I’m about to leave for home from an excellent Liberty Fund colloquium on “Free Trade and Liberty” in La Jolla. Thanks to Liberty Fund, discussion leader Sandra Peart, organizers Pierre Lemieux and Liberty Fund’s Hans Eicholz, and the other participants.
One of the readings is from Adam Smith‘s An Inquiry into the Nature and Causes of the Wealth of Nations. Here’s a great passage where he does a really nice reductio ad absurdum to make the point that, for a given quality, it makes sense to buy where it’s cheapest:
The natural advantages which one country has over another in producing particular commodities are sometimes so great that it is acknowledged by all the world to be in vain to struggle with them. By means of glasses, hotbeds, and hot walls, very good grapes can be raised in Scotland, and very good wine too can be made of them at about thirty times the expense for which at least equally good can be brought from foreign countries. Would it be a reasonable law to prohibit the importation of all foreign wines merely to encourage the making of claret and burgundy in Scotland? But if there would be a manifest absurdity in turning towards any employment thirty times more of the capital and industry of the country than would be necessary to purchase from foreign countries an equal quantity of the commodities wanted, there must be an absurdity, though not altogether so glaring, yet exactly of the same kind, in turning towards any such employment a thirtieth, or even a three-hundredth part more of either.
A few years ago, I was in a Staples to buy paper clips. A customer younger than me was in the same aisle, picking up boxes of paper clips and throwing them down in disgust. An employee approached him and asked if there was something wrong.
“None of these paper clips are made in America,” he said. “Do you have any paper clips made in America?”
“No,” answered the employee.
“Well, are there any stores in town that sell paper clips made in America?” said the customer.
“I’m pretty sure there aren’t,” said the employee. “Pretty much all paper clips are foreign-made.”
The man walked out in disgust. I picked up one of the boxes of paper clips and went to the cash register, where I bought them
Then it occurred to me that I should do the same thing at other stores that this man did at Staples. I thought: I’ll go to Safeway, pick up a bunch of bananas and ask the store employee where they’re from. When she says Honduras or some other foreign country, I’ll throw them down in disgust. Then, since I’ll be on a roll, I’ll go to Starbuck’s and say that I want coffee made in America. When they tell me that they don’t have any, I’ll leave the store in disgust.
READER COMMENTS
Jonathan S
Feb 10 2019 at 12:18pm
I wonder how much anti-foreign sentiment is based on the following beliefs?
A) foreign products are significantly lower quality (i.e. won’t last nearly as long as native goods)
B) a duty to buy goods from others in your identity group (particularly with a presumption that trade with outsiders takes money out of your group)
If A) is true, then there should be enough consumer demand to pay significantly more for native goods. This doesn’t appear to be the case unless big native businesses (i.e. Staples) have a grand conspiracy against native goods.
If B) is pervasive amongst consumers then it would be wise for some businesses to exclusively specialize in native goods. Since there doesn’t seem to be a successful example of this right now (and I’m sure that this has been attempted many times), then this is either 1) not a common consumer belief or 2) it is too expensive to reasonably live out this belief.
Matthias Goergens
Feb 10 2019 at 7:39pm
Hypocrisy is a strong force in human behavior, especially in the signalling behavior.
Plymouth Sid
Feb 14 2019 at 2:30pm
Mathias (Feb 10 2019 at 7:39pm) is “Spot On”
“Hypocrisy is a strong force in human behavior, especially in the signalling behavior.”
It is but one explanation but certainly a significant one. I am sure that Mathias did not mean it to undermine the Closing paragraph of Jonathan S (Feb 10 2019 at 12:18pm)
Education and understanding is the key but “The Dismal Science” attracts few.
Sid
john hare
Feb 10 2019 at 4:26pm
There are some products that should be bought from local companies if possible. I was looking at a class of machines at the trade show a few weeks ago and decided that the Chinese machine at half the price ($25K vs $50K) was a bad deal. Dealer support and parts availability are factors. For paper clips and such though, shop bargains.
Mark Z
Feb 10 2019 at 4:51pm
I think many people easily understand the concept of an absolute advantage (bananas growing better in Honduras than in the US) but struggle with the ‘comparative’ part: Americans may be just as capable of manufacturing paperclips as the Chinese, but Americans may also more efficiently spend their time producing other things, justifying leaving paperclip manufacture to others.
Jim Plamondon
Feb 10 2019 at 11:26pm
…which is why the website of the Thai Cannabis Corporation features exactly that quote on its home page. Why buy expensive (tropical) marijuana grown in (temperate) America, when better marijuana can be imported from Thailand… and cheaper, too?
https://thaicannabiscorporation.com/2018/05/26/which-ounce/
Michael S Thompson
Feb 11 2019 at 2:53pm
The paper clip example here is funny to me because paper clips are subject to HEAVY tariffs. If I remember correctly, the plastic coated ones are not subject to the same tariff. I haven’t checked for myself, but I’ve heard that all plastic coated clips are made overseas, but some or most metal ones are made here.
I am 100% for getting rid of these and all other tariffs, but apparently, paper clips are something that actually ARE made in the US. And they probably shouldn’t be.
https://www.wsj.com/articles/SB10001424053111903327904576524671643378078
David Henderson
Feb 12 2019 at 10:34am
Interesting. Thanks.
Hugh E. Brennan
Feb 11 2019 at 4:49pm
Of course taking advantage of comparative advantage is only rational, and pursuing a course of protection for the sake of beggaring thy neighbor is not only inefficient but immoral. However, this presupposes that the trade is fair, free, and equitable.
If your neighbor is in the process of beggaring you, it is not only inefficient and immoral to allow him to do so, it is also dangerous, ruinous, and potentially fatal to allow him to do so.
Our neighbor China, is using the wealth it has gained by gaming trade to buy a military designed to destroy ours. Was it Leninin who said he would hang the capitalists with a rope they had sold him?
Free trade absolutists, and it’s easy to be devoted to a theory which enriches you personally, were able to view the hollowing out of America’s industrial capacity and the erasure of millions of American jobs with equanimity. They assured us that the hard and dirty jobs of wrestling with the obdurate reality of factory production would be replaced by higher value intellectual work.
This turned out to be untrue. The knowledge economy did grow and prosper, but the high paying production economy was outsourced and its labor force offered the choice of the meagre returns of service and retail or opioids and EBT cards.
Meanwhile, we educated China’s scientists and engineers, built her factories, and opened our doors to her products. China, for her part, declined to import anything she wasn’t forced to. Copied, stole, or coerced the transfer of all the technologies required for a modern industrial state, and is rapidly acquiring a world-class military.
What fools we. We beggared a major part of our population, put the future security of our nation at risk, emboldened a communist tyranny, and did so for the sake of cheap crap. We are buying our Christmas ornaments from a country that tears down churches.
If trade isn’t fair, it isn’t free.
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