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Freedom Has Positive Externalities

Here’s a letter to a new Cafe Hayek patron who is disappointed that this blog is not as conservative as his friends led him to believe.

Mr. Stan Harman

Dear Mr. Harman:

Thanks for your e-mail.

In your criticism of my support for free trade you note that “just a small hand full of Americans export to other countries.”  This criticism fails for several reasons.

First, the value of trade is not found in exports; it’s found in imports.  Imports are the ultimate reason people trade, while exports are merely the means of acquiring imports.  And the fact is that hundreds of millions of American buy imports.  These Americans benefit from the lower prices, improved quality, and wider product selection that more trade brings to them as consumers and, in many cases, also as producers who use imports as inputs in their own production here in the U.S.

Second, while it’s true that only a handful of Americans export their outputs directly to foreigners, the number of Americans whose outputs are eventually bought by foreigners, or whose occupations or jobs exist only because other Americans export to foreigners, is huge.  The manager of the Starbucks near Merck’s headquarters in New Jersey, for example, does not herself sell directly to foreigners, but because much of Merck’s sales are to foreigners, that manager might not have her current job were it not for Merck’s exports.

Third and more generally, it’s erroneous to suppose that freedom to do some activity (such as export) is valuable only to those persons who directly do that activity.  Do you believe that freedom of the press is valuable only to the press?  Do you believe that freedom of religion serves only those with religious faith?  Do you believe that freedom of speech is of no benefit to people who are mute?  I trust that your answer to each of these questions is ‘no.’  And so freedom to trade internationally – by diminishing in domestic markets the incidence of monopoly power and cronyism – serves both the economic and the political interests of nearly everyone.

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