International trade, it is commonly said, has winners and losers. Consumers in the U.S. gain when they buy wine imported from France while winemakers in California lose. C’est la vie, counsel economists. Nothing should be done about this situation. The reason is that it’s also commonly said – at least among those of us in the economic know – that the winners’ gains from free international trade are easily shown to exceed the losers’ losses, thus making trade efficient. Economists call this outcome “Kaldor-Hicks efficient.” Because the winners’ gains exceed the losers’ losses, the winners could in principle fully compensate the losers, wiping out the losses while still leaving net gains for the winners. Therefore, even without actual compensation of the losers, free trade makes society as a whole better off despite the fact that some individuals suffer net losses.
Crack open any textbook in international trade and you’ll find that the author, when presenting the normative case for free trade, almost certainly offers an argument similar to the one in the previous paragraph.
This argument is sophomoric utilitarianism and, hence, unconvincing. “Why,” a serious trade skeptic asks, “should we tolerate policies that allow some people – even a majority of people – to gain at the expense of other people?” Good question. It’s one the economics-textbook author cannot answer.
Fortunately, the common claim that “trade has winners and losers” is emphatically not correct.
One way to see the flaw in this claim is to recognize that trade is merely one among countless different sources of economic change. There’s nothing unique or special about trading with foreigners that causes some businesses to lose profits and some workers to lose jobs. Every change in economic activity has these effects. If Americans have fewer babies, Americans buy fewer diapers, thus causing profit and job losses among American producers of diapers. If Americans come to enjoy taking more meals at home, they buy fewer restaurant meals, thus causing profit and job losses in American restaurants. Improvements in automotive technology over the years have reduced the demand for neighborhood garage mechanics.
The polio vaccine wiped out lots of jobs in factories making wheelchairs, leg braces, and crutches.
In light of this reality, if someone wants to continue to describe trade as “having winners and losers,” that person – to be consistent – must describe every economic change, such as the introduction of the polio vaccine, as having winners and losers. This description proves that there is nothing unique about international trade.
But there’s a deeper reason why it’s wrong to say that trade has winners and losers – namely, losses differ from costs. There are indeed costs to be borne by participating in commercial society, but these costs are not losses.
Someone who truly loses from trade is someone whose life would be better if she had never been part of a society in which trade occurs. If the worker whose job is destroyed by imports would, in light of this job loss, have had a better life had she lived in a country that had no international trade, this worker might fairly be described as being among trade’s losers. But if this person’s life, even given her loss of a job, is on the whole better than she would have experienced had she lived in a country with no foreign trade, describing her as being among trade’s losers makes no sense. Living in a country whose economy is connected to the global economy ensures that her access to goods and services – and, likely, to another job – is almost certainly much greater than that access would be were her country never to have had commercial contact with foreigners.
It might be true that had the particular imports that destroyed her job never been admitted into the country she would have been better off than she finds herself with the imports allowed in. But if, as is almost certainly the case, her life overall is so enriched by trade that her life, taken as a whole – even taking account of her job loss – is better than it would have been had her country been autarkic, then she is no loser from trade.
One reason why innovative, commercial free markets produce such an abundance of material goods and services for ordinary people is that consumers, not producers, call the shots. A foundational rule of a market economy is that consumption is an end, and production is a means of achieving this end. Anyone who wishes to enjoy the (ample) benefits of a market economy must agree to play by this rule. But playing by this rule has its costs, one of which is the risk that, in your role as producer, you must adjust to the demands of consumers.
The worker in a market economy who loses her job to imports – or to labor-saving technology, or simply to changes in consumer tastes – pays the cost of admission and participation in this economy. Of course, this worker would prefer not to pay this cost. But all benefits in our valley of eternal scarcity come with costs. Payment of this particular cost is no more a loss than is, say, my paying my monthly mortgage bill: I’d prefer to be relieved from the obligation to make this payment. But I’m nevertheless thrilled that I had the opportunity to agree to incur this monthly cost, for otherwise no one would have loaned me money to buy my home.
My monthly mortgage payments aren’t losses; they’re costs incurred for the greater benefit of borrowing money to purchase a home. Likewise, a worker whose particular job is destroy by economic change doesn’t suffer a loss; that worker, instead, pays the cost of participating in an economy that promises a material bounty unmatched by any other kind of economy. This worker, even having lost a good job, remains far better off living in an economy with trade than she would be were her economy cut off from the rest of the world.
Donald J. Boudreaux is Professor of Economics, George Mason University. He blogs at Café Hayek (www.cafehayek.com).
READER COMMENTS
nobody.really
Jul 17 2024 at 4:16pm
I agree with the thought. Likewise, the person who is mugged doesn’t suffer a loss; that person, instead, pays the cost of participating in a society with sufficient freedom that even muggers can roam around. That person, even having lost her purse, remains far better off living in a society with freedom than she would be in a society with a sufficiently dominant police-state that no one could ever engage in mugging.
In sum, we face trade-offs. The choice to characterize a trade-off as a “loss” is to some extent arbitrary. And I expect we all do it.
Douglas Adams, Hitchhikers Guide to the Galaxy (radio script)
Over-reasoned
Jul 17 2024 at 5:29pm
This example is amusing to me since it simultaneously serves to make a plausible nuanced point while also being a reductio-ad absurdum of the original argument.
Being mugged is most naturally a loss. It’s true that compared to a dystopian police state it’s only a cost. But why should that be the only point of comparison? Instead of an all-or nothing police state, why isn’t the relevant comparison a state with just enough policing to prevent or significantly reduce the likelihood of the mugging? Most actual muggings probably don’t require a dystopian police state to prevent. There are often reasonable steps in between that could have avoided the mugging without imposing the extraordinary costs of dystopia. If the victim compares the case to that counterfactual then, she has suffered a loss and not merely a cost.
But once we go down that road we’ve undermined the entire point of the original example. The problem is that the example depends on an all or nothing comparison. One, which we are all too familiar with being abused. As an authority, I can excuse our shoddy police work as a mere cost to you since compared to a lawless state or a dystopian authority you’re far better off so stop complaining about your supposed “losses” and just accept the costs of our righteous authority regarding free-trade or free-movement.
Don Boudreaux
Jul 18 2024 at 10:56am
nobody.really correctly points out that the distinction between costs and losses rests on a normative theory of mine and thine. A mugger takes from you that which, in our society, is regarded – both in ethics and law – to belong to you. As a mugging victim, you suffer a genuine loss. (It remains true that, if you know that there is some significant chance of being mugged while walking at night through a park, you incur a cost by deciding to walk in that park at night.)
In contrast, in our society jobs and customer patronage are not regarded as property rights – although politicians and pundits frequently talk of jobs as such (but usually only against foreigners, not against fellow-citizen competitors or technology, thus showing the flimsiness of the ‘reasoning’ that motivates such talk). It follows that a worker who loses a particular job because of changes in the pattern of consumer expenditures, or because of the introduction of labor-saving technology, loses nothing to which he or she is entitled either legally or ethically. The “loss” is not of a property interest, so no wrong has been done to this person. This person suffers no loss that economics, ethics, or law requires be compensated. And because this worker should understand that he or she has no property right in his or her job, by choosing to work that job that person thereby chooses to incur the legitimate risk of being laid-off from that job.
Another way to look at this matter is that this worker, by choosing to participate in the modern economy through working in a job that is subject to the legitimate forces of the modern economy, is already compensated for taking this risk. The compensation comes in the form of the greater access this worker enjoys to the goods and services that would be off-limits to him or her had that worker chosen not to participate in the modern economy, or had the government suddenly put an end to all economic change.
nobody.really
Jul 18 2024 at 12:35pm
Well argued–but then we encounter the Douglas Adams (and C.S. Lewis) argument: People do nothing to call themselves into life. They often do nothing to maintain the huge variety of circumstances requried to maintain their life (for example, maintaining gravity or the air supply). Yet these same people perversely feel a sense of loss when they face their imminent deaths–especially deaths at a young age.
Contrary to Thomas Jefferson’s claim, men are NOT endowed with an unalienable right to life. Perhaps my heirs are endowed with a right to pursue a claim against those who would wrongfully alienate my life. But litigants may find it difficult to obtain personal jurisdiction over landslides or God.
Gilbert & Sullivan’s Yeomen of the Guard (1888)
Knut P. Heen
Jul 20 2024 at 10:04am
Opponents of free trade favor market privileges to favored groups. That is mugging. They steal my right to trade with whoever I want to.
David Seltzer
Jul 17 2024 at 4:32pm
Don: Good stuff. “This worker, even having lost a good job, remains far better off living in an economy with trade than she would be were her economy cut off from the rest of the world.”
Yes because in an economy engaged in global trade, at the margin, workers have skills that are portable. She may go from Silicon Valley to Cambridge Mass or Taiwan to find employment. In terms of costs to one seeking employment, tariffs and restrictive zoning laws probably increase them.
Bob Lawson
Jul 17 2024 at 5:05pm
Every student who enrolls at TCU, Baylor, and UTD costs jobs at SMU. I demand these students be stopped from importing educations from these schools to protect jobs at SMU!
steve
Jul 17 2024 at 9:38pm
It’s a big world so I suppose there are people who oppose all trade, but I think that’s mostly a straw man case. I also think that people understand and accept that in general the world changes and that people will lose jobs because you no longer need buggy whips, but the new jobs replacing buggy whips remain within your own area or nation so that you might possibly have the ability to compete for the new jobs, or at least your kids might. In the case of international trade your job disappears overseas not because of change in technology but because a company can make more profits by moving overseas. There is no new job available for the worker in the new industry as there is none.
The other big issue is the time factor which economists tend to ignore. Many particular jobs gradually disappear to be gradually replaced by new ones. In the recent case large numbers of jobs disappeared over a short period of time. Large groups of people were left without work. Eventually new jobs may move to those areas but that may take a while. You want to call this a cost for living in our robust economy, but its a cost not borne equally be everyone and in context its a relatively new cost. Jobs being shipped wholesale out of the country is a relatively new phenomenon.
Steve
robc
Jul 20 2024 at 12:08am
The only reason you can make more money moving jobs overseas is because of a change in technology.
My morning (to me) meeting in Colorado for a Florida company has people in Malaysia and Eastern Europe. Zoom made those jobs possible (for them and for me).
Thomas L Hutcheson
Jul 17 2024 at 11:08pm
Yes. Trade is no different from another economic even that creates winners and losers. The deference between “cost” and “loss” would have zero weight in the utility function I use to judge outcomes.
Don Boudreaux
Jul 18 2024 at 9:45am
Mr. Hutcheson: You might not find any difference between “costs” and “losses,” but such a difference is found in ethics, economics, and law (if not, admittedly, always in common language). If I pay $20 for a meal at a restaurant, I incur a $20 cost; I’m sure that not even you would say that I incurred a $20 loss. The fact that I would have preferred to receive my meal for free doesn’t turn the $20 expense that I voluntarily paid for that meal into a loss. However, if I were already entitled to that meal – let’s say that someone had prepared the meal for me as a gift – and then some brute came along and took it from me, then that meal, worth $20, would be for me a $20 loss. Likewise if the brute credibly threatened to deny that meal to me unless I paid him $20.
In the law, if I damage an interest in your property – say, I destroy your garage – I inflict on you a loss. This loss is remediable at law; I must make you whole. If, on the other hand, you took out an equity loan to pay for the building of your garage, with the garage serving as security for the loan, and then you refused to repay the loan, the seizure from you by the mortgage holder of your property would not be reckoned at law to be a loss for you. Your being stripped of your garage in this case is simply the cost that you incurred by not living up to your end of the bargain.
By refusing to distinguish costs from losses simply because the subjective experience of these two are often identical leads to all manner of confusion.
Don Boudreaux
Jul 18 2024 at 11:31am
I wrote carelessly in my reply just above to Mr. Hutcheson. I meant to write, not that he sees no difference between “cost” and “loss,” but that he attaches no weight to the difference between the two. His point – which I grasped but did not fairly convey in my reply – is that the subjective experience of “costs” and “losses” is (at least very often) identical and, thus, whatever differences do or might distinguish “costs” from “losses” carry no weight for him.
My point is that, while of course it’s true that the subjective experience of a “cost” is often indistinguishable from that of a “loss,” there nevertheless is – and there ought to be – a difference between “costs” and “losses” ethically, legally, and economically. The failure to distinguish between the two sows much confusion.
Thomas L Hutcheson
Jul 19 2024 at 10:26pm
Thanks for the clarification and it should lead to one of my own. When I referred to the identity of cost and loss in my utility function, I meant but did not say, that it was a function for judging policy changes. The owner of a protected firm I would say incurs a loss from the removal of the protection as his income falls. I claim this is a loss even recognizing that he has no proprietary right to the protection. Although it is a loss, I maintain that it is more than offset by the gain of the consumers of his output and of exporters whose Lerner tax has fallen, but net of the loss of government revenue from the tariff.
Likewise the owner of a firm producing an import substitute looses if shipping rates fall enabling their foreign competitor to reduce the import price of the imported good. As before, however users of the import substitute gain by more. Real national income has risen.
Don Boudreaux
Jul 18 2024 at 6:02am
Steve: In the U.S., international trade today is responsible for at most ten percent of job churn, with the number likely being closer to five percent. International trade is therefore a minor source of job destruction. To single out jobs destroyed by trade – meaning, jobs destroyed by consumer choice – as a categorically distinct source of job destruction is simply mistaken. All economic change destroys some jobs as it – if markets are reasonably free – creates others.
It follows that if one is to impart substantive meaning into the claim that “international trade has losers,” one must credibly identify a categorical distinction that separates the economic change caused by international trade and the economic change caused by the many sources of such change other than international trade. Absent such a distinction, to say correctly that “international trade has no losers” does not require that the comparison be with a world of autarky. The correct comparison, instead, is with the countless sources of economic change (and, hence, of job losses) other than international trade.
I respectfully submit that the argument in my essay features no straw man.
steve
Jul 18 2024 at 9:58am
Your claim is that there are no losers. If you want to change that to say that there are fewer losers than we have with normal job destruction that would be fine. However, we do have an identifiable group that lost jobs when their companies moved overseas. The huge majority of those will not find a job right away so they lose money. Many will jobs that pay less. Many will never find work again.
I think free trade is a good idea and your writings in particular have been pretty convincing but this piece was disappointing. Free trade is good for overall economic growth from which we all have some benefits, but there are costs that are concentrated onto a specific group of people.
Steve
Don Boudreaux
Jul 18 2024 at 10:07am
Steve: I’m sorry, but you’ve identified nothing unique about trade. All economic change creates what you want to call “losers.” If it’s true (which it isn’t) that most or even a sizable portion of workers who lose jobs to imports will never again find employment, then it is equally true that most or even a sizable portion of workers who lose jobs to other sources of economic change will never again find employment. You seem to think that workers who lose jobs to imports uniquely have a more difficult time adjusting to economic change. What’s your logic for this assumption? Any evidence for it?
Don Boudreaux
Jul 18 2024 at 10:22am
One more point for now: Let’s suppose – again, contrary to fact – that workers who lose jobs to imports, as compared to the much larger number of workers who lose jobs to domestic economic change, generally have a more difficult time finding new jobs. Presumably this reality (were it reality) would be widely known, including to workers. (Steve, after all, thinks that he knows that this is so.) With this knowledge known to at least enough workers to affect wage rates, wage rates in industries that compete, or are likely to compete, with imports would thus rise. The resulting wage premium would reflect the higher risk of working in such jobs. Choosing to work in these jobs, and to be compensated for doing so, would render workers who lose their jobs to imports, not losers, but simply workers who pay costs for their choices.
steve
Jul 18 2024 at 3:43pm
I am not sure why there has to be anything unique about trade. Industries change all of the time and sometimes we have losers. One day you are making $30/hour at your factory then the job disappears. 8 months later you are working in a warehouse at $14/hr. In that case you are a loser. It can happen because your product is obsolete or many other reasons but also because your job went overseas, in which case you are still a loser.
I dont know the numbers but I know my family. 2 cousins had their jobs move overseas. One got another job year later after living off of savings. He sold his house at a loss since no one wants to buy a house in an area without jobs. Is renting a new place. Pay is about 20% less. The other opted to not move and after a couple of years found a job paying about 25% less and no benefits. Seems to like they lost. Even if more new jobs were gained than were lost by jobs moving overseas they dont appear instantly, they may not pay the same and the costs of moving may be high.
“would render workers who lose their jobs to imports, not losers, but simply workers who pay costs for their choices.”
If that is what you want to go with then I guess I have to agree that no one is ever a loser, not just in trade but in anything. I do wonder though, how are workers supposed to know they are choosing jobs that might move overseas?
Steve
vince
Jul 18 2024 at 11:56pm
Good question. Free trade is great, but why should our country be subject to the vagaries of industrial policies of other countries? There’s a reason one of the Ricardian assumptions of comparative advantage is that labor is costlessly mobile across industries within a country. Not so in the real world. How are these costs identified and measured? Here’s an article exemplifying some of the difficulties:
https://www.washingtonpost.com/politics/2019/07/15/free-trade-doesnt-just-lead-job-loss-it-means-higher-deaths-drug-overdoses-more-military-recruitment/
Here’s another relevant article on dislocation costs:
https://foreignpolicy.com/2019/10/22/economists-globalization-trade-paul-krugman-china/
robc
Jul 20 2024 at 12:18am
I can answer that last question, my previous employer was in food manufacturing, those jobs, for many reasons, were not getting shipped overseas.
Jon Murphy
Jul 20 2024 at 10:58am
Because that is the claim put forth by those who want to reduce/eliminate trade. Indeed, not too long ago, I saw an individual argue that the negative effects that come from unemployment only occur when jobs are lost via trade becase Americans don’t mind if another American gets “their” job.
People are extremely perceptive. It’d be a mistake to assume people are unaware of the conditions surrounding their jobs. Indeed, a quick conversation finds workers understand the world surrounding them far better than many (most?) “men of system.” Protectionists seem to have no idea what jobs are affected by trade and which are not (this is evidenced by Trump’s steel tariffs, which directly weakened American manufacturing and led to job losses of many manufacturers).
robc
Jul 20 2024 at 12:14am
Those job “losses” arent a loss, as the employee had no right to continued employment. Its no more a loss to be laid off due to job moving overseas than to not get a job in the first place.
Jim Glass
Jul 19 2024 at 5:09pm
I’m extremely all for free trade. So I must object that this sort of rhetoric *hurts* the free-trade cause among those most in need of convincing…
“I used to have a good career in the textile industry along Mass Route 128. Then textile trade opened up and the whole industry was wiped out. Now I’m on welfare living in my cousin’s basement. And you are saying I *haven’t* suffered a loss? Compared to if I was living in some phantom dystopia ‘cut off from the rest of the world’? WHAT?? ” Moreover, do you limit this argument to trade? Say it is 2009…
“I’ve been wiped out in the real estate crash. But you say I *haven’t* suffered any real ‘loss’ — compared to living in some poor backward country with no property rights in real estate? Like Mao’s China?? Then what is this 7-figure ‘loss’ on my balance sheet that my accountant, lawyer and the bankruptcy judge keep talking about?”
To the people who need to be convinced to support trade — the losers and their sympathizers — this argument is even worse than “Trade is good because gain to the winners exceeds the losses to you losers”, as it adds, “plus, you losers really haven’t lost at all but are actually better off for having had the opportunity to suffer your losses. We winners will now explain this reality to you losers, and teach you how you should be be grateful for being so better off for having had this opportunity. Just imagine if you all were living in the Congo.”
Tell that to people who have suffered real measurable $$$$ losses and their allies. Watch them pick up pitchforks and torches and march out to support Trump and his 60% tariffs.
Don Boudreaux
Jul 20 2024 at 12:10pm
Mr. Glass: I get what you’re saying. If my goal were sell free trade to today’s voters, I’d write and talk differently than I do. But my goal is to get to bottom of the truth, as best as I can discern it, of economic matters, and then to tell that truth as clearly as my poor talents allow.
No one who loses a job will be mollified by an abstract argument that shows that that job loss is part of a larger process that generates gains for most people – and even, over time, for the individual who loses his or her job. This reality holds if the job is lost to imports, to technology, or simply to changes in consumer tastes having nothing to do with trade or technology.
Yet this person, at least in America, who loses a job nevertheless likely feels uneasy complaining too much about technology or changes in consumer tastes. This person doesn’t know the source of this unease, but it comes from the widespread acceptance by fellow Americans (and likely also by this person) that none of us has a right to prevent others of us from using new technology or from changing our preferences.
Yet there is no such unease about complaining about the consequences of trade – which consequences, in fact, differ economically not one whit from changes in technology or consumer preferences. It is an appropriate task of the economist to point out this inconsistency regardless of the emotional state that performance of this tasks elicits in others. As a purely scientific matter, I stand by my argument, and wish that it be judged on those grounds rather than on how well or poorly it will be heard by workers who lose jobs to imports.
And here’s a hope: if people can come generally to accept, however grudgingly, that complaining about jobs lost to technological advances or to changes in consumer tastes is unseemly, then they might one day come to have the same attitude about complaining about jobs lost to trade. But this latter, happy development will never occur if, because we don’t want to offend the feelings of people who lose their jobs to imports, we persist in the lie that there is a categorical difference between trade and other sources of job losses.
Don Boudreaux
Jul 20 2024 at 1:51pm
Mr. Glass: I’ve two other, related thoughts.
First, I believe that precisely because too many people have been unwillingly to point out that losing jobs to imports is absolutely no different than is losing jobs to other sources of economic change (most of which, especially in a country as large as is the United States, are purely domestic) that people who today lose jobs to imports react in the way that you correctly understand them to react. It’s a reaction based upon a faulty understanding of economics, and a defective ethic. The longer we persist in refusing to acknowledge that there is nothing unique about trade at destroying particular jobs, the more difficult will it be to persuade the general public to accept that a policy of free trade is truly in their best interest, for they will continue to mistakenly believe that losing jobs to imports is unjust because they think that such job loses are out of the ordinary.
Second, I suspect that you would not have objected to my post had it been about how free markets have no losers. Socialists and many people on the progressive left (and, admittedly, increasingly more people on the conservative right) might argue today that free markets have winners and losers, but very few regular readers of EconLog would say or believe such a thing. Economically and historically informed people understand that everyone alive today in market-oriented societies is far better off materially than he or she would have been were that person born and reared in a communist society or any where at any time prior to 1900 (if not even more recently). My confident guess is that you share with me the belief that no one alive today in the U.S. is worse off – indeed, not better off – than he or she would be if he or she lived in a non-market society.
And yet you and I also understand that there’s enormous job churn in market economies. If you encounter someone who lost his job, say, repairing automobiles because automobiles have become less likely to break down, would you describe this person as among the market economy’s losers? Would you criticize me if I were to point out that this person, despite his loss of that particular job, continues to reap enormous gains from living in a market economy? My guess (hope!) is that you’d do neither. If my guess is correct, why treat the person who loses his or her job to imports differently?
Michael D. McAuley
Jul 21 2024 at 5:44am
Don’s original post and this response were superb and, as usual, beautifully articulated. I’ve forwarded the original article to friends, who have universally admired it.
Daniel B.
Jul 21 2024 at 8:58am
I support free trade and free markets, and I’m a fan of your blog, yet I’m afraid I don’t see why any supporter of the free market should believe this. Is it really true that if, for example, I weren’t dictator of the United States today, I couldn’t make myself and my friends better off than we would be if we were in the current United States or a much more free market one? Or if I were dictator of the US in 1890 (i.e., before 1900), is it really true that it’s impossible – or even unlikely – that every single one of the descendants of the friends, family, etc. I give my plunder of the taxpayers to wouldn’t be better off today? (Maybe I could write some rules that benefit those friends and their descendants, which end up surviving to the modern day, because of the difficulty of removing laws once interest groups form around them. Or… perhaps instead I could avoid being dictator entirely, and instead work with others to persuade the legislature to pass such laws…)
I hope we can agree on how stringent the claim in the above block quote is. If I understand the claim’s logic right, if anyone could find even just one example of how someone “alive today in the U.S.” is better off they “lived in a non-market society,” then of necessity it would be the case that the idea “the free market has no losers” is false. I believe such examples can be found. For example, the salary of a dictator is probably higher than it would have been in a free market society (whether that means an anarcho-capitalist society or something else seems moot here and doesn’t really affect the point). Similar with those who work in the sectors the dictator favors.
I mean… this is a rather stringent claim about a country of over 320 million people. I struggle to see how you know that every single one of those people could not have been better off in some non-market society. I find it very likely, given my dictatorship examples, that at least one person would’ve been better off overall (considering not only money, but other things as well) in a non-market society.
Let’s be frank with each other. Who cares whether the pain and hassles we suffer under the free market because of economic competition, changes, etc. are supposed to be called “costs” or “losses”? In either case they are said to be (if I might quote you) “incurred for the greater benefit” of something else. What difference does it make, might I ask? Maybe the idea is that “costs” (but not “losses”) is supposed to refer to “the risk that, in your role as producer, you must adjust to the demands of consumers.” If I might borrow an example from this paper I partly skimmed, if someone knowingly chooses to move to a high crime area (thus taking advantage of the probably lower property prices there), well, he surely still has rights not to be stolen from, even though he voluntarily took the risk of being a victim of theft. He still has the right to be protected from theft despite voluntarily taking the risk. Yet a businessman who takes the risk that technologies won’t shift in a way that puts him out of business – something which we both agree, for example, many makers of horse carriages surely did, before the automobile was invented – is not considered to have a right to be protected from the harm of bankruptcy when it happens. It can’t be that voluntary risk taking explains why the one can have a right of protection against harm and not the other, since both are doing that. So some other explanation for this difference is surely required.
I’m afraid this “costs” and “losses” terminology is too semantic for my and probably most other people’s tastes. Economic competition can and does cause harm and suffering, whatever we choose to call it, and that’s what matters more than what terminology we use to describe it. If I might quote the aforementioned paper (emphasis added):
I find these statements rather forceful. Let’s go to your automobile repairman example. How could he not be a loser? The financial loss is a true loss. There’s a reason why capitalism is called a profit and loss system. If he’s not supposed to be called a loser, then so what? He’d just be someone who’s winning less than other people in the market society, because of harm that he suffered. He does reap gains from being in a market society, but he’d reap even greater gains if he were dictator of the world, or if his friends were (assuming they want to practice nepotism, give him power, influence, and money, etc.). I’m sorry for rambling (hopefully I don’t sound aggressive or rude) but I just cannot see how I’m supposed to accept the idea that free markets don’t have losers. (I see how free trade makes the world better off overall, though, which is one reason to support it.)
George
Jul 20 2024 at 12:16pm
I agree when it comes to free trade amongst nations except in the case when these countries are hostile to the US and whose economic power could be used against us. Lastly, I would include the US. I am greatly conflicted.
Jon Murphy
Jul 21 2024 at 8:38am
There is no country in the world that could successfully wield economic power (whatever that phrase means) against the US. We’re just too big. As American history (from the early 1800s through the Pandemic to now) shows rather conclusively, the biggest threat to American stability is her government, not other governments.
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