Wednesday, 4 July 2012

Free trade is good in the real world too

Posting at NZ’s Anti Dismal blog, Paul Walker is great at finding snippets of interest around the net—like this one, a letter to the editor from Don Boudreaux to the Washington Post on free trade:

[Your correspondent] Steven Pearlstein correctly notes that the economic theory in support of free trade “is based on a number of assumptions” – but he mistakenly suggests that many of these assumptions often don’t hold in the real world.
    In fact, the critical assumptions on which the economic case for free trade rests are highly descriptive of reality:
(1) the ultimate justification for economic activity is to improve living standards for consumers;
(2) producers facing competition serve consumers better than do monopolists;
(3) each party to a voluntary trade is generally made better off by such trades; and – most importantly –
(4) the first three assumptions aren’t nullified merely by putting a national political border between consumers and producers.
    Other subsidiary assumptions, when they hold, explain particular trade patterns and the size of trade’s benefits.  But the proposition that trade between America and, say, India is beneficial for the people of both countries rests on assumptions no more unrealistic, tentative, or fragile than does the proposition that trade between Arizona and Indiana is beneficial for the people of both states.

So as Paul summarises,

if people in the South Island are made better off by trading with people in the North Island (and vice versa) then people in the South Island are made just as well off trading with people in Iceland (and vice versa).

And there are enough geographic barriers between us trading with the rest of the world to make us better off (and vice versa) without adding legal ones as well.


  1. I've long argued that advocates of protectionism ought to engage in self sufficiency, because obviously they would be better off if their neighbours didn't compete with them by providing goods they could surely make at home, keeping the whole family employed.

  2. I am increasing of the view that modern nation states (and especially conglomerations of states such as the EU) are nothing more than anachronistic structures for the abuse of individuals' rights. I believe we need to return to smaller nation states that enable greater self-determination and differentiation of political structures. In other words, if the people of the East Coast want to establish a Communist tribal state and the people of the Wairarapa a Libertarian republic they should be free to do so (so long as individuals are allowed free choice as to where to live). This was the aim of the founding fathers of America - disparate states loosely held together by common interests of defense and trade. Instead we are all bound to these artifical national borders with the tyranny of majority views imposed on us all.


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