Tweet [1]
… is from page 348 of my late colleague Jim Buchanan [2]‘s 1992 article “The Supply of Labor and the Extent of the Market,” as it is reprinted in volume 1 of The Collected Works of James M. Buchanan: The Logical Foundations of Constitutional Liberty [3]:
The international trade theorist would not question the proposition that a shift from the production of non-tradeables to the production of tradeables would facilitate an extension of the trading network among nations and that such an extension would make possible increased international specialization, with consequent aggregate increases in economic value. Indeed, Adam Smith’s central message might well be interpreted as a variant of this proposition. To the extent that artificially maintained political restrictions reduce the effective set of potentially tradeable goods, a removal of such restrictions will enhance the wealth of citizens.
DBx: Indeed so. Why would anyone think otherwise? But of course, many (most?) people do think otherwise. Political borders seem to work a mysterious black magic that distorts and deforms the thinking of otherwise thoughtful people, thus conditioning such people to fall for the many fallacies about trade trumpeted by the likes of Donald Trump.
Is Jones – who is a resident of, say, Kentucky – made better off if he hires a neighborhood teen to mow his lawn if the price that he pays the teen is less than the income (or the value of leisure) that Jones would forego if he, Jones, mowed his own lawn? Of course. Is Jones made better off if he hires a local barber to cut his hair rather than he, Jones, cutting his own hair? If Jones does in fact use a local barber, the answer is an unambiguous ‘yes.’ Is Jones made better off if he buys pineapples for his dessert from a pineapple grower in Hawaii rather than Jones growing his own pineapples (which, with the right kind of hothouse, he could do) or going without pineapples for dessert? Of course. And do the lawn-care workers who Jones doesn’t hire to mow his lawn, the hair-stylists that Jones doesn’t hire to cut his hair, and the blueberry or apple farmers whose produce Jones foregoes in favor of pineapples have a right to complain about Jones’s spending decisions? After all, on a very narrow reading of Jones’s actions, Jones has harmed these producers by spending his money on the outputs of others rather than on their outputs.
And who would be so pedantic to assert that we cannot say with sufficient certainty that allowing Jones to spend, or not to spend, his money in these ways is good for Jones as well as for the larger economy? Who would dare insist that Jones’s freedom to spend his money in such ways within the U.S. – and his freedom to change the ways that he spends his money within the U.S. – might be so bad for the U.S. economy that the U.S. president and his team of trade advisors should superintend all such decisions by Jones (and all other Americans) and block these spending decisions if and when these government officials believe that they’ve determined that such expenditures by Jones and other Americans are likely to damage the U.S. economy?
Very few people – even Trump’s most ardent fans – would tolerate Uncle Sam imposing, purely for geographical reasons, internal tariffs and other barriers to commerce that prevent Americans from trading peacefully with one another.
And yet, let Jones choose to buy a pound of sugar from a farmer who produces in a Caribbean nation, a roll of steel from a steelmaker in China, a bolt of cloth from a factory owner in Indonesia, or a day’s worth of lettuce-picking services from Mexico, and suddenly people become frantic that Jones’s spending decisions are paving for Americans a highway to hell.
Why? Do these people who fret about free trade not understand that foreigners who sell things to Americans do so because they also wish to buy things from Americans – either immediately or in the future? Do these protectionist-minded people suppose that Jones accurately assesses his own economic well-being when trading with fellow citizens but somehow loses this ability when trading with foreigners? What, exactly, do protectionists believe? It’s mysterious. But whatever it is, it is flawed through-and-through. These beliefs reflect a stubborn refusal to think clearly and consistently.