I fear we have to admit it: there is not a single truly free country among the 200 or so that occupy this planet. If there were one, we would have expected a representative of its state to declare publicly, about the current trade war, something like the following—let me put it in blockquote even if it is not an actual quote but a virtual one from an inexistent official:
Whatever others do, our government has decided to eliminate the last vestiges of tariffs and coercive barriers to trade. The citizens and residents of this country are free individuals who may trade with anybody—in the next village, the next country, or at the farthest reaches of the earth—who is willing and able to trade with them. Only a few restrictions exist, such as trade in stolen goods, the slave trade, hiring killers-for-hire, buying copper, and such. (Pardon my dark humor designed to lighten up these difficult times, but the last example in my list is, of course, a joke.) Anybody or any non-violent organization in the world who wishes to buy from, or sell to, the free men and women here, associated in firms or not, is welcome to try. Whether the sum of their trades results in a trade deficit or a trade surplus, more foreign investment or less, a higher or lower production of dolls, deodorant, or watermelons in some places, is really no busybody’s business. In our country, each person and private group minds its own business in a spirit of reciprocity; so does the government. Thanks to price signals and entrepreneurs, free markets adapt to desires for prosperity more efficiently than controlling and bullying politicians. Besides three centuries of economic analysis, history testifies to that.
Perhaps only one man in the last hundred years could have said that: John Cowperthwaite, British administrator of Hong Kong between 1945 and 1971. The consequences were remarkable. (See my EconLog post, “Hong Kong and John Cowperthwaite.”)
I would add that, even with the blessing of electoral majorities, imitating what tyrants do to their subjects is not a recipe for liberty. An example is the Chinese state prohibiting its subjects who are dual citizens, and therefore not captive dependents, from leaving “their” national territory once they are caught there (see “U.S. Citizen Who Works for Commerce Dept. Ensnared in Chinese Exit Ban,” Washington Post, July 20, 2025). Should the U.S. government retaliate and promulgate the same ban in America? Ditto for trade.
This does not mean that there doesn’t exist countries that are freer or less unfree, of course. Note however that, except when we move close to the extremes, countries are not always easy to distinguish and classify on that scale, if only because freedom has many aspects, areas, or dimensions. These aspects occupy different positions in the preferences of different individuals. What seems clear is that free exchange between individuals is a paradigmatic feature of a free society. The reality is complex, but the ideal to pursue is not ambiguous.
It should not be forgotten either that some equilibria are not dynamically stable: a small move away from “more free” may well lead to a widening divergence from liberty. State intervention begets state intervention. Isn’t that happening today?
READER COMMENTS
Robert EV
Jul 27 2025 at 1:08pm
Would regulating externalities and shoddy goods still be considered free trade under your model? I’m specifically thinking of things like everhanging, ultrablast perfumes that saturate the neighborhood, chemical off-gassing, and the like.
Basically meet the standards and there are no barriers to trade, but don’t meet them and trade is prohibited. This applies equally for foreign and domestic traders.
Pierre Lemieux
Jul 27 2025 at 5:05pm
Robert: Good question, but the answer is not as obvious as it seems. The simplest case is that of “shoddy goods”: let each consumer determine what they are for him and make his own trade-offs.
The problem with externalities is that they are everywhere, and the case for letting the disinterested and wise geniuses in the White House or Congress decide where they are is weak (see my article “The Threat of Externalities“). There are “real” nuisances but they are better determined by the common law or by letting people trade to eliminate them.
The same applies to “standards.” Let the market determine what they are–whether and in which cases, for example, measurements should be metric or English. Standards are too easy an excuse for protectionist or other authoritarian diktats. Don’t underestimate Leviathan. A related and fun case reported by Peter Kenen in International Economics (2nd edition, p. 36):
Robert EV
Jul 27 2025 at 11:55pm
Wow on the German case.
I would prefer a system that allows suing the manufacturer of Glade plug-ins, or the super-scented laundry detergents, for example, as a tort with unlimited penalties. Would this fall under “common law”? And how would it work regarding international imports?
Matthias
Jul 29 2025 at 3:13am
Well, as long as it puts foreigners and locals on an even footing, it’s fair game under ‘free trade’.
But that doesn’t mean it’s necessarily a good idea: there are plenty of good / bad things than just free trade vs protectionism.
Eg a 98% VAT would be entirely compatible with free trade, but it would still be a bad idea.
Pierre Lemieux
Jul 29 2025 at 11:30am
Mathias: Of course, there are other things in life than trade. Or is there? Asking this question leads to the discovery that nearly everything in social life is trade. Motherly love is beyond trade, but note that a mother normally wants to buy things for her children (such as inexpensive dolls from China). Free exchange is paradigmatic of a free society. (See also my post “Exchange as the Basis of Everything Social.”)
As you say, a 98% VAT (or any other tax) would indeed be a bad thing for a lot of reasons. As you also note very correctly, it would be compatible with free international trade (the freedom of an individual to trade with anybody in the world who wants to and is able to) but, quite certainly, not with free domestic exchange. The reasons why free international trade is just and efficient are the same reasons why domestic trade is just and efficient; and exceptions are broadly the same.
Thomas L Hutcheson
Jul 29 2025 at 10:20am
There woud not be anything that distinguished foreign shoddy goods from domestic ones.
Even the border adjustment of imported CO2 emitting goods that woud compliment a tax on net emissions is aimed at the emission, not the foreignness.
Mactoul
Jul 28 2025 at 12:15am
Yet countries like India and China are internally free trade zones of 1.4 billion people each. A large fraction of the global population of a hundred years ago. Perhaps this is behind rapid economic progress in these nations.
Then EU is half a billion people again.
The inter-country comparisons need to be weighed by the population size. A single city in India has more people than numerous small nations. Not weighing by population is bound to give strange results.
Matthias
Jul 29 2025 at 3:11am
There’s plenty of restrictions inside of China and India.
Even the US has quite a few instances where internal trade is more restricted than external trade.
Eg as far as I can tell, there are no price gouging laws on imports/exports in the US, but plenty of internal ones.
However you are right that China and India have large and relatively free internal markets.
Pierre Lemieux
Jul 29 2025 at 11:31am
Matthias: Good points!
David Seltzer
Jul 28 2025 at 12:16pm
Pierre: One can hope. A group of we libertarians met for dinner and the subject came up. The unanimous hypothetical decision, purchase a large remote island in the Pacific. The principle agreed upon would embrace de Jasy’s focus on individual freedom wherein, “All social phenomena emerge from the choices of individuals in response to expected benefits and costs to themselves.” Per Paul Heyne. One asked,” how do we defend Libertaria, the name of our island, from attack by superior forces?” The suggestions became a long journey of what ifs. Fun exercise of an hypothetical world devoid of war and violence.
Pierre Lemieux
Jul 29 2025 at 11:39am
David: All good points. But, even ignoring territorial defense, the problems start if there is an owner of the island. See my post “The Marxist Owner of the American Store.” Perhaps unanimous consent would be a solution.
Robert EV
Jul 29 2025 at 2:34pm
From that article:
Back in the day the Crown had sole monopoly on who could trade (e.g. the leadup to the Boston Tea Party). What you write of isn’t Marxist, per se. To the extent Marx even went there it was in the prior context of Crown monopolies.
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As seen in the US, if utopian communities exist within a larger society, and are not reinforced through coercion, they tend to fall apart by the third generation at most (and generally sooner). I see no reason why a libertarian utopian community would be any different.
David Seltzer
Jul 29 2025 at 3:30pm
Pierre wrote, the problems start if there is an owner of the island. That point came up in our dinner discussion. To avoid that problem, some suggested issuing equity shares to several individuals. Some suggested Co-ops where residents own shares in a building. One suggested HOA like contracts. My suggestion came from my fifty years as a trader with memberships on several exchanges. It follows Becker and Lazear, “…the U.S. should sell the right to become a citizen.” My first trading venue in NYC was the American Stock Exchange. I became a member (fractional owner) when I purchased my seat for $100,000. Before I could trade, I was required to read the Constitution of The American Stock Exchange and acknowledge with my signature, as witnessed, the rules and regulations governing the exchange. No one individual had enough power to influence, or coerce my trading decisions. It seemed to me, listed exchanges may be the few remaining bastions of free voluntary exchange where traders are unanimous in accepting the principles of fair play. Fair play meaning each individual is free to pursue their purposes so long as there is little or no third party harm. If one is hurt inadvertently, or otherwise, the trader also has liability as a condition of owning private property. I was able to convince a few of my proposal. Those who vetoed my proposal were free to not purchase ownership in Libertaria.
Robert EV
Jul 30 2025 at 12:09pm
How does this deal with the second generation? Do they inherit citizenship, or do they have to purchase it? If they inherit, or heck even purchase, does this address gamesmanship by first generation owners (e.g. having a lot of kids, and holding those kid’s inheritance over them to get them to vote the way the parent wants)?
How about the gamesmanship of paying a lot of people to acquire citizenship and vote how you want?
David Seltzer
Jul 30 2025 at 12:33pm
Robert: Really good questions and points. I’ll present those questions to the voluntary association of like-minded libertarian individuals, with whom, I’ll dine. BTW. Craig’s fix. Of course, ideal solutions to those questions are elusive. At the margin, there are only trade-offs. With apologies to Thomas Sowell.
Robert EV
Jul 30 2025 at 7:26pm
I’m thinking a decent solution would be age-cohort based segregation of libertarian communities. I.e. You’d have a large libertarian land that has unalterable rules. Within this would be the age-cohort, and maybe even wealth-cohort, libertarian lands in which citizenship would need to be purchased (and could never be inherited). Only citizens of a land could own, even as part owners, and fixed assets within the land.
While a particular land’s age cohort would continue incrementing day-by-day as its population ages, the wealth cohort would be fixed. If you graduated into a higher wealth cohort you’d have a limited time to sell your immovable assets and to purchase new citizenship in the land of the higher cohort (getting a refund for your citizenship purchase in the lower cohort). There would probably be a bit more flexibility for those who lose enough to fall down a cohort.
This wouldn’t address the inheritance coercion, but would both limit wealth gamesmanship (if you’re among monetary equals then they could do it too), as well as opening up a part of libertarian land to even the poorest.
David Seltzer
Jul 30 2025 at 10:02pm
Robert, interesting thought experiment. How and why would those cohorts be segregated? The principle reason for living in Libertaria is each individual would choose to live wherever they choose, once they’ve purchased citizenship. Not be segregated by wealth or age or even race. (I reference Jim Crow segregation in the South.) I live in a high net-worth community. If I became a billionaire, should I be required to sell my current residence and purchase a far more expensive dwelling? I thought the principle was avoiding coercive rules that limited my freedom. If one of the requirements or conditions of purchasing citizenship is selling my immovable assets when I choose not to, I would not buy citizenship in the first place. The only exception to my decision, in terms of methodological individualism, would be my subjective personal motivation, wherein, my personal opportunity cost would be lower if I purchased citizenship as opposed to not doing so. As an aside, I suspect insular Amish communities and Hasidic Jewish enclaves have debated these issues ad infinitum. Thanks for taking time to think about this.
Robert EV
Jul 30 2025 at 11:52pm
Sure. It seems an interesting thought experiment. I’m sure businesses would evolve to move everything but the land from one cohort-land to another, if it came down to it.
Maybe it’s just easier to have permanent expulsion as a punishment for gamesmanship. Now how to enforce that without gamesmanship is another thing. Completely blind ballots may be the way to go. Just make sure there are no sleight-of-hand magicians in the community!
Insular communities, especially those based around religious hierarchies as opposed to egalitarian freedom, will not necessarily come up with acceptable answers.
Craig
Jul 28 2025 at 10:03pm
“group of we libertarians”
Now THAT is an oxynoron. Let me help. A voluntary association of like-minded libertaroan individuals — FTFY
David Seltzer
Jul 29 2025 at 8:26am
Craig, good catch. Thanks for the fix. It was an unexpected surprise…lol. BTW. The investment bank of Dewey, Wynn and Howe is underwriting an Initial Private Offering of shares to finance the purchase of Libertaria. If interested, our Compliance Officer, James Nasium, will send you a prospectus forthwith.
Craig
Jul 29 2025 at 10:01am
Conflict; partner with Dewey Cheathun & Howe
😉
Matthias
Jul 29 2025 at 3:08am
Our politicians didn’t make your statement (as far as I can tell), but I don’t think anyone in Singapore was about to commit the folly of ‘reciprocal’ tariffs.
Roger McKinney
Jul 30 2025 at 12:50pm
I asked one of the indexes of economic freedom to recalibrate their index to say the 1920s so that people could see how much freedom we had lost. They said they didn’t have the funds. We live in a world of socialism. We haven’t had capitalism in the U.S for over a century.
Robert EV
Aug 1 2025 at 1:35pm
They should also look at the freedoms that the median and mode people can exercise. Economic freedoms don’t necessarily trickle-down, and if they do, it will be to such a limited extent that it shouldn’t be weighed equally with more basic economic freedoms.
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