… is from page five of the Mercatus Center’s hot-off-the-press 2020 reissue of the late Ludwig Lachmann’s 1986 book, The Market as an Economic Process:
No agent can enter a market, or extend his range of activity within one by making offers to other agents, without disrupting some market relationship presently existing between them and others. This fact is of course of the very essence of competition.
DBx: This insight is seemingly so obvious as to be trite. Yet failure to grasp it is typically at the core of arguments made by protectionists, and even by most free traders, that trade has “losers” as well as “winners.”
The fact that increased international trade disrupts some existing exchange relationships is, of course, undeniable. Also undeniable is the fact that sellers whose relationships with buyers are so disrupted by trade as to cause these sellers to lose sales, or to have to lower their prices, are made worse off than they would be had trade not increased. It’s this worsening in some particular sellers’ economic fortunes that people have in mind when they say that “trade has losers as well as winners.”
But as I’ve argued before, such talk is highly misleading. Whatever truth there is in the observation that trade “has losers as well as winners” is a truth not unique to trade. It’s a truth that holds for all economic change. And so to single out trade in this fashion is to imply a non-existent reality – namely, that increased international trade uniquely disrupts existing patterns of buyer-seller relationships.
Put differently, if some important point is conveyed by observing that “increased trade with foreigners has losers as well as winners,” then an equally important point is conveyed by saying that “increased trade with women has losers as well as winners” or that “increased trade with Episcopalians has losers as well as winners” or that “increased trade with gay people has losers as well as winners.” Whatever truth there is in saying that “increased trade with foreigners has losers as well as winners” exists in identical statements made about increased trade with members of any other classifications of trading partners.
And so because saying that “increased trade with foreigners has losers as well as winners” implies, or at least suggests, that increased trade with members of any other classification of trading partners does not have losers as well as winners, saying that “increased trade with foreigners has losers as well as winners” is misleading to the point of being mistaken.
Also, precisely because increased trade with members of any conceivable classification of trading partners has such losers as well as winners, if it is appropriate (as many people believe) to allow such increased trade only if it passes some cost-benefit test administered by econometricians, politicians, or thinktank wags, then increased trade with members of any other group should also be conditioned on it passing the same cost-benefit test. Let’s have econometricians, politicians, and thinktank wags offer their assessments of the justice and cost-benefit outcomes not only of increased trade with foreigners, but also of increased trade with redheads, increased trade with short people, increased trade with people 56 and older, increased trade with Denver Broncos fans, and increased trade with lesbians of Italian descent.
Anyone who recognizes the absurdity of calling for any of these last-listed cost-benefit tests should recognize the equal absurdity of calling for a cost-benefit test of increased trade with foreigners.
