Economic Impacts of Offshore Coding: US Economy and Adam Smith It is clear that it is more efficient and therefore economically better to buy that which one cannot make cheaper oneself. This principle is likely obvious to almost everyone. For example, it is obviously more efficient for most people to buy flour than to grow, cultivate, and grind wheat to produce their own. Similarly, it is far more economical to buy a color TV from Best Buy or JC Penny than to attempt to construct one yourself. In both of these cases, one could probably produce the good oneself, but it would take time and money that could be more efficiently spent elsewhere, in ways that more directly benefit the economy and the individual. If US consumers want cellular phones, and India can produce the same cellular phone for US $10 that US companies can produce for US $100, it is generally better for the economies of both India and the US if the US consumers purchase the Indian cellular phone. According to Smith, this principle extends from individuals and households to entire countries. Indian economy is somewhat obvious and gets more benefits. It benefits from US economic prosperity as US consumers buy more phones. In particular, the example above benefits the Indian people, as it grows the Indian economy, creating jobs, increasing demand (and thus, pay) for skilled workers, which in turn will seek to enjoy their new middle-class lifestyle by spending more in the local economy, paying more taxes, etc. The US economy benefits in a number of ways: 1. Many of the US consumers will be able to afford the cellular phone, and therefore pay the sales and other consumption taxes on the phone. In this case, the old example of selling 1000 of something for $1 being better than selling 100 of something for $5 is very applicable, particular as it relates to the tax revenue which of course stays within the US and local economies. 2. It empowers the US cellular phone manufacturers to increase their efficiency, or close down. The alternative, though somewhat cold-hearted, is also positive, as it frees the resources consumed by the inefficient and uncompetitive US cellular phone manufacturer, for use by more efficient and economically beneficial endeavors. A more efficient manufacturer will consume fewer economic resources for equivalent output, gain competitive advantage, reduce costs, and may even increase profitability. 3. It is pretty well to onshore vs. offshore coding. To contrive another example, if a software company, Evil Empire Inc., can produce its software, World Domination ware, at a cost of US $1 million using domestic programmers, or US $100,000 using offshore programmers producing software of equal quality, Evil Empire, Inc.'s executives have little economic reason to choose the domestic programmers. 4. And the effect of this is that Evil Empire can sell its software at a lower cost and higher profit, yielding more tax revenue, increased wealth for its shareholders, faster and more significant growth, and thus increased payrolls (though likely not including many programmers). 5. Here Adam Smith is correct, and that his theory applies as much to wheat flour as it does to programming. While the local consequences of offshore coding may be negative (job loss and the ensuing unemployment), these can be overcome (see below), and the net result at the macro level is generally positive for both economies. 6. If a country were populated entirely by programmers who had no other skills, and another country began taking their jobs by offering a cheaper product of equal quality, the country of programmers would likely suffer economically. However, this can hardly be seen as an injustice: if one cannot provide a competitive service (that is, if other countries can provide programming services for less than our hypothetical nation of programmers), one should not be surprised when one's customers go elsewhere. Conclusion
At the micro level, those employees that lose their jobs are obviously not benefiting, at least initially. Though it may seem cold-hearted, the same maxim in the previous paragraph applies to individuals as well: if one demands more for the same service than someone else, it should come as no surprise when the cheaper price prevails. Also, imagine a junior programmer applying for an entry-level programming position, and demanding lot US $ per year. This issue of micro-level consequences and the associated solutions will be examined further in the following sections. | 
