Wednesday, September 16, 2009

Don Boudreaux Demolishes Protectionist Author

As if on cue, following the previous post, my question about which Adam Smith Chicago or Kirkcaldy is challenged is partly answered by Don Boudreau of Café Hayek HERE: under “Witless on Trade

Don Boudreaux writes many of the best, brief, articles on free trade and competition in the main stream media today (that is, when his witty letters are published by the editors).

Consider this one, which he sent to the Financial Times (15 September):

According to Mr Prestowitz, the case for free trade relies on the validity of “the assumptions that the markets are perfectly competitive, that exchange rates are not manipulated, that there are no economies of scale, that there is no cross-border investment or cross-border transfers of technology, and that there are no government subsidies or export requirements.”

But with the possible exception of the assumption about economies of scale – an assumption that even its notable champion, Paul Krugman, regards as being academic rather than practical – the case for free trade in no way depends upon any of these assumptions. For example, although free-trader Adam Smith well understood competition, he never heard of “perfect competition” (as the model wasn’t developed until the 1930s). And even if he had heard of this model, Smith would have understood that free trade’s benefits are positive even when industries are not (as they never are) ‘perfectly competitive.’ (The supermarket down the street from me doesn’t compete in an industry that’s ‘perfectly competitive,’ yet I gain every time I choose to trade with it – as I frequently do.) …

… Not a thing in Mr Prestowitz’s poorly reasoned, factually inaccurate, and economically uninformed essay justifies Uncle Sam’s efforts to penalize American consumers who wish to purchase imports from China

Donald J. Boudreaux produces similar brief rebuttals to protectionist propaganda regularly and I recommend that you bookmark Café Hayek and scan his posts for excellent economics (and a good knowledge of Adam Smith too).



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