Bryan Caplan  

Trade War: Boudreaux's Case for Pacifism

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Last week, Don Boudreaux praised my attempt to re-explain the Law of Comparative Advantage, but his latest post on the same theme puts mine to shame:

If governments fought real wars like they fight trade wars, here's how the transcript of the communiqu├ęs between the leaders of two warring nations would read:

Leader of Absurditoptia (A): I say, leader of Stupidia - we demand that you stop occupying that contested strip of land.  If you refuse, we'll have no choice but to shoot our own citizens.

Leader of Stupidia (S): You don't scare us!  That land is ours.  And if you do kill some of your own people, make no mistake that we will immediately - and just as cruelly - commence to killing our own people.  Courage is our national motto!

(A): Ha!  You're bluffing.  But I'm not.  I've just courageously ordered my troops to mow down in cold blood ten percent of my fellow countrymen.  Take that!

[...]

Sure, Henry George said almost the same:

rotective tariffs are as much applications of force as are blockading squadrons, and their object is the same--to prevent trade. The difference between the two is that blockading squadrons are a means whereby nations seek to prevent their enemies from trading; protective tariffs are a means whereby nations attempt to prevent their own people from trading. What protection teaches us, is to do to ourselves in time of peace what enemies seek to do to us in time of war.

But for my money, Don says it better.


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COMMENTS (7 to date)
agnostic writes:

Those are both great examples of what's wrong with the standard, nearly ubiquitous, arguments for completely free trade -- ignoring how gains and losses are distributed among individuals, and focusing only on the net or average.

Depending on who those 10% of my fellow countrymen were, I'd either be aghast or cheering in the bleachers. *

This very simple fact also explains why there will never be a trade agreement that says only "Free trade -- no questions asked." There's too much heterogeneity in the larger social effects that free trade would have across all possible cases, hence no single solution either in the liberal or protectionist direction.

* Or to give another numerical example, suppose that there are 100 men in our society, that there are 100 women, and finally that there's monogamy. As an index of standard of living, take the number of wives a man has -- hard to argue against that. The average man has 1 wife.

Suppose that through free trade we could import another 400 wives from a society where parents prefer to have males rather than females, and so specialize in their comparative advantage by exporting females. We give them wheat or whatever in exchange.

Now there are 500 wives for 100 men, so the average man has 5 wives. Oh, and by the way, it will happen in a way that 1 man gets 500 wives and everyone else gets 0. But because the average is the be all and end all of judging how great the policy is, we can't argue -- this is clearly a superior society!

Each of the 99 wifeless men suffers a loss through the policy of -1, and the lucky guy enjoys a gain of +499. Hey, the gains to the winners outweigh the losses to the losers, to again we can't argue against the superiority of this society.

Even allowing for losses stinging more than gains lift up, we can allow for a 5-fold greater subjective value for losses than for gains of a single wife, and still the society is better off on net.

This is an extreme example to highlight a subtle point, but that's what you have to do when people don't pay enough attention to subtleties.

kebko writes:

agnostic,

Are we allowed to have a "technology - no questions asked" policy? Before I finish my comment, do I need to take a minute to mourn the postal workers who suffer because I am sending this message digitally?
I think you have a valid question, but I think there is another question - Are we holding gains through international trade to a different moral standard than other gains, and why?

8 writes:

What about instituting uniform tariffs? A country on the extreme left-side of the Laffer Curve for tariffs and with extremely large trade deficits could perhaps gain absolutely by enacting a uniform tariff while slashing other tax rates.

Tracy W writes:

Depending on who those 10% of my fellow countrymen were, I'd either be aghast or cheering in the bleachers.

You think 10% of your countrymen deserve to die?

Harsh.

Oh, and by the way, it will happen in a way that 1 man gets 500 wives and everyone else gets 0.

Umm, how? And, if he can get 500 wives now, why didn't he have 100 wives before?

This is an extreme example to highlight a subtle point, but that's what you have to do when people don't pay enough attention to subtleties.

Actually it's a non-sequitor. How does the man get all 500 wives, given that the only thing that has changed is the move to free trade?

I think this example shows what you have to do when you can't find a single thing wrong with the argument, but still want to reject the conclusions, you have to make up some random stuff up.

Tracy W writes:

Not to mention, of course, the sexism in agnostic only counting the gains to men, not to women. Puzzlingly, by omitting to mention them, he weakens his numerical statement.

Tom West writes:

> Umm, how? And, if he can get 500 wives now, why didn't he have 100 wives before?

I think agnostic's assumption is that in his anything-goes free-trade example, we lose the legal right to restrict how imported items are used.

This would have parallels with the real-life example of importers suing governments for pollution and safety laws that restrict free-trade. (Of course, to be fair, sometimes governments do enact arbitrary "safety" laws for the sole purpose of restricting imports, however...)

> 1 man gets 500 wives and everyone else gets 0

> only counting the gains to men

Please no Roissy, please no Roissy...

Tracy W writes:

Those cases of suing over free-trade laws are where a law is discriminatory in effect, eg the locals catch fish using method x, the foreigners catch fish using method y, the government bans fish caught using method y on environmental/animal welfare grounds. I haven't heard of one covering where the law is even-handed, eg limiting alcohol sales by age. And in agnostic's case, why would all the women want to marry this one guy? If the existing women were happy with monogamy before, why would the entrance of 400 more women make the existing women want to enter a polgymous relationship? The guy in question would now be dividing his wealth by 500 rather than by 100, so it's a far worse deal.

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