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Trade is Trade

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Commenting on this recent post [2], Josh writes:

[H]ow about [Ian] Fletcher’s cited argument (if I may rephrase, and nevermind his ulterior reasons for making it) that the disemployment cost (borne by few) may somehow exceed the cost-of-consumption savings experienced by many?

In pure dollars, the cost to the few can’t exceed the savings of the many, perhaps, but we might agree that one person’s loss of $40K earnings has more ‘weight’ than, say, 40,000 people saving $1 each. If I’m not being too strange, the effect of money on happiness is greater the more concentrated it is (I think of it like gravity – a constant force, whose effects are more noticeable in areas where mass is concentrated than where it ain’t).

I don’t think it is safe to ignore this subject. How do we deal with it?

Three replies.

First, the number of slaves in the American south prior to 1863 was much larger than the number of slave owners.  So, the benefits of the abolition of slavery (accruing mostly, of course, to the freed slaves) were spread much thinner than were the costs.  Should the costs of abolition to the slave owners have been weighed more heavily than the benefits to freed blacks from abolition?  Perhaps the costs to the former slave-holders was greater according to some ‘scientific’ calculus than were the gains to the freed slaves.  Can anyone prove that the gains from abolition outweighed the costs?

Even asking such questions is, at best, an exercise in pedantry – and, more realistically in the case of the abolition of slavery, obscene.

Second, and relatedly: I propose that Congress immediately impose a one-time $1 head tax on every man, woman, and child in the U.S.  The typical American household would, as a result, see its tax bill for 2011 rise by less than $3.00 – peanuts; they’ll never miss it.  I further propose that Uncle Sam take, from the resulting $310 million in revenue, $60 million to cover whatever expenses he incurs to administer and collect these taxes.  The remaining $250 million will be turned over to me, Don Boudreaux.

I guarantee that the joy I would experience from suddenly finding my net worth higher by $250 million will greatly exceed the unhappiness any American suffers as a result of paying this one-time tax.  I’m also quite confident that my immensely elevated happiness would be greater even than the total – ‘aggregate’ – amount of felt unhappiness suffered by Americans as a group as a result of this tax.

So should this tax be implemented?  I’m pretty sure not.  And the reasons (I leave it to you to spell them out) are among the reasons why the relative ‘concentratedness’ of the costs of freer trade are no argument against free trade.

Third (and most importantly), there’s nothing unique about international trade in raising the issue that Josh worries about.  Any economic change raises the same issue.  Consumers choosing to abandon the Atkins diet (which was all the rage about ten years ago) eliminates some jobs on cattle ranches and pig farms; the rise of MP3 players reduces the demand for clerks in music stores and for workers producing compact discs; the Internet and Amazon.com eliminated the jobs of many bookstore executives and clerks; the advent of e-books threatens to put even more book-store workers (and probably warehouse workers for even Amazon) out of jobs; improvements in the technologies for recycling cardboard and paper threaten the jobs of some lumberjacks…..  The list goes on and on and on.

It’s fine to have a debate about the merits of consumer sovereignty, of competition, of innovation, and of market-driven economic change.  But if, and as long as, we accept as a matter of course that these things are on net greatly beneficial for changes in purely domestic patterns of trade and other economic activities, we do – and ought to – treat changes in trade that happens to take place across political borders with the very same strong presumption that the gains to consumers justify losses to workers.

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