When I was a full -time professor of economics at the Naval Postgraduate School, I always learned my master’s students about comparative benefits. I showed them that if two people were on a desert island and discovered each other, they could each have more by specializing in producing the good in which they had a comparative advantage and act for the other good. I would then go from a simple numerical illustration to three other important points.
First I spread from an island to a country and I show why it makes sense to people in California to act with people in New York. Secondly, I expanded from a country to the world, which shows that national boundaries do not change the reasoning: people in the United States win from trade with people in China, in Canada or in another country. Thirdly, I showed how they implicitly recognized comparative benefits in their work. Many of my students had left dozens to hundreds of people. They realized, if only from experience, that even if they could do the work of their subordinates better and faster, it was a fool’s message to do the tasks of their subordinates, because that left less time for them to do their jobs.
I would then comment on the fact that when trade is opened for the world, some companies lose their business and some employees in those companies lose their jobs, to good costs for foreign producers. Some employees will be worse off, I noticed on at least a few years that jobs find maybe 20 percent less than what they had earned before. The endangered loss of foreign competition would lead to some companies and employees lobbying for rates or import quotas to make foreign goods less attractive for domestic buyers.
Students were enthusiastic about their new knowledge, but some were pessimistic about the prospects for free trade. They realized that most people did not understand the argument that they had just mastered and that is why the students thought we were stuck with high rates. Then I gave them a pleasant surprise. I showed that the rates had fallen every decade since the Second World War and were now a small percentage of what they were before the Second World War.
This is from David R. Henderson, “The benefits of free trade are at risk” DefineFebruary 20, 2025.
I then go into the details about how rates rates have fallen worldwide to a fraction of what they were before the Second World War, and shows how that is in danger.
Read the all -thingThat is longer than my usual Hoover article.