≡ Menu

Voluntary Trades Are Each A Cost-Benefit Test

Here’s a letter to a new Cafe Hayek reader:

Mr. Charlie Naumov

Mr. Naumov:

Thanks for your e-mail.

Advising me to “be less absolute” in defense of free trade, you ask what objection I have to “using [a] cost-benefits test to resolve if, when and with whom trade liberalization is justified.”

I can list at least a dozen economic – and an additional dozen ethical – objections to the practice of keeping international-trade restrictions in place unless and until some econometricians somewhere conclude that easing these restrictions is justified.  In the interest of brevity, however, I’ll here offer only one economic objection and one ethical objection to your proposal.

First the economic objection: there is nothing unique about competition that comes from foreign producers that justifies treating it differently from competition that comes from domestic producers.  Prohibiting American consumers from purchasing goods and services from foreign sellers until and unless such purchases pass a cost-benefit test administered by a government agency makes no more sense than prohibiting American consumers from purchasing goods and services from American women – or from American blacks, or from American Catholics, or from green-eyed Americans, or from gay Americans, or from Americans with Slavic surnames, or from Americans living in Florida – until and unless such purchases pass a cost-benefit test administered by a government agency.

Free trade, in fact, is an on-going series of cost-benefit tests, with only those trades that ‘pass’ occurring.  When domestic consumers spend their own money on particular imports, those trades pass the only cost-benefit tests that are reliable and that matter – namely, those administered by each of the consumers who determined that the benefits he or she stands to receive from the purchased imports are worth the costs of those imports.

Now the ethical objection: it is no one’s business but my own how I spend my money on peaceful pursuits.  My money is mine, so just as no foreign producer has a privileged claim on it so, too, does no domestic producer.  It is my right to spend my money as I – and as I alone – choose.  And of course what’s true for me is true for every other adult.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercator Center
George Mason University
Fairfax, VA  22030


I don’t oppose cost-benefit assessments or even cost-benefit tests.  But I do oppose careless proposals to use such tests in inappropriate ways and in inappropriate contexts.