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Quotation of the Day…

… is from page 221 of Douglas Irwin’s splendid 1996 volume, Against the Tide: An Intellectual History of Free Trade (links added; emphasis original to Marshall):

Alfred Marshall (1903) argued that free trade is an advantageous expedient because “it is not a device, but the absence of any device.  A device contrived to deal with any set of conditions must become obsolete when they change.  The simplicity and naturalness of Free Trade – that is, the absence of any device – may continue to outweigh the series of different small gains which could be obtained by any manipulation of tariffs, however scientific and astute.”

This important insight from Marshall applies to more than just trade.  It is child’s play for clever people and idle theorists searching for topics for academic papers to describe possibilities in which exceptions to general rules occur.  And it’s undoubtedly true that such exceptions do occur in reality.  But by their nature these exceptions to general rules are just that: exceptions.  They are relatively rare and fleeting.

Also, in the complexity of everyday social and economic reality, these exceptions, when they do occur in reality, are typically difficult to identify with sufficient certainty to justify giving government officials discretionary power to violate general rules in order to deal with these exceptions.  Not only do such officials not possess the information, knowledge, and judgment necessary for them to accurately identify actual occurrences of these exceptions, but the temptation is enormous for these officials to be pressured politically – by incumbent domestic producers and other rent seekers – into falsely ‘finding’ these exceptions.

Furthermore, as Ronald Coase, Lin Ostrom, Bruce Benson, David BeitoEd Stringham, and others have demonstrated, in real-world market-oriented economies state action is not the only means of addressing most of the problems that pop up occasionally as exceptions to the rule that markets allocate resources optimally.  Today’s “market imperfections” – today’s monopoly or monopsony power – today’s above-average (“excess”) profits – often are profit opportunities for alert and creative entrepreneurs to exploit. These market responses typically rid the market of the problems, and these market responses do so more reliably, and without as many unintended ill-consequences, as state efforts to rid the market of these problems.


An important, if largely neglected, book along these lines is Rutledge Vining’s 1984 volume, On Appraising the Performance of an Economic System.


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