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Freedom first

By Isabel Wu
web posted September 24, 2018

Milton Friedman in Chapter 2 of Free to Choose explains a concept almost universally agreed upon: free trade is beneficial. It makes sense to me as someone who used to host trade days with my sisters where I would gather all my toys I was bored of and then trade them for my sisters’ toys they no longer wanted. As mentioned by Timothy Taylor, only when both parties believe they benefit will they make an exchange. And yet trade is still restricted under the euphemism of protection. One of the reasons Friedman gives for the prevalence of tariffs (which tax the foreign good in order to discourage the purchase of that product) is that people would like to believe they protect American workers, domestic production, or infant industries. I agree with Friedman that all of these instances where tariffs are purported to act as protection are flawed. It’s difficult to look past the surface to see the underlying damage or benefit that lack of trade or trade brings to Americans.

One of my friends was telling me about a train project he was advocating for. Even though it would likely take a lot of maintenance and wasn’t a very efficient route, he argued that the repairs would provide jobs for train repairmen and he really liked the idea of such a fast train. I enjoy thinking about these kinds of things and I’ve heard of this idea called the broken window fallacy and I think that sort of explains why supporting inefficient jobs hurts far more than it helps. I asked him where the money for the extra repairs would come from. Well, they’d probably come from whoever managed the train, and they would have to pass the costs onto either the consumers or cut their own incomes. Either way, someone would have less money to spend on something else. Maybe the train operator who had his income cut was planning on buying one of those new-fangled transportation devices from the up and growing, competitive transport industry. Technically, everyone could probably have jobs if we tried to keep up a whole bunch of old machines but that would mean losing the ability to spend on better things.

So, tying that idea back to what Friedman said about tariffs, when tariffs prevent American consumers from buying cheap Chinese tires on the less efficient American tire industry, these American consumers are spending perhaps an extra $10 on an inefficient industry they would’ve otherwise spent on perhaps supporting a certain other American shirt brand that happens to be cheap and high quality. Or maybe American car manufacturers are hurt because they can’t buy the cheap Chinese tires and instead have to buy more expensive American ones.

I suppose you could also see these downstream effects as the opportunity costs of tariffs. If the US government believes tariffs are the best choice because of the jobs they save, the next best alternative would be no tariffs because of the benefitted jobs in industries with higher competitiveness. And even though to me it seems pretty clear that the opportunity cost is greater than the choice to impose tariffs, it’s easy to point at the superficial benefits of a policy made rather than to something a little further down the line. Or maybe the government does see the benefits of international trade, but is simply without some kind of free trade agreement won’t take the first step.

Something that Milton Friedman says that really resounds with me is the true idea of what freedom is. He says that “We believe in freedom and intend to practice it,” but “We cannot force you to be free.” And he proposes unilaterally opening our trade borders so that these free exchanges, this “cooperation among individuals can be worldwide and free.” ESR

Isabel Wu is studying AP Macroeconomics in high school. This is her first contribution to Enter Stage Right. © 2018 Isabel Wu.

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