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Quotation of the Day…

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… is from page 217 of Douglas Irwin’s vital 1996 volume, Against the Tide: An Intellectual History of Free Trade [2]:

The benefits of specialization and trade apply at the level of the individual, the household, the community, the city, the region, and the nation. As individuals or groups or regions specialize in certain activities, the resulting larger output can be exchanged among these entities to their mutual advantage in allowing a greater fulfillment of their material wants and desires.

DBx: Understanding the fact that trade is necessary for specialization and that specialization is necessary for total economic output per person to increase [3] is not difficult, but it does require some effort. And to then draw from this understanding any normative conclusions about policy requires – in addition, of course, to a set of values – both some other positive analyses (such as of the manner in which governments actually operate [4]) as well as sound judgment of how the positive theory of specialization and trade ‘maps’ onto a reality that is necessarily far more complex and nuanced in its details than are the theories meant to make reality more understandable.

Most of the disagreement between those of us who support a policy of unilateral free trade and those persons who, for non-venal reasons, oppose such a policy, arises chiefly from one of of two sources. First, members of the latter group have yet to exert the effort necessary to understand the economics of trade. (Again, gaining this understanding requires nothing close to the intellectual feats of rocket scientists, but it does require some effort and willingness to learn.) Or, second, members of the latter group judge to be essential some or many of the details of reality that members of the first group judge to be inessential.

An example of this second source of disagreement is the often-heard objection that the citizens of country A cannot gain by trading freely with the citizens of country B if the government of B has in place policies – for example, subsidies for exporters – that differ from the policies of A. Most proponents of a policy of unilateral free trade understand that any difference in the policies of A and B is an inessential detail; while this difference might of course affect the particular pattern of trade and specialization, it does nothing to undermine the case for free trade. In contrast, many opponents of free trade find in such a difference a violation of the essential case for free trade and, thus, conclude that such a difference is good cause for protectionism in the home country.

At the end of the day, I suppose, these two sources of disagreement separating free traders from (non-venal) protectionists boil down to the first source: a simple failure of protectionists to understand with sufficient depth the positive economics of trade. To truly grasp a theory requires a quality of mind that the theory itself is incapable of imparting – namely, sound judgment of what aspects of reality are central to that theory’s domain and which are superficial.

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