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Policy, Trade, and the Long-Run

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Today is the fifth anniversary of my first blog post at Cafe Hayek [2].  I stand by it still.

April 19, 2004

Still alive in the long-run

Don Boudreaux

Trade’s documented effect on employment is clear: freer trade does
not reduce the aggregate level of employment (and nor does it increase
it). Skeptics of free(r) trade frequently respond “Sure, in the
long-run new jobs will be created. But what about workers who are
unemployed now? The long run is no good to them. Even an economist,
John Maynard Keynes [3], recognized that ‘in the long run we’re all dead.’”

This justification for protectionism – that protectionist policies
are justified because they diminish pain and anxiety today, while the
costs of protectionism emerge only in the less-significant tomorrow –
is faulty on a variety of fronts. Perhaps the biggest flaw of this
justification is that it’s a lie. No one really believes that short-run
consequences should take precedence over long-run consequences.

You see, people who really believe that long-run effects should be
ignored or significantly discounted in favor of short-run effects
would, in addition to supporting protectionism, support also the
following policies:

– eliminating environmental laws (because these impose substantial
costs today in return for benefits that arise mostly in the long-run);

– Uncle Sam’s current, unprecedented budget deficit (because the
benefits of the deficit are enjoyed today while payment for today’s
benefits need not be made until tomorrow);

– eliminating Social Security (which forces people to forego consumption today in favor of the long-run).

If no sensible person accepts the mantra “in the long run we’re all
dead” as an argument against environmental laws and efforts to reduce
the budget deficit, why does this mantra have credence in debates over
free trade?

Posted by Don Boudreaux in Trade [4] | Permalink [2]

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