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Quotation of the Day…

… is from the abstract of Solomon Polachek’s and Carlos Seiglie’s important 2006 paper, “Trade, Peace and Democracy: An Analysis of Dyadic Dispute“:

At least since 1750 when Baron de Montesquieu declared peace is the natural effect of trade, a number of economists and political scientists espoused the notion that trade among nations leads to peace….  The greater two nations’ gain from trade the more costly is bilateral (dyadic) conflict.  This notion forms the basis of Baron de Montesquieu’s assertion regarding dyadic dispute.  This paper develops an analytical framework showing that higher gains from trade between two trading partners (dyads) lowers the level of conflict between them….  Crosssectional evidence using various data on political interactions confirms that trading nations cooperate more and fight less.  A doubling of trade leads to a 20% diminution of belligerence.

The precise number is less important than is the nature and direction of the effect.  Perhaps a doubling of trade leads to something more or something less than a 20% diminution of belligerence.  Econometricians and statisticians can entertain themselves and their specialized audiences for years with different specifications of the model and with alternative ways to measure – and to gather data on – ‘belligerence,’ ‘trade, and other relevant variables.  But the proposition that increased trade is a force for – if, sadly, not a guarantor of – peace can hardly be doubted.

When people trade they must engage with others, mostly strangers; when people trade across political borders they must engage with greater numbers of strangers still.  This trade, though, makes the strangers less strange to each other, because each learns better what the other is like and what the other likes and dislikes.  Trade is peaceful, and so it reveals to each trader the other’s humanity; war reveals the other’s brutality.  Each party to every trade gains; with war, one party certainly losses, and even the ‘winner’ might well, in the end, have lost so much to have made the entire activity a losing proposition.

Trade obliges each participant to empathize, to some degree, with the other; war obliges each participant to demonize the other.

Trade increases our dependence on each other – and even base self-interest dictates that it’s a bad strategy to terrorize your customers or to firebomb your suppliers.  Trade, like war, incites retaliation.  Yet the retaliation incited by trade – retaliation such as more exchange, more hiring, and greater effort to match competitors’ offers – is not only mutually productive and peaceful, it nurtures (because it requires) our intelligence and rationality.  The retaliation incited by trade is positive-sum and intelligent: “I’ll make you an even better deal if you make me an even better deal.”  In stark and horrible contrast, the retaliation incited by war is mutually destructive and violent; it nurtures (because it requires) our capacity to look distortingly upon other human beings as monsters.  The retaliation incited by war is negative-sum and stupid: “You killed someone whose passport is issued by the same agency that issues my passport, so I’ll kill someone whose passport is issued by the same agency that issues your passport.  That’ll teach you!”

I applaud any move to make trade freer, including, of course, between people living in America and people living in Cuba.