Post by RS Davis on Jan 23, 2004 11:38:49 GMT -5
[glow=red,2,300]Robert P. Murphy Wrote:[/glow]First, let's be clear what I mean by free trade. When I say I'm "for free trade," that means I do not think the US government should impose tariffs or other barriers (such as import quotas) on the importation of foreign consumption goods by US consumers. Now it's true, I'm a philosophical anti-statist and so I oppose the very existence of the US federal government, but beyond that there are very practical reasons for being a free trader. Specifically, I believe that imposing tariffs makes Americans in general poorer. True, the workers in a "protected" industry may have higher wages than they otherwise would under free trade, but US consumers would be worse off because of higher prices. Most economists favor free trade because (at least under classical assumptions) when the government imposes a tariff, the monetary gains to the winners are outweighed by the monetary losses to the losers.
Roberts says that he agrees with this economic analysis in the case when capital goods cannot be easily shipped from one country to another. However, Roberts argues that the benefits of "free trade" do not necessarily hold when capital goods are mobile internationally. In his words, this possibility means that some countries gain and some lose.
Now here's the tricky point: I am claiming that even if it's true that the change from immobile to mobile factors of production "hurts" a given nation (which for a mainstream economist means that the average real income of people in a given nation goes down), this doesn't undermine the case for "free trade" unless we can show that a protective tariff or other barrier on imports would mitigate or eliminate this "hurting."
To use a silly analogy, it is certainly true that an earthquake in California hurts US citizens. In other words, Americans would be richer if there were no earthquake. But this doesn't undermine the case for free trade, because slapping on tariffs would make Americans even worse off. This is true even if the Americans would have been better off with no earthquake and a small tariff.
Roberts says that he agrees with this economic analysis in the case when capital goods cannot be easily shipped from one country to another. However, Roberts argues that the benefits of "free trade" do not necessarily hold when capital goods are mobile internationally. In his words, this possibility means that some countries gain and some lose.
Now here's the tricky point: I am claiming that even if it's true that the change from immobile to mobile factors of production "hurts" a given nation (which for a mainstream economist means that the average real income of people in a given nation goes down), this doesn't undermine the case for "free trade" unless we can show that a protective tariff or other barrier on imports would mitigate or eliminate this "hurting."
To use a silly analogy, it is certainly true that an earthquake in California hurts US citizens. In other words, Americans would be richer if there were no earthquake. But this doesn't undermine the case for free trade, because slapping on tariffs would make Americans even worse off. This is true even if the Americans would have been better off with no earthquake and a small tariff.
- Rick
