Trade Is a Labor-Saving Device
We each have two legitimate ways to acquire any good: produce it ourselves or acquire it through trade. For most goods, trade will be the lower cost method.
Democratic politics makes savvy people stupid, at least when they act politically. This has long been demonstrated, and it applies both to voters and policymakers. Several things account for it: the impotence of one vote, the consequent futility and hence wastefulness of acquiring information, the dispersal of the costs of government, and the resulting theatrical mood-setting farces called election campaigns.
Outside politics life is rather different. Our actions have a reasonable chance of making a difference to ourselves and those we care about; the costs of our actions fall largely on ourselves; and acquiring information in order to act more intelligently is thus worthwhile. As a result, those who try to sell us goods and services have an incentive to behave responsively and responsibly, unlike candidates for political office.
That's why, by and large, people act smarter in the personal realm than they do in political realm.
To see the difference, think about the saving of labor. Normally we see this as a good thing. We buy electric toothbrushes, power lawnmowers, dishwashers, clothes washers and dryers, and self-cleaning ovens, among many other things, precisely to save labor. Why? Obviously because labor is work—exertion. Most of what we think of as work we would not do if we could have the expected fruits without it. (Of course we sometimes are paid to do things we'd do anyway, but then it is something more than mere work.) Saving labor through technology not only relieves us of particular exertion; it also frees us to obtain other things we want but would otherwise have to do without—including leisure. Thus labor-saving enables us to have more stuff for less exertion. Time and energy are scarce, but our ends are infinite. That's why no one in private life fails to see labor-saving as good.
Frederic Bastiat captured this in a fable about Robinson Crusoe. Crusoe had a two-week project planned: making a plank. This would require many days of labor, cutting down a tree, trimming the trunk, and fashioning the plank just so. Next he would re-sharpen his tools and then replenish the provisions he would consume during the project. As he prepared to start the job, Friday excitedly delivered the news that a piece of wood, well suited as a plank, had just washed up on their island. Terrible news, Crusoe said. Friday didn't understand, so Crusoe explained: obtaining the plank without effort—that is, for free—would cost him weeks of labor. He said:
Now, labor is wealth. It is clear that I shall only be hurting my own interests if I go down to the beach to pick up that piece of driftwood. It is vital for me to protect my personal labor, and, now that I think of it, I can even create additional labor for myself by going down and kicking that plank right back into the sea!
The genius of Bastiat's fable is that people will readily spot Crusoe's foolishness. But it is equally certain that few will apply the lesson to the "national economy," which is nothing more than a lot of people, arbitrarily grouped into a "nation," who produce and trade, when permitted, with other people arbitrarily grouped into other "nations."
When Bastiat's interlocutor calls Crusoe's reasoning "absurd," Bastiat replies:
That may be. It is nonetheless the same line of reasoning that is adopted by every nation that protects itself by interdicting the entry of foreign goods. It kicks back the plank that is offered it in exchange for a little labor, in order to give itself more labor. There is no labor, even including that of the customs official, in which it does not see some profit. It is represented by the pains Robinson Crusoe took to return to the sea the present it was offering him. Consider the nation as a collective entity, and you will not find an iota of difference between its line of reasoning and that of Robinson Crusoe.
People can easily see that the free "imported" plank gives Crusoe time to make something else or to relax, but they don't see that imports delivered at prices lower than domestic alternatives similarly free up scarce labor and resources, enabling us to make things we want but hitherto couldn't afford, or make leisure feasible. Presented with this argument, the protectionist will undoubtedly ask what the newly freed labor would make. We should give the answer that Bastiat gives:
As long as a person has wants to satisfy and time at his disposal, he always has something to do. I am not obliged to specify the kind of work he could undertake to do.
Or:
If the total quantity of consumers' goods enjoyed by the … people could be obtained with one-tenth less labor, no one can predict what new satisfactions they would try to obtain for themselves with the remaining available labor. One person would want to be better clothed; another, better fed; this one, better educated; that one, better entertained.
Trade is a labor-saving "device." We each have two legitimate ways to acquire any good: produce it ourselves or acquire it through trade (after producing something else). For most goods, trade will be the lower cost method. (See why "comparative advantage" is "The Most Elusive Proposition.") The day is simply too short to make everything we want. Thus trade makes us wealthy. When government interferes with trade, it makes us poorer.
Bastiat believed that people found the destruction of cross-border trade ("protectionism") attractive "because, as free trade enables them to attain the same result with less labor, this apparent diminution of labor terrifies them." (Read about the bias against saving labor in Bryan Caplan's The Myth of the Rational Voter.) Why do people who try to save labor every day believe this? Because they think a society's principles of well-being are different from those of an individual's. As long as they do, political candidates will feed the bias.
Donald Trump and Hillary Clinton may or may not know that trade unfettered at political boundaries makes people wealthier. We need not waste time (which of course could be put to better use) wondering if they are demagogues or just ignoramuses. Rather, we should devote our scarce energy to showing people that what is good for them individually—saving labor—is just as good when observed from a bird's-eye view.
This piece originally appeared at Richman's "Free Association" blog.