A lot of people who think they love freedom balk at gender crossing. Conservatives who read my writing on the glories of free enterprise are often on board—even enthusiastic about reading such sentiments from a woman—right up until the moment that they learn my backstory.
Nafta went into effect on Jan. 1, 1994, and brought commitments to competition, privatization and foreign capital. Cross-border commercial relationships required improvements in civil law. For the first time in more than six decades, Mexico had the fundamentals of a market economy.
As Mexican economist Luis de la Calle and political scientist Luis Rubio show in their 2010 book, “Mexico: A Middle Class Society,” today’s consumption patterns indicate that the nation is no longer “poor.” But this is about more than an increase in creature comforts for a wider number of Mexicans. It is also about the spread of middle-class values in education, civil rights and culture.
… is from page 306 of James Doti’s and Dwight Lee’s Introduction to Section 8 (“International Trade”) of their excellent 1991 collection, The Market Economy: A Reader:
The benefits of free trade are readily acknowledged for trade that occurs within a nation. Indeed, the success of the U.S. Constitution as compared to the earlier Articles of Confederation was in large part due to the Constitution’s adherence to free trade principles that broke down government-imposed trade barriers between states. Yet, while free trade among exchanging parties within a nation is a right generally protected by a nation’s laws, free trade among nations rarely exists.
The divergence in policy regarding inter and intra nation trade policies seems even more puzzling in light of the great abundance of economic analysis from [David] Ricardo to the present that in the main shows clear and significant gains from free trade among nations.
DBx: What Jim and Dwight say. (I add only that the abundance of economic analyses showing the productive powers of free trade began to accumulate even before Ricardo (1772-1823) wrote. Adam Smith (1723-1790) famously, brilliantly synthesized and firmed-up much of this analysis in 1776 – but even Smith was not the first on this front.)
Here’s a letter to a new correspondent who writes that he is “impressed” by a recent letter in the Wall Street Journal by a Mr. Scot Phelps of New York. (In contrast, I was not impressed by Mr. Phelps’s letter.)
Mr. Chris Indovino
I did indeed read Scot Phelps’s Wall Street Journal letter in which he argues that government subsidization of low-skilled workers’ “housing, food, medical care, and transportation” enables employers of such workers to pay them less than their “true” value. I didn’t respond to it because I had nothing to say about such an economically unmoored argument that I’ve not said in the past. (See also this EconLog post by my colleague Bryan Caplan.) The central economic point is this: the welfare programs to which Mr. Phelps alludes (with the possible exception of transportation subsidies) reduce the supply of labor and, thus, push wages up. Far from employers being subsidized by such welfare programs, employers of workers who receive these government benefits are obliged, as a result, to pay wages that are made artificially high.
But to show just how deeply confused this Mr. Phelps is, let’s pretend that he’s correct to insist that welfare programs artificially reduce wages. Mr. Phelps then asserts that “Failure to pay a living wage gives consumers artificially low prices and increases corporate profits.” Because nearly all employers of low-skilled workers operate in intensely competitive industries such as retail and food service, workers’ artificially low wages would indeed result in artificially low prices for consumer goods, but not in increased corporate profits. The ability to hire workers at artificially low wages would attract new entrants into these markets, as well as cause existing firms to expand their outputs, until the rate of profit earned by employers of these workers is no higher than it would be if wages were higher. That Mr. Phelps is oblivious to this reality is sufficient reason to dismiss his economic analysis.
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
One of the important applications of the principle of comparative advantage is international trade. To an economist there is nothing really special about international trade; individuals make trades when both of them expect to benefit, whether they live across the street, in different states, or in different countries.
DBx: This short passage is about as good a summary of the economics of international trade as there can be. Trade is trade, and there’s nothing at all about political borders that causes the nature or consequences of trade to change. The essence of the benefits from trade that arise from trading with people across town arise no less surely from trading with people across an ocean. And any problems commonly identified as reasons to restrict or to stop trading with people across an ocean arise no less surely from trading with people across town.
I especially like the way David Boaz opens this passage. International trade is simply one application of the principle of comparative advantage. Each and every individual (person or firm) enjoys a comparative advantage in producing some service or good over nearly every other individual and firm on the planet. Comparative advantage is no less an essential part of the reason why you specialize as you do and trade with some of the people in your town as it is a part of the reason why you specialize as you do and trade with some of the people in China.
It’s regrettable that David Ricardo introduced the principle of comparative advantage in the chapter of his Principles titled “On Foreign Trade” and used for his illustrative example two countries – England and Portugal – as the two trading parties. In fact, comparative advantage exists at the level of the individual producer – worker or firm – and not originally or in any unique way at the level of the country. Whatever comparative advantage we might sensibly speak of a country having is nothing other than the composite comparative advantages of the producers within its borders. (When I teach economic principles, the very first piece of formal economic analysis that I share with my students is the principle of comparative advantage. I use this principle to reveal an essential part of the reason why individuals specialize and trade – and, so, in my example the two specialists are individuals, not countries.)
As I’ve argued before, I suspect that the world would be a better place had there never been a speciality in economics called “international trade.” The existence of such a speciality conveys the mistaken impression that there is something unique about the essentials of international trade compared to purely domestic trade. But no such uniqueness exists. For another example, consider that the same reciprocal demand, or “offer,” curves that every student of international trade encounters can be used with no less validity and good effect to explain trade between blue-eyed people and brown-eyed people of the same country as they can be used to explain trade between the people of the United States and the people of Guatemala.
I place the balance of international payments data in the class of statistics for which the world would have been a happier place had the data never been devised, popularized (in a rough way), and used by policy makers. This last aspect is the crux of the matter because the balance-of-trade data in particular can scarcely help but serve as a rationale for pernicious policies, such as export subsidies and tariffs, quotas, and other official restrictions on imports. In short, the data help the government establish and maintain policies that enrich the privileged few at the expense of the unconnected many, including consumers in general and producers who rely on imported raw materials and components, as many do these days.
… is from page 6 of Benjamin Rogge’s October 1962 speech titled “The Case for Economic Freedom,” as this essay is reprinted in A Maverick’s Defense of Freedom, the 2010 collection of Rogge’s essays that is edited by Dwight Lee:
In other words, economic freedom is part of total freedom; if freedom is an end in itself, as our society has traditionally asserted, then economic freedom is an end in itself, to be valued for itself alone and not just for its instrumental value in serving other goals.
If this thesis is accepted, there must always exist a tremendous presumption against each and every proposal for governmental limitation of economic freedom. What is wrong with a state system of compulsory social security? It denies to the individual his freedom, his right to choose what he will do with his own money [and] resources. What is wrong with a governmentally enforced minimum wage? It denies to the employer and the employee their individual freedoms, their individual rights to enter into any voluntary relationship not involving force or fraud. What is wrong with a tariff or an import quota? It denies to the individual consumer his right to buy what he wishes, wherever he wishes.
An idea has taken root “that you’re entitled to certain things, that you don’t necessarily have to earn them,” he [Sowell] says. “There’s a belief that something’s wrong if you don’t have what other people have – that it’s because you’re ‘disadvantaged.’ A teenage dropout mother is told she has a disadvantage. But if you’re going to call the negative consequences of chosen behavior ‘disadvantage,’ the word is corrupt beyond repair and useful only for propaganda purposes.”
I want the people of America to be able to work less for the government and more for themselves. I want them to have the rewards of their own industry.
How radical. How humane. How very wonderful.
As you watch this short video of President Coolidge making the case for what he called greater “economy” of government and lower taxes, note his use of the words “freedom” and “liberty.” He seems to have understood freedom better than do most of today’s politicians (a low standard, to be sure), and Coolidge certainly was more committed to it than are any but a vanishingly small handful of today’s so-called “leaders” (again, alas, another terribly low standard).