Thursday, March 29, 2007

This one's for Tom Johnson

We take requests here at TPS; as such, here are my thoughts on yesterday's WSJ piece against free trade:

The article focuses a lot (entirely?) on one side of the argument-- the costs to Americans. If the goal is to make "Americans" better, then you have to look at the costs and benefits to Americans and make a judgment. Americans losing jobs is a cost, but being able to produce goods and services cheaper is a benefit. It's an example of visible, condensed costs and very dispersed benefits-- and "300 million Americans paying $0.50 less for a t-shirt" isn't quite the newsworthy story that "5,000 Americans to lose their jobs" is.

It's not unlike the argument for the minimum wage. A family member plainly asked me over the weekend: Don't some people benefit from raising the minimum wage? Quite simply, the answer is probably yes. There are people that benefit from the minimum wage being increased. But that's not a reason to do it-- you need to look at both sides of the issue. If it's aimed at helping the working poor, are more of the working poor being hurt by the policy than helped on some margin? If it's aimed at income redistribution, are the working poor as a whole improving at the expense of the upper classes? It's a positive statement--not a normative one--on the means of formulating an actual argument and determining a policy's effect. Just because something has benefits is no reason to do it, and just because something has costs is no reason to refrain from doing it.

But back to the free trade issue-- it is also related to an issue first brought to my attention by Don Boudreaux in relation to international balance sheets and the irrelevance of trade deficits. Namely: Why look at the world in terms of countries? If we looked at the world in terms of a world economy, the idea of outsourcing immediately goes out the window. Instead, what we previously attributed to "outsourcing" is now the world becoming a richer place through a better allocation of productive resources. To adapt one of Boudreaux's analogies: If we divided the world into blondes, brunettes and redheads, would we have reason to fret if the blonde's jobs were being outsourced to the redheads?

"Retooling the American education system" is not the answer. Training Americans for jobs that are "likely" to remain in the United States is guesswork at best as to which jobs those will be-- not to mention the political processes involved in determining what those jobs would be. If "retooling" meant "eliminating the requirement of all American children to complete school through high school," I think that policy might have a bit more prospect for positive impact. After all, the U.S. could be completely eliminating a comparative advantage by requiring everyone to go to school through age 18...and if the goal is to get jobs within the U.S., then that would help achieve those ends.

"Retooling the tax code" involves all of the same guesswork and public choice issues as does the education issue.

"Free trade works" doesn't sell enough newspapers, I suppose.

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