
> **username_3**: @KartikChughヅ Good question. The models that predict specialisation are, generally, a bit "naive" in the sense that they do not allow much role for fluctuating demand (and therefore fluctuating prices for the goods a country produces). Especially with a good like oil, whose price is quite volatile, being so heavily specialised indeed exposes a country to very large price fluctuations. In this respect, some diversification is probably a good thing: it trades some short-run efficiency in favour of long-run protection from price shocks.  
> **username_1**: @username_3 1) In your example they don't "cancel out"; there is a net loss. We need to account for the labor to clean up the broken windows, the labor and resources to produce the windows, and the labor to install the windows. 2) You said the dumping of shirts does not harm the third-world economy but say in your above comment that countries should specialize in industries that they are most competitive. Let's say that the third-world nation has comparative advantage; doesn't the shirt dumping negatively affect the more efficient economy meaning that the answer is "yes"?  
> **username_3**: @username_1 On 1), you are repeating what I already wrote in my answer: there is a net loss to society. We are just accounting for the loss differently. The reason I wrote it this way is that it is important to keep track of the transfers that compensate the glazier for his time and materials if we are to determine who ultimately bears the net cost. On 2): from the perspective of the recipient, if someone will give you a good for free it is *as if* you had an extreme comparative disadvantage in that good. The result is that your feasible consumption set expands and you are better-off.  
> **username_1**: @username_3 1) I don't see how the losses are the same. There is a specific cost to the neighbor resulting in a loss for him but society as a whole loses apart from that. The labor and resources I mentioned above could have been used to benefit society and not merely restore it to the previous pre-broken window state. 2) From the third-world perspective, yes. But, from the perspective of the whole system, there would be a net loss between both societies if the third-world nation has the comparative advantage.  
> **username_3**: @username_1 On 1) The neighbour has to pay the glazier at least enough to compensate him for the alternative use of his time and materials that is foregone. In any sensible general equilibrium model, this will mean that all of the social costs you are talking about are already reflected in the payment made by the neighbour.  
> **username_3**: @username_1 On 2), once the shirts are already produced there is effectively a marginal cost of zero so I don't agree that the third world can possibly have a comparative advantage in shirts at that stage. I *do* agree with you that, if we are also considering the decision of whether to produce the shirts in the first place, then global society is made worse off if they were produced in the US despite a comparative disadvantage. But that wasn't the question asked by the OP. The OP's question is specifically whether it is better to destroy the (already produced) shirts or to give them away.  
> **username_1**: @username_3 1) For the most part, yes. But the cost does not account for the opportunity cost of the materials and labor. 2) Actually, I believe that that is the OP's question. Both countries are worse of because we don't follow comparative advantage. Comparative advantage is not followed because we have already produced the shirts. Why did we produce the shirts if we have comparative disadvantage? Because there are not many businesses in the third-world nation. Why? Because the business isn't profitable and can't compete with shirts given away for free. Free shirts do hurt the economy.  

---

### Answer by username_1 on 2016-08-14. Score: 2

**It Depends.**

We first need to decide on which country we are going to analyze.

1) If we look at the country producing the shirts, that country just spent the resources, labor, etc. to produce both types of shirts. The industry could pile all the wrong shirts and burn them, but that would be a waste of the resources and labor that have already been used to produce the shirts. **Thus, it would be bad for the first-world nation to destroy the products. It would be better to use the shirts in some capacity.** With other items, this comes in the form of selling the products to regain some of the cost of production.

2) Now we will look at the third-world nation who is receiving the shirts. You have already done most of the analysis. The market is flooded with free shirts, no additional jobs are created in the shirt industry, local clothing industries don't get the business, and many of these shirt businesses go bankrupt. All of this is true. The question is whether it is bad for that country's economy. **Individuals from those countries would argue that it does harm the economy.** One of the better resources describing this phenomenon is the book *When Helping Hurts* (there are starting to be many other resources, but this is the flagship). The argument is that third-world countries are not able to develop certain industries naturally because the industries are competing with "free" goods from the first-world country.

Let's look at an example. Let's say another planet produces a lot of technology, finds that it doesn't need it, and, instead of destroying it, dumps it on earth. The economy in any technology producing country on earth would suffer. Why? Because the country can't compete with free. It wouldn't be able to compete even if it had comparative/absolute advantage in that industry when compared to the other planet. **Thus, the other planet would still produce technology despite the countries on earth being able to produce the same technology more efficiently and at a lower cost. This is bad for both countries.**  
Notice the parallels between the example above and the scenario you mentioned. A first-world country produces a lot of shirts and dumps them onto a third-world country at no cost. The third-world economy suffers because, even if it could produce the shirts at a higher quality and at a lower cost, the shirt industry cannot compete with free. Thus, the first-world country will still continue to produce the shirts even if the third-world country is more efficient. This is bad for **both** countries.

So, what is the solution?  
As stated above, there are three conditions that need to be satisfied in order for us to find the best possible solution.  
1) The first-world nation should use the shirts in some capacity.  
2) The unintentional "predatory dumping" of shirts into the third-world countries does harm their economies.  
3) Allow the most efficient country to produce the shirts.  
**The solution would be for the NFL to *sell* the wrong shirts to the third-world countries.**  
The solution allows for the companies in the first-world country to regain some of the resources used to produce the bad shirts (1), stops the dumping of "free" goods into developing nations (2), and encourages competition between the industries of the countries so that the consumers purchase from the companies that produce the highest quality shirts at the highest efficiency and the lowest price (3).


---

### Answer by username_2 on 2016-08-14. Score: 2

This isn't the case, because in the clothing market (much like in other markets) there is **Product Differentiation**. This is written on [Investopedia](http://www.investopedia.com/terms/p/product_differentiation.asp) as:

> Product differentiation is a marketing process that showcases the differences between products. Differentiation looks to make a product more attractive by contrasting its unique qualities with other competing products...
>
> ...Product differentiation can be as simple as packaging the goods in a creative way, or as elaborate as incorporating new functional features. Sometimes differentiation does not involve changing the product at all, but creating a new advertising campaign or other sales promotions instead.
> **Product differentiation determines what sets one product apart from other similar products, and it uses that difference to drive consumer interest**...

In short, flooding the shirt market with the "losing NFL champion shirts" does not affect the market in any radical way, as NFL shirts are not substitutes for all other types of shirts as there are differences in styles of shirts.

> **Comments:**
> **username_0**: I somewhat doubt that though. In places stricken by poverty, with families desperately in need, I'm sure they would be happy with whatever they could get, and many wouldn't seek to purchase a sweater or suit if they had free shirts given to them, at least not in the short term.  

---

