Wednesday, February 13, 2008

A recipe for protectionism 

I have found Minnesota 2020's peculiar program on "buying local" at first amusing, and now have to chuckle that we are going to suggest to lovers that you should "dine and eat local on Valentine's Day". I'm amused by the fact that Lee Egerstrom's logic seems to be that Minnesota is harmed when we trade with California for wine. That logic obviously does not extend to the computer on which he types this piffle, or the Prius he drives to the co-op.

Imagine replacing the words American and Brazilian with Minnesotan and Californian in this paragraph from Russ Roberts: point to an American steel worker put out of work by imports of Brazilian steel and say that he is "harmed by trade" is to misunderstand the nature of trade and its winners and losers.'s like saying that a man whose wife leaves him for another man is harmed by love. After all, the man married because of love. The man is the product of his parents who were touched by love. So it is with the steel worker. His steel job exists because of trade. His whole life is supported by trade of various kinds. So in what sense is he "harmed by trade?"

It's a profound point. It forces you to see just how trade and specialization and the division of labor create the incredible lives we lead, lives of wealth and health unimagined by previous generations.

The wealth of Minnesota depends on our ability to trade with those outside of Minnesota. Ask any corn farmer producing ethanol. Ask any wheat farmer. She or he is sending their goods out of state -- the extended market provides them with their income. Surely MN2020 cannot be so foolish as to think Minnesota firms must ONLY sell to Minnesota consumers? Yet they ask that Minnesota consumers trade only with Minnesota firms. On what basis?

The goods I want to buy are the goods that provide the most benefit to my Minnesota family. I have no obligation to sacrifice their happiness for the purpose of enriching a Minnesota business, when that business has no compunctions about selling goods we make to families in New York or Brazil. And specialization is how we become as wealthy as we are:
...most of us willingly embrace and accept economic change even though we know that it sometimes has disparate effects on us. There is always a temptation to ask for an exemption from the costs while enjoying the benefits.
A temptation that Minnesota "progressives" cannot seem to resist.'s wrong to say that trade creates winners and losers. We are all winners. But it's also true that the benefits from winning are not evenly distributed and that the political demand for exemptions from certain kinds of economic change isn't going away.

Ironically, the richer we become, the more specialization we have. The more specialized you are, the greater the risks (and rewards) from economic change.

That's just a risk we have to take, if we want to improve our lives.

UPDATE: For loquacious Bobby in comments, I give you Art Carden:
Trade is an issue that definitely cuts across economists' ideological spectrum. Here's Greg Mankiw on Barack Obama's anti-NAFTA stance, including an instructive quote from his colleague Larry Summers on NAFTA's success. Here's Paul Krugman on "Ricardo's Difficult Idea." Finally, here's Brad DeLong explaining why comparative advantage is the most misunderstood concept in economics. "Trade Promotes Economic Progress" is #4 among the "Ten Key Elements of Economics."
Art notes that three of those four did not work for the Bush Administration.

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