Arnold Kling  

Another Parable

Not Fannie Mae!... Monetary Theory and Policy...

Greg Mankiw writes,

A 2006 poll of Ph.D. members of the American Economic Association found that 87.5 percent agreed that “the U.S. should eliminate remaining tariffs and other barriers to trade.”

The benefits from an open world trading system are standard fare in introductory economics courses...The basic lessons can be traced back to Adam Smith of the 18th century and David Ricardo of the 19th century

As an argument for free trade goes, this one is weak. In effect, Mankiw is saying, "Economists are for free trade, so you should be, too."

The challenge is to make an argument for free trade in terms that everyone can understand. Perhaps a parable is in order. Perhaps we could start with "Once upon a time," and describe an economy that works like ours today. But we decide that free trade has gone too far.

First, we enact national protectionism. Then, the "buy local" movement catches on and leads to effective elimination of the Constitutional provisions against trade barriers within the United States. Cities and states start enacting tariffs, quotas, and trade subsidies.

Finally, the movement moves toward its logical conclusion: only buy products made in your own household. People give up computers, cars, packaged food, electricity, and plumbing. We go back to subsistence farming and hunter-gathering.

Comments and Sharing

CATEGORIES: International Trade

COMMENTS (15 to date)
Ironman writes:

Arnold - your parable is a good start. However, as it focuses on the destructive consequences of abandoning free trade, it needs a complementary parable to show the positive side of the argument and really seal the deal.

Since you left off at "subsistence farming and hunting-gathering," might I suggest picking up the constructive side of the argument with a couple of cavemen who discover the benefits....

Gary Rogers writes:

This is basically what happened in 1929 and 1930. Economists almost universally warned about the dangers of protectionism the Smoot-Hawley tariff act but populist politicians sold it using fear tactics based on the losing jobs to foreigners. The act was passed and the rest is history. Is this still taught in high school history classes?

The problem with using using a real event, though, is that you can pick apart the argument by pointing out details and claiming they change the situation. I am not sure a parable makes the argument stronger, but it does help someone to better visualize cause and effect.

Unit writes:

The Choice -- by Russ Roberts?

John Maxwell writes:

You should look at "Biblical Economics in Comics". It explains the advantages of free trade in very simple terms. I was surprised at how effective it was in convincing my children of the advantages of a free market.

jason braswell writes:

As a person who has spent way too much time discussing free trade with skeptics on the internet, my experience has been that telling parables like the one suggested almost invariably causes my interlocutors to accuse me of being an ivory-tower academic whose fairy tales do not apply to the "real world."

fdfs writes:

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RL writes:

AK: "As an argument for free trade goes, this one is weak. In effect, Mankiw is saying, "Economists are for free trade, so you should be, too."

Yes. A much better argument is: "Economists are for free trade, so you must be irrational if you're not." (Right, Bryan? :-> )

Dr. T writes:
Is this (Smoot-Hawley tariff) still taught in high school history classes?
Ha, ha! Surely you don't believe that high schools waste any time on something as unimportant as failed populist economic policies? No, they spend their time learning how Native Americans were crucial to colonists and explorers, how 'people of color' made gigantic contributions to early 19th century culture and literature, and how unchecked capitalism nearly ruined our economy in the late 1800s. My daughter (now a college freshman) told me she never heard of Smoot-Hawley, but she did learn about the importance of free trade (multiple examples given) in her Advanced Placement economics class (yeah!).

Looks like Dr. T doesn't want his children to understand the varying cultures in the melting pot. If you actually cared to notice, the reason why your daughter reads all that junk by "people of color" is because of positive externalities - your child can understand the cultural differences between her and those "people of color." Actually, we should teach her how to love and embrace white culture like that isn't already implanted in her brain.

I think Arnold makes a good point about Mankiw's juvenile argument but it is proper to note that his blog is aimed at people reading his textbook. His textbook goes into great detail about the benefits of trade.

Brandon Berg writes:

Finally, the movement moves toward its logical conclusion: only buy products made in your own household.

Hell if I'm going to give my sister a job that I could keep for myself.

Matt writes:

"Adam Smith of the 18th century and David Ricardo"

Mankiw, typical professional tradesman, only cites fellow tradesmen.

What was Christopher Columbus's thought on world trade in the 15th century?

Mason writes:

Read Atlas Shrugged lately? (I know you have, and from what I recall you weren’t a fan, but if you’d care to revise your position I won’t hold it against you)

“As an argument for free trade goes, this one is weak. In effect, Mankiw is saying, "Economists are for free trade, so you should be, too."”

Don’t let Bryan hear you.

hutch writes:

Some have already mentioned it, but Mankiw's argument is fairly consistent with Bryan. Did I read/hear something of his that said if we aren't knowledgeable in a particular subject we should just be agnostic with respect to it? I don't know jack about 19th century spanish lit so I have no opinions about it. Because I don't, I have to trust those who do know. They can try to explain it to me, which I may or may not be interested in listening to, but in the short term I shouldn't try to go teach a class at the local community college (or even worse try to affect public policy).
I think Mankiw's argument isn't to try to convince people that free trade is best. It's to convince people to slow down and trust the experts until they know a little more about the topic themselves.

Lord writes:

Shouldn't they also learn how necessary it is for the government to raise taxes as well and tariffs are quite efficient for collection? Dealing with half an issue is always misleading.

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