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Reshuffling Workers

Posted By Don Boudreaux On January 5, 2005 @ 1:33 pm In Trade | Comments Disabled

Sheldon Richman wrote this excellent op-ed [1] in yesterday’s Miami Herald.   Even if you already know the case for free trade, it’s worth reading.

Richman is especially effective at showing that, just as specific domestic jobs are lost when consumers buy more goods or services from abroad, specific domestic jobs are lost when protectionist policies are implemented or intensified.

I’m often asked, following lectures on trade, the following question: “I understand your point.  But even you [meaning me, Boudreaux] admit that when Americans import more, some of our fellow citizens lose their jobs.  And job-loss is painful.  How do you justify trade given these job losses?”

One response – the one, I think, typically offered by economists asked this question – is to say “Well, yes, but in the long run things work out.  Free trade is the best long-run policy.” This response is correct, as far as it goes – especially if it’s combined with a sound justification for focusing on the long-run [2].

But this response, while valid, is unsatisfying to many people.  A better response – instead of the one above or, better, along with the one above – is to point out that you can save Mr. American Jones’s job only by putting Mr. American Smith out of work.

Protectionism, like free trade, reshuffles jobs.  This reshuffling creates some jobs and eliminates others.  (Again, see Sheldon Richman’s essay.)  The only economic difference is that free trade reshuffles workers toward those jobs at which workers have a comparative advantage – and, hence, will earn in general higher pay – while protectionism reshuffles workers away from jobs at which workers have a comparative advantage.

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[1] this excellent op-ed: http://www.miami.com/mld/miamiherald/news/opinion/10559121.htm

[2] sound justification for focusing on the long-run: http://cafehayek.com/2004/04/still_alive_in_.html

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