International TradeIt’s often said that there are winners and losers in wine: American consumers win when they buy wine imported from France, but California wine producers lose. This is life” economists advise. Nothing should be done about this situation. The reason is that it is often argued, at least among those of us who know economics, that it is easy to show that the gains to the winners from free international trade outweigh the losses to the losers, making trade efficient. Economists call this result “Kaldor-Hicks efficient.” Because the gains to the winners exceed the losses to the losers, the winners could in principle compensate the losers in full, wiping out their losses and leaving the winners with a net profit. Thus, even without actual compensation for the losers, free trade would improve society. as a whole Some individuals are better off, despite suffering net losses.
If you look at a textbook on international trade, you will find that the author: Free Tradearguably develops a similar argument to the previous paragraph.
This argument is second-rate utilitarianism and therefore unconvincing. “Why should we accept policies that benefit some people, even the majority of people, at the expense of others?” asks the serious trade skeptic. That’s a good question, and one that economics textbook authors cannot answer.
Fortunately, the common assertion that “trade has winners and losers” is do not have correct.
One way to understand the flaws in this argument is to recognize that trade is only one of countless causes of economic change. There is nothing unique or special about trade with foreigners causing profit losses for some businesses and job losses for some workers. every Changes in economic activity have these effects. If Americans have fewer babies, Americans buy fewer diapers, which means fewer profits and jobs for American diaper manufacturers. If Americans enjoy eating at home more, they eat less at restaurants, which means fewer profits and jobs for American restaurants. Advances in automobile technology over the years have reduced the demand for your neighborhood garage mechanic.
The polio vaccine caused many job losses in factories making wheelchairs, leg braces and crutches.
Given this reality, if someone wants to continue describing trade as having winners and losers, he or she should, in order to be consistent, every Economic changes, like the introduction of the polio vaccine, are explained as having winners and losers. This explanation proves that there is nothing special about international trade.
But it is wrong to say there are winners and losers in trade, for a deeper reason: losses are not the same as costs. cost There are costs that must be borne by participating in the commercial society, but these costs are not losses.
Really lose A worker lost from trade is someone whose life would be better off not being part of a society in which trade exists. If a worker who loses her job because of imports would have been better off, taking into account her job losses, if she had lived in a country without international trade, then she could be described as one of the losers of trade. But if her life, despite her job loss, is still better overall than if she had lived in a country without foreign trade, then she could also be described as one of the losers of trade. loser has no meaning. A country whose economy is connected to the global economy This will certainly give her much greater access to goods and services, and perhaps even alternative jobs, than she would have if her country had no commercial contacts with foreigners.
It may be true that she might have been better off if the particular import that destroyed her job had never been brought into the country than she is now if it had been allowed in. But if, as is almost certainly the case, her whole life has been so enriched by trade that, taken as a whole, even allowing for the loss of employment, she is better off than if her country had been self-sufficient, then she has not lost out from trade.
One of the reasons that innovative, commercial, free markets create such an abundance of goods and services for ordinary people is because consumers, not producers, are in control. The cardinal rule of a market economy is that consumption is the end, and production is the means to that end. Anyone who wants to enjoy the (full) benefits of a market economy must agree to abide by this rule. But abiding by this rule comes with costs, one of which is the risk of having to match consumer demand in your role as a producer.
In a market economy, workers who lose their jobs to imports, labor-saving technology, or simply changing consumer tastes Fee An obligation to participate and enter this economy. Of course, this worker would not want to pay this cost. But every gain in this valley of eternal scarcity comes with a cost. Paying this particular cost is no more a loss than, say, a monthly mortgage payment. I would prefer to be freed from the obligation to pay this. But still, I am glad that I had the opportunity to agree to bear this monthly cost, because otherwise no one would have lent me the money to buy a house.
My monthly mortgage payment is not a loss; it is a cost incurred for the larger benefit of borrowing money to buy a house. Similarly, a worker whose job is destroyed by an economic change does not suffer a loss; that worker pays a cost to participate in an economy that promises material benefits that cannot be matched in any other economy. Even if that worker loses his or her good job, he or she is still much better off living in an economy with trade than if his or her economy was cut off from the world.
Donald Boudreau is a professor of economics at George Mason University.Cafe Hayek).
