International Trade Is Not Properly Analogized to Sports or to War

by Don Boudreaux on January 28, 2011

in Myths and Fallacies, Trade

Here’s a letter to the Washington Post:

E.J. Dionne interprets Pres. Obama’s State of the Union summons for government to ‘invest’ more in “our free-enterprise system” as the president telling Americans that “without smart and active government, China will leave us in the dust” (“Obama finds a new angle to reach old goals,” Jan. 27).

This message is surely the one that Mr. Obama meant to convey.  But the message is misleading, based as it is on the popular fallacies that countries are like corporations, and that international trade is akin to a sporting event in which there are winners and losers.

As explained by a Nobel-laureate economist who wrote an entire book denouncing the notion that when countries trade with each other they compete against each other, “One of the most popular enduring misconceptions of practical men is that countries are in competition with each other in the same way that companies in the same business are in competition….  [I]nternational trade is not about competition, it is about mutually beneficial exchange.”

Are these the words of “conservative” economist Milton Friedman?  No.  F.A. Hayek?  Again, no.  They are the words of arch-”Progressive” Paul Krugman.*

Sincerely,
Donald J. Boudreaux

*Paul Krugman, “What Do Undergrads Need to Know about Trade?” American Economic Review, May 1993; reprinted in Paul Krugman, Pop Internationalism (Cambridge, MA: MIT Press, 1996), pp. 117-125.  The quotation in the letter is on page 120.

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