… is from page 58 of my Mercatus Center colleague (and GMU Econ alum) James Broughel’s excellent new book, Regulation and Economic Growth (citation omitted):
A key insight from trade theory in recent decades has been that open trade gives firms access to a greater variety of more highly specialized production inputs. Access to such resources allows firms greater opportunity to specialize and differentiate their products. Firms and, indeed, whole industries may face increasing returns to scale for just these kinds of reasons. Therefore, regulations in the form of trade restrictions have limited the ability of firms to specialize and to take advantage of increasing returns to scale where it exists.
DBx: James here identifies one of the very many reasons why Trump and other economic nationalists who propose to use trade restrictions to make “make America great again” don’t know that they’re talking about.