The Benefits of Trade

by Don Boudreaux on October 24, 2007

in Economics, Trade

My GMU Economics colleague (and founder of the indispensable Econ Journal Watch) Dan Klein here explains why economists left, right, and center strongly support free trade.  Here’s part of Dan’s message:

Free
international trade increases the extent of the market. International
buyers and sellers thicken the market, and make the markets for
specialized goods more competitive and reliable. That’s what makes
further specialization justified in the minds of entrepreneurs. They go
forward with specialization, and they enhance productivity. They make
things used by people the world over.

That’s
why we all gain from increases in the extent of the market. Large,
thick, international markets invite the productivity investments, and
the result is better stuff at lower prices for all of us.

Today,
the extent of the market is vast. That’s one reason why humanity is
better off than in the past. People in China are part of a great chain
of beings, a chain that works to make stuff for humanity. Humanity
would be happier still if the market were free of protective duties and
quotas.

Comments    Share Share    Print Print    Email Email

  • Brandi

    I like that you are discussing the benefits of trade because I recently attended a lecture by Dr. David Schmidtz at the Mesa Community College; he talked about many interesting things I found it to be most on the effects of trade. One thing that got my mind going was how he said "no one will live long enough to make a pizza". As he explained himself he said you must grow your own harvest and anything you might need, and not just buy everything. This statement really made me wonder and open my eyes to how the world and trade system seems works. How would are world work without trade and services? Dr. Schmidtz also talked about Adam Smith and the invisible hand. Before this lecture I did not know much about Smith or what he developed. Dr. Schmidtz gave an example by stating individuals will always attempt to get the best deal for themselves, at least in their minds, creating the most reward for everyone. This concept makes sense to me, but I did some reading on Adam Smith and he felt so strongly about the invisible hand creating more utility for all participants, that he said that regulation would never be needed in a free market due to this invisible hand. What is your point or view on Adam Smith and the invisible had? Do you agree With Dr. David Schmidtz or have a different view? I would be very interested in reading what you think.


  • I listened to a lecture by Dr. Schmit which he had said, “No one will live long enough to make pizza from scratch.” This view of his is entirely true. Being a philosopher he said it perfectly. It isn’t considered making a pizza if you buy the flour, salt, ingredients, etc. He meant it to be said society does not grow their own wheat or yeast, for the most part. We rely on the people who grow it for us so we can buy it later to satisfy our needs. This is a demand by the people to have ingredients to make whatever it is they need. The producers satisfy their needs by growing it and putting it out on the market. His view is that no one will live long enough to make pizza from scratch. We all need to trade or buy our goods from one another to produce a certain need. Without trade we wouldn't survive.


    To Don Boudreaux,

    Do you believe our economy will ever get to the point where we wouldn't need to trade anymore? Where we can produce and sell everything on our owns without trading from anyone outside the US?

  • I've forwarded the Klein article quoted above to almost everyone that I know. Hope everyone else does likewise. See the link below for my take on the same article.

    I LOVE this site ! Thanks for all you do, Cafe Hayek !


    http://thewhitedsepulchre.blogspot.com/2007/10/where-right-left-and-center-agree-free.html


blog comments powered by Disqus

Previous post:

Next post: