Free Trade Parable

ARNOLD KLING'S PARABLE of free trade:

The challenge is to make an argument for free trade in terms that everyone can understand. Perhaps a parable is in order. Perhaps we could start with "Once upon a time," and describe an economy that works like ours today. But we decide that free trade has gone too far.

First, we enact national protectionism. Then, the "buy local" movement catches on and leads to effective elimination of the Constitutional provisions against trade barriers within the United States. Cities and states start enacting tariffs, quotas, and trade subsidies.

Finally, the movement moves toward its logical conclusion: only buy products made in your own household. People give up computers, cars, packaged food, electricity, and plumbing. We go back to subsistence farming and hunter-gathering.

Notice that the advantages of free trade are not described in this parable directly in terms of comparative advantage. The advantages of free trade in this parable seem to be due to the division of labor, even though this concept is not explicitly described. The advantages of free trade in this parable seem, perhaps, to rely more on what I've described in class as the broadening or deepening of the network on which we individually depend in our daily lives.