A reader has just emailed me a link to a Washington Post story about North Carolina workers losing their jobs to foreign competition. Presumably he believes there’s a larger moral here, because his subject line is “Wrong again, Steve”. Here is a slightly edited version of my emailed response:
It would be dishonest for me or anyone else to defend free trade by pointing to its advantages while ignoring its disadvantages.
It is equally dishonest to oppose free trade by pointing to its disadvantages while ignoring its advantages.
What you need is a framework that accounts for all the advantages and disadvantages, together with enough of a logical structure to instill confidence that nothing imporant has been overlooked. Thats what economic theory supplies. You can find that theory in the economics textbooks. You can also find (I think) a pretty good summary of it in The Big Questions.
My correspondent wrote back with a pointer to a website with fifty years of what he calls “extrapolatable stats” that he thinks supply the necessary framework. This misses the point entirely. There is no way a hodgepodge of numbers can settle the question of whether something’s been left out. For that you need a theory.
Here, in brief, is the theory: If Joe the American sells blankets to Mary the American for $15 each, and if an opening to trade allows Mary to buy Chinese blankets for $5 each, then three things happen:
- Mary is better off by $10.
- Joe is worse off by at most $10—because Joe can always match the Chinese price if he wants to, taking a $10 hit. On the other hand, he also has the option of getting out of the blanket business, which he’ll choose only if he prefers it to taking that hit.
- Frieda, another American, who might not have been willing to pay $15 for a blanket, picks up a Chinese blanket for $5 and goes to bed warm tonight.
Of these, only the second effect is bad for Americans, and it’s got to be outweighed (or at least matched) by the first effect. The third effect is pure gravy.
That, in essence, is the argument for free trade. There are plenty of obvious objections, and plenty of somewhat less obvious responses—again, all easily found in textbooks. But if you’re going to argue that trade is bad, then this is the argument you’ve got to confront, because this is the argument on which the vast majority of economists rest their case.