What’s the Difference?

by Don Boudreaux on February 1, 2017

in Myths and Fallacies, Trade

Here’s a letter to a new correspondent:

Mr. Wilson Shannon

Mr. Shannon:

You ask how I can “continue to regard [myself] scientific” given my “failure to consider the differences that mark off foreign trading from domestic trading.”

What differences do you have in mind?  I can think of none that are economically relevant.  I can think of no economically relevant differences that cause voluntary trades between people who live in different countries to be any less likely to be mutually advantageous than are voluntary trades between people who live in the same country.  I can think of no differences that render increased competition from foreign firms to be any less economically advantageous for the domestic economy than is increased competition from domestic firms.  I can think of no differences that cause the pain of losing a job to a foreign competitor to be any more intense than is the pain of losing a job to a domestic competitor.

To consistently support free trade with foreigners is no less scientific than is, say, to consistently support free trade with red-headed people. Just as there is no reason to suppose that trading with red-headed people is different from trading with non-red-headed people, there is no reason to suppose that trading with people who live abroad is different from trading with people who live in the home country.  Indeed, what is unscientific is the all-too-common, unreflective assumption that trading with foreigners does differ in economically relevant ways from trading with fellow citizens.

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

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