Trump Bashing — Free Trade

In a deserving tribute to Cordell Hull for his work in support of free trade, Jeffrey A. Tucker and Peter C. Earle engage in some unnecessary and gratuitous Trump bashing.

Before dealing with the Trump bashing, some background comments on free trade are in order.

The Academic (Ideal) Case For Free Trade

The case for free trade is simple. Pedagogically, the lawyer – secretary example can be used to introduce the concept.

A lawyer is the best attorney in town. This lawyer is also the best typist. He engages a secretary who cannot type as well or as fast.

This act represents a “division of labor.” This key economic concept is central to understanding personal and group wealth. Markets make the division of labor possible.

Imagine how much poorer the attorney and the rest of us would be if we had to grow our own food, build our own transportation (horses would still be with us), doctor to ourselves, defend ourselves in court, etc. etc.

Wealth creation and higher standards of living occur when markets are large and function well. Defining markets according to political demarcations (nations) diminishes their benefits unless goods pass freely across borders. The bigger the markets, the better the division of labor and the better the wealth effect.

Even if one country has an absolute competitive advantage in all products, well-being is still enhanced by free trade.

Kimberly Amadeo discussed the “theory of comparative advantage:”

Eighteenth-century economist David Ricardo created the theory of comparative advantage. He argued that a country boosts its economic growth the most by focusing on the industry in which it has the most substantial comparative advantage.

For example, England was able to manufacture cheap cloth. Portugal had the right conditions to make cheap wine. Ricardo predicted that England would stop making wine and Portugal stop making cloth. He was right. England made more money by trading its cloth for Portugal’s wine, and vice versa. It would have cost England a lot to make all the wine it needed because it lacked the climate. Portugal didn’t have the manufacturing ability to make cheap cloth. Therefore, they both benefited by trading what they produced the most efficiently.

No trained economist, qua economist, honestly argues against free trade. Economists on government payrolls compromise their independence and routinely prostitute economic ideas in order to support the political needs of their employers. Obvious examples of the duplicity of such gun-for-hire economists is support for trade protections, minimum wage legislation, government spending, price controls, etc.

Honest economists are reluctant to accept political positions. Milton Friedman never joined a political administration because he would have been pressured to modify his positions. He argued he could be more effective as an unconstrained, apolitical analyst.  Sadly, too many second-rate economists are drawn to the power and riches of government positions.

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