One of the arguments I’ve often seen made in opposition to free trade is that while international trade often increases the amount of money in a less-developed nation, it can damage the quality of life for the people living there.

Here’s an example: you might have a small community that has subsisted for many years on small farming and handcrafts that are traded locally. The people are poor, but getting along OK.

Then a foreign-owned mine opens up, and offers higher wages than anyone is making farming in their backyard. A generation of workers goes to the mine, and in the process loses much of the farming and crafting skill their parents and grandparents used.

When the local resource is exhausted and the mine closes, the people are left impoverished and unskilled; a worse situation than if they had never traded outside their local region.

Overall, the wealth of the country has gone up, and the mine probably made a few people in that country rich. But the workers are worse off than before, and don’t have a clear path to accessing the overall improved wealth of their nation.

I can see how free trade makes more money for both countries, but I’m not convinced (yet) that more money always makes life better.

Sierra: Exactly the same argument applies in both countries. The conclusion of the argument is that wealth increases in both of the countries that are trading.

If that is the basic theory, I get it now, and did not before. Thank you.

I too am tempted to dive into the moral implications of this system where the “competitive advantage” a poorer country has over a wealthier one comes from cheaper labor and looser environmental regulations, but as you say that’s straying pretty far from economic principles.

Sierra: being a non-economist myself, I found that I had to apply economic principles to what I read in the newspapers, for at least a couple of years, to really understand economic principles. The Economist used to be good for that: it has declined, but this blog more than makes up for it.

Steve and Sierra: important as the Ricardian principle is, I think that economic history makes an even stronger case for free trade. I guess what I am saying is: The theory of comparative advantage is compelling largely because of the evidence that supports it.

But that’s an answer to a question you’re not asking. You’re asking: What is the argument? As a teacher and a writer, I’ve spent decades trying to figure out the best way to answer that question. You can find my latest attempt in Chapter 5 of The Big Questions, but I will summarize it here. (You can also find several excellent attempts on Paul Krugman’s web page.)

First, though: As Krugman has so eloquently pointed out, this argument rests on a lot of auxiliary assumptions that virtually all economists take for granted (and for excellent reasons), but that we sometimes forget are not obvious to people who are not economists. So, I hope I’m not taking too much for granted by stripping the argument down so much.
I hope this makes sense, though, because this really is the essence of the whole thing.

John sells blankets to Mary for $10 each. Now because of an opening to free trade, Chinese blankets become available for $2 each. This has three effects:

A) Mary saves $8 per blanket.

B) John has two choices: He can match the Chinese price, in which case free trade costs him $8 per blanket. Or he can get out of the blanket business and do something else (either work at McDonald’s or go back to school or be unemployed). Whatever he chooses can’t be worse than matching the Chinese price, because if it were worse, he wouldn’t choose it. So the WORST case scenario for John is that he matches the Chinese price and loses $8 per blanket.

C) Frieda, who was never willing to pay $10 for a blanket in the first place, buys a Chinese blanket for $2 and goes to bed warm tonight.

A) is an $8 gain to Mary; B) is *at most* an $8 loss to John; therefore the good from A) cancels the bad from B). At the same time, the good from C) is pure gravy. So the upside of free trade must outweigh the bad.

That’s the economic argument. It seems to me that there are also compelling *moral* arguments for free trade, but of course there’s no reason to assume that economists know more than anyone else about morality. So at least in this comment, I’ll stick to the economic case.

I’ve just carefully read the Krugman essay you pointed at (it ate my whole morning). I recognize myself in his remarks about lefty intellectuals. I’m well-educated and reasonably bright, but with no training in economics. I’ve read popular arguments for and against free trade in many contexts, and always felt strongly opposed to free trade based on those readings.

The idea that the argument in its favor is as simple, elegant and right as the argument in favor of evolution is disturbing. I’d hate to be on the side of the creationists in any conversation.

After reading Krugman’s article though, I still do not understand Ricardo’s mysterious idea. I’d like to learn about it, but I’m a journalist and might need the baby talk version Krugman bemoans being reduced to when talking to editors.

Is there a good, clear, simple version of the free trade argument available? Or is this as clear as it gets?

I think what you’re suggesting is something along the lines of an attractor: The Ricardian model is simplistic but represents a sort of ideal which, while not matching any real system, none the less marks a spot in the space of all models, which real systems tend not to stray far from.

Is that, in fact, true? Or do the “secondary effects” tend to keep real systems significantly far from the Ricardian model? I don’t know. My suspicion is that the real world has so many significant secondary effects, that the pressures pushing towards the Ricardian model amount to only a fairish fraction of all pressures, and sustained departure from the ideal is not at all unlikely. But that’s nothing more than a guess, and I have little to support it.