Saturday, May 30, 2020

Free trade raises standards of living

  I find it amazing that there are still people in life who favor trade restrictions and trade wars. If there is anything credible economists agree on, almost 145 years after the publication of Adam Smith’s treatise The Wealth of Nations, it is that free trade is a good thing.

  In every trade, both sides benefit. There is a simple reason for that. Each side is giving up something he values less for something he values more. Thus, at the very moment of the trade, both sides have improved their own respective economic condition. The trade has enabled both parties to the trade to raise their own standard of living.

  Suppose John has 10 apples and George has 10 oranges. They enter into a trade in which John agrees to give George 9 apples. For his part, George agrees to give John 1 orange.

  One’s initial reaction might be: That’s an unfair trade! Poor John is now left with only 1 apple and 1 orange and George has ended up with 9 apples and 9 oranges.

  Not so! Both John and George have raised their standard of living with their trade. It doesn’t matter how many apples or oranges they have each traded as part of their deal. They have both raised their standard of living through the trade. That’s because they both gave up something they valued less for something they valued more.

  The corollary to this principle of free trade — that is, trade that is free of governmental interference — is that any governmental restriction on trade interferes with people’s ability to raise their standard of living.

  Of course, the most important argument in favor of free trade is the freedom argument: People have a natural, God-given right to buy and sell whatever they want. It’s their property. It’s their liberty. When government wields the power to infringe on the exercise of people’s natural, God-given rights, that is a society in which people are not free.

  About the author: Jacob G. Hornberger is founder and president of The Future of Freedom Foundation.

  This article was published by The Future of Freedom Foundation.

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