On Fair Trade

by Don Boudreaux on November 29, 2006

in Trade

Everyone this side of sociopathy champions fairness.  But much disagreement exists about how to define, how to identify, instances of unfairness in reality.

In local, frequently recurring, familiar circumstances the disagreement is minimal.  For example, everyone agrees that if Jones agrees to pay Smith $25 to mow Jones’s lawn, and then if Smith mows the lawn in a good and timely fashion, it is unfair of Jones to give Smith only $20 — or of Smith to demand $30.

But the more abstract — the more ‘macro’ — the circumstances, the more our intuitions fail us in understanding what is and isn’t fair.  This point was driven home to me by the incredibly insightful Steven Landsburg, from page 49 of his 1993 book The Armchair Economist:

My dinner companion was passionate in her conviction that the rich pay less than their fair share of taxes. I didn’t understand what she meant by "fair," so I asked a clarifying question: Suppose that Jack and Jill draw equal amounts of water from a community well. Jack’s income is $10,000, of which he is taxed 10%, or $1,000, to support the well. Jill’s income is $100,000, of which she is taxed 5%, or $5,000, to support the well. In which direction is that tax policy unfair?

… I have thought about the issue in those terms quite a bit and am still unsure of my own answer. That’s why I hesitate to pronounce judgment on the fairness of tax policies. If I can’t tell what’s fair in a world with two people and one well, how can I tell what’s fair in a country with 250 million people and tens of thousands of government services.

And so it is with all the talk of "fair trade."  No one believes that trade should be unfair, or that unfair trade should be tolerated.  But those persons who bleat most loudly and most incessant about "fair trade" cannot be allowed to win arguments simply by labeling patterns and instances of trade that they disapprove of as "unfair" and then insisting that all "unfair" trade be condemned and prohibited.

Relatedly, there is no reason to take any official or quasi-official government definition of "unfair trade" as valid and then pronouncing self-righteously "X’s trade with Y is an instance of what our government defines as ‘unfair trade.’  Being unfair, therefore, this trade is illegitimate and should be prevented."

Those persons who disagree with the point of the previous paragraph should ask themselves if they would trust government with the power to distinguish "fair" from "unfair" speech and to suppress or penalize all speech declared to be "unfair."


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