Friday, February 18, 2011

Free Trade is Good Overall, but Creates Winners and Losers

This is the ultimate message of the theories of trade based on comparative advantage that I try to convey to my students.  In other words, trade makes societies richer, but depending on where production ends up, how groups feel about trade depends on whether they are in an industry in which their country has a comparative advantage.  For example, it may be true that trade makes us wealthier as a society, but tell that to US workers in wood products who are finding more and more of the production ending up occurring in other countries. They key is whether a country can use the benefits from trade to compensate and accommodate (retrain) the losers.

Which, by the way is an argument for the continuation of the timber payments for rural counties in Oregon, but that is a topic for another day.

Anyway, I am still battling a sinus infection and am getting further and further behind so I direct you to a good piece on the gains from trade from Greg Mankiw in The New York Times and a response from Uwe Reinhardt in the Times' Economix Blog.

Good, and thoughtful, stuff.


Jeff Alworth said...

I find that, to be looser, I have a couple beers. I have no idea why you're talking about loggers.

Patrick Emerson said...