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The Economic Case for Free Trade is Not a Narrow Cost-Benefit One

Here’s a letter to a new and thoughtful correspondent:

Mr. Dave Bartkiewicz

Mr. Bartkiewicz:

Thanks for your e-mail.  The economic case for a policy of free trade is indeed consequentialist; any economic case for or against any policy is necessarily a case that focuses on as full a range of real-world consequences as can reasonably be made ‘visible’ with economic theory.  As so, yes, you’re correct that the economist’s case for free trade is built upon the economist’s recognition of consequences that the economically uninformed person doesn’t recognize.

But you’re incorrect to interpret the economic case for free trade as resting on a narrow cost-benefit calculus that finds that the value of the ‘winners’’ gains exceeds the value of the ‘losers’’ losses.  The economic case for free trade is built on ground far more solid than that.  It’s built on the recognition that over time everyone gains from free trade in the same sense that everyone gains from laws against thievery.

The economic case against thievery is not that the gains to today’s thieves happen to fall short of the losses suffered today by the thieves’ victims.  Instead, the economic case against thievery is that the more successful is a society at preventing thievery, the more prosperous will everyone that society be over time.  Indeed – and this next part is vital – even would-be thieves would prefer to live in a society in which thievery is outlawed than to live in one in which it is permitted.  The very same economic and ethical calculus that condemns thievery condemns protectionism.  If a person could choose to live in either Protectionania or Freetradeia, but when choosing (1) doesn’t know what his or her occupation will be in either society, (2) doesn’t know what his or her political clout will be in either society, and (3) understands the basic economics of trade, the economist predicts that that person will choose Freetradeia.  And with good consequentialist reason.

A society will be poorer the greater is the number of its citizens who are allowed to enrich themselves by taking the property of fellow citizens.  This reality is true whether the taking is done in the form of pickpocketing and house burgling or in the form of protective tariffs and import quotas.

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