At Least Try to Better Align the Costs with the Benefits

by Don Boudreaux on January 9, 2012

in Other People's Money, Seen and Unseen, Trade

Here’s a letter to one of my kindest e-mail foes; I use his real name with his kind permission:

Mr. Alan Ravitz

Dear Alan:

Thanks for your e-mail.  And Happy 2012, backatcha, to you and yours!

You and I still disagree fundamentally on trade and tariffs.  My first response to your latest note is the same as my past responses: examine the evidence.  It overwhelmingly shows that freer trade is associated with higher rates of economic growth and with higher standards of living for ordinary people.

As for your rhetorical question of “Why shouldn’t we be asking US consumers to sacrifice some so that fellow citizens can have jobs and higher wages?”….

As you know from our earlier exchanges, it’s untrue that trade over the long run reduces domestic employment and wages.  (It’s also untrue that protectionist policies are a manner of “asking” consumers to sacrifice; such policies command sacrifice.)

But rather than repeat earlier arguments, let me ask you: if it’s appropriate for some Americans to sacrifice in order to keep the current pattern of production and employment in America from changing in response to intensified foreign competition, why should the ones who sacrifice be consumers?  Why not – instead of “asking” consumers to sacrifice – “ask” workers in import-competing industries to sacrifice by taking pay cuts?  Why not also “ask” owners of businesses that are now losing market share to foreign rivals to sacrifice by accepting lower profits?  And why not ask investors in those industries to sacrifice by accepting lower, below-market rates of return on their investments?

If Americans should sacrifice in order to stymie competitive forces, what economic theory or ethical precept demands that such sacrifice be done by consumers rather than by producers – producers who are, after all, the parties who reap most of whatever benefits are generated from such sacrifice?

Sincerely,
Donald J. Boudreaux
Professor of Economics
George Mason University
Fairfax, VA 22030

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