Resources Are Not Free

by Don Boudreaux on August 21, 2018

in Myths and Fallacies, Seen and Unseen, Trade

Here’s a letter to a commenter – “XY” (male, I presume!) – at Mark Perry’s blog, Carpe Diem:

Mr. XY:

In a comment on this post by Mark Perry you attempt to ridicule his case for free trade by asking snarkily: “And how much more than 5% would our economy be growing? 6 – 7 – 8%.”

You’ve got matters backwards: with more protectionism U.S. economic growth would be slower, not faster.

Of course, you deny that free trade results in faster growth because you imagine that, were we Americans ourselves directly to produce many of the goods and services that we now import, this production would be added to that which we produce with freer trade. But you’re mistaken. Any goods and services that we produce only because of protectionism come at the expense of goods and services that we would produce in the absence of protectionism. And the amount of output that protectionism would prompt us to produce would be less than the amount of output that protectionism would prevent us from producing.

Per-capita economic growth is possible only if worker productivity rises. More and better tools, worker skills, and infrastructure raise worker productivity. And for the same reason so too does free trade. It does so by ensuring that as few resources as possible are used to produce any given quantity of goods and services. Resources released from having to produce goods and services that we import are resources made available to produce outputs that would otherwise be impossible to produce. The result is that the same number of workers produce more output.

In summary, your assertion that economic growth is fueled by protectionism makes no more sense than would the assertion that economic growth is fueled by the arbitrary destruction of tools, skills, infrastructure, and productive resources.

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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