Why Do We Trade?

Column for week of April 14, 2014

     Trading is at least as old as recorded history, most likely
older.  Even subsistence farmers trade.  In our specialized
industrial society each individual consumes little of what he
produces while producing little of what he consumes.

     Individuals producing for their own consumption is such
a small part of production that economists feel free to ignore
such production when calculating the Gross National Product
(GNP).  People still produce for themselves.  Who among us
would even survive without the goods produced by others?

     Why do we prefer to produce for others rather than for
ourselves?  By specializing and each only doing what he does
best we greatly increase productivity.  There is more for
everyone.

     Imagine that you divided your time among producing all
the things you have.  How many of those things could you
produce for yourself?

     We have three options for getting things produced by
others  --  gifts, theft or trade.  We are likely to come up a bit
short if we sit around waiting for others to give us what we
want.

     Granted, more and more people are choosing this route. 
Mostly they wait for government to take from others and give to
them.  If we continue this trend, soon there will be little left for
government to take and give.  Relying on direct theft by
consumers has no brighter future.  If we are to prosper we must
produce and trade.

     There are two possible kinds of trade -- coerced trade and
free trade.  In free trade we trade because we want to.  It takes
two to trade.  The only reason to freely trade is that both parties
believe they gain by trading.  In coerced trade individuals trade
because they fear that someone will hurt them if they don't trade,
or if they make the wrong trades.

     With all of the government restrictions on trade, fully
free trade is all but extinct.   People who believe they are
engaging in free trade probably aren't.  An individual may freely
choose to make a trade.  Still, he is only choosing from the
options government allows.  Would he choose the same trade if
government hadn't eliminated many of the possible options?

     Some claim there is good trade and bad trade.  Bad trade
supposedly hurts others.  All trades affect others.  If we ban
trades merely because they affect others, we must ban all trades. 
The consequences of eliminating trade would be that the few
survivors would all be reduced to being self sufficient
hunter-gatherers.

     Most opposition to free trade is from two sources.  One
is wasteful, inefficient producers trying to rip off consumers by
eliminating competition from those who serve consumers better. 
The other source is people who see only the detriments of trade
and miss the benefits.

     When consumers switch to different suppliers, the old
suppliers lose jobs.  The near endless list of job losers includes
weavers, buggy makers, telephone operators, and most farmers. 
Much of what we have today wouldn't exist if workers still
labored inefficiency in those old jobs.

     Some people get upset if the new jobs are in another
country.  Supposedly we are exporting jobs.  The only way we
export jobs is if imports are gifts.  Otherwise, someone must
make something to trade for the imports.

     When we buy cameras from the Japanese, someone in the
USA must make something to pay for the cameras.   If the
Japanese lend the camera money to the US government, or
someone else, we must produce something for the borrower.  All
we have done is trade less productive jobs for more productive
ones.  Free traders won't trade unless trading increases
productivity so that they get more by trading.

     It doesn't matter where the people we trade with live. 
We, and they, benefit from free trade.  The only losers are
exploitive special interests who can gain by denying us the
benefits of free trade.  Those losers are loud and have lobbyists.

aldmccallum@gmail.com
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Copyright 2014
Albert D. McCallum