Value and Exchange

Some distinguished theorists have lately entered into a debate over the merits of free trade after two of them had suggested that "free trade has necessary conditions" and "today these conditions are not met". In particular, they mean that David Ricardo's law of comparative advantage don't hold if the "factors of production" are free to move around, particularly if money and laboring persons are able to move faster than goods. Thus, in a way, this argument says that since people are free to move around, move their money around as well as their goods, free trade is bad. But how can it be that free movement of persons, money and goods is bad for free trade? How can it be that free trade is bad for free trade?

The citizens of the US are not made richer by raising taxes or other barriers to foreign consumption goods, writes Robert Murphy, and this is true whether factors of production are immobile (as Ricardo assumed) or mobile. We should not fear the cost-cutting advancements in data transmission, or the improved skills and education of foreign workers. On the contrary, we should welcome these developments because they mean lower prices for imported goods and services, and hence a higher standard of living for Americans.

The case for free trade is based on David Ricardo’s principle of comparative advantage. Ricardo addressed the question how trade could take place between country A and country B (England and Portugal in his example) if country B was more efficient in the production of tradable goods (cloth and wine in his example) than A.

Writes George Reisman: If we follow the line of Schumer and Roberts, and their avowed mentor, Keynes, and instead of allowing ourselves to benefit from the competition of the rest of the world, seek to impede others' progress, we should not be surprised if we end up finding much of that intelligence and ability turned against us, in producing the weapons of future wars rather than the better and more economical consumers' goods it can and wants to produce and which we want to consume.

No, there are no economic agencies in this country like Gosplan, but the U.S. Government, as well as many state and local governments, engage in central economic planning all the same. As Bill Anderson tells us, in the end, it is still central economic planning and, not surprisingly, it does not work any better here than it did in the U.S.S.R.

The exchange rate is a measure of the relative value of these two currencies, not the value of the dollar or the euro per se. Perhaps the value of dollar and the euro have risen lately but the euro a bit more. Richard Johnsson believes that both have lost in value since mid-2001, only the euro has lost less than the dollar.

In a wide-ranging interview Sudha Shenoy comments on her decision to become an economist, the influence of Rothbard and Kirzner, the politics of Hayek, current trends in global trade, US protectionism, the bad turn in economic theorizing, and the need to resolve the conflict between Islam and the West.

Jobs are not being shipped, and Americans are not somehow being stopped from making TVs, writes Lew Rockwell. TVs can still be made in the US. Everyone and anyone is free to invest the money, hire the workers (bidding them away from other pursuits), buy the parts, build the sets, and put them on sale. That the same processes are undertaken in China has no bearing on anyone's freedom to do it here. If you want to make an all-American TV, no one is stopping you.

The newest trade deals involving American corporations and the Chinese government look less like free trade and more like mafia thuggery, writes Jude Blanchette. Using the threat of trade sanctions, the U.S. government has bullied the Chinese into purchasing billions of dollars in goods from only a few corporations. Just as the mob would exact tribute, the U.S. government is now playing the part of the mob and the Chinese government playing the hapless storeowner.

Hans Sennholz writes: No central bank on earth, not even the Federal Reserve System, can continually inflate its currency and defy market rates of interest without harming both its currency and the economy. Inflation tends to accelerate and ultimately destroy the currency and cripple the economy. And no government whatsoever can suffer budget deficits of half a trillion dollars annually without impairing its standing with its creditors.