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Fair Trade is Good

Posted By Don Boudreaux On October 13, 2010 @ 9:07 am In Complexity & Emergence,Seen and Unseen,Trade | Comments Disabled

In my latest column in the Pittsburgh Tribune-Review, I support fair trade [1].  Here are my concluding paragraphs:

Yet even for those rare jobs that have no direct connection with trade, the wages earned by their workers are higher because of trade. By keeping prices down, and outputs and product varieties up, trade makes every dollar earned go further. This fact means that the attractiveness of any particular job — even one that does not depend upon sales to foreigners or on inputs or investments supplied by foreigners — is raised by trade.

Put differently, among the very reasons that losing a particular job to trade is so traumatic is that that job is made so attractive by trade.

Of course, each of us would love to have our own job guaranteed while we simultaneously exercise the consumer sovereignty that enables us to enjoy a high standard of living. But to guarantee your job requires a sacrifice of some of your neighbor’s consumer sovereignty — just as a policy that guarantees your neighbor his job requires a sacrifice of some of your consumer sovereignty.

The only fair policy — and the only one that ensures long-run prosperity for all — is a policy in which no one’s consumer sovereignty is ever sacrificed.

Keynesians are fond of claiming that advocates of unconditional savings commit the fallacy of composition.  I’m pretty sure that this Keynesian claim is mistaken.  But here’s a real instance of the commission of the fallacy of composition: “Monopoly power increases the wealth of producers in industry X; therefore, if every industry is monopolized, we’ll all be wealthier.”

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[1] In my latest column in the Pittsburgh Tribune-Review, I support fair trade: http://www.pittsburghlive.com/x/pittsburghtrib/opinion/columnists/boudreaux/s_703961.html

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