… is from page 10 of Pierre Lemieux’s excellent essay “Trade and Adjustment Costs,” which appeared in the Fall 2016 issue of Regulation:
Standard economic theory proves that free trade creates net benefits. As economics students know, the geometric proof is beautiful and compelling, but the gist of it is not difficult to grasp. Consumers gain because they pay lower prices, and they gain more than domestic producers lose. If this were not the case, domestic producers could bribe consumers, through lower prices, to patronize their own products instead of their foreign competitors’.
DBx: One of the many economically uninformed and mistaken claims frequently issued by protectionists in prosperous countries such as the United States is that workers in high-wage countries are at a disadvantage when competing against workers in low-wage countries. Not only do these protectionists forget – if they ever knew – that, because wages reflect worker productivity, a high-wage-and-high-productivity worker is not at a disadvantage relative to a low-wage-and-low-productivity worker. Protectionists also are unaware that they are, in effect, complaining that workers in high-wage countries generally have very good income-earning alternatives relative to workers in low-wage countries. (To understand why workers in high-wage countries generally have very good income-earning alternatives, begin by realizing that employers of workers in high-wage countries do not pay high wages out of a spirit of philanthropy.)
