The Benefits of Trade; T. Hultman

Todd S. Hultman The Benefits of Trade FREE TRADE affords benefits often overlooked. At the heart of free trade lies the law of comparative cost: an individual stands to gain by concen trating his efforts and exchanging with others rather than trying to produce all types of goods. This is why individuals of various abilities are able to trade peacefully for mu tual gain. For example, Jones lives next door to Smith. They have similar lawns and gardens. Jones mows his lawn in two hours and hoes his garden in one. Smith mows his lawn in three hours and hoes his garden in four. Thus, each Saturday Jones spends three hours working in his yard while Smith spends seven hours. One Saturday Jones, observing Mr. Hultman assisted with the 1981 Summer Seminar program at FEE. He is a senior at the University of Nebraska at Omaha. 626 these differences, offers to hoe Smith's garden if· Smith will mow Jones' lawn. Smith agrees and both find they benefit from this exchange.

Jones now works only two hours in stead of three, while Smith works only six instead of seven. The same results are accomplished, but each man gains one hour of free time. When Smith and Jones each fo cuses on his more productive skills, they are able to cooperate peacefully for mutual benefit. Each receives a free hour in his day he would not otherwise have had. Depending on their time preferences, the men may consume their extra time in enjoy ment or use it to engage in further production and exchange. Smith may go for a walk, enjoy his family, or watch television while Jones may hoe another garden for more bene fits. The goal is not necessarily to THE BENEFITS OF TRADE 627 accumulate goods and services, but to enlarge the opportunity to engage in the peaceful activities of their choice (which often requires goods and services). This example of comparative cost also shows that the unskilled, as well as the skilled, can benefit from free trade. Jones was the more skill ful at both mowing and hoeing, yet Smith could still offer his aid to Jones for mutual benefit. Smith's lack of skill as a mower and hoer didn't make him subservient to Jones; both were dependent on the other to get the work done and acquire their free time. It is true that Smith would be working several hours after Jones was done, but both were better off after the exchange than before. Any attempt to force Jones to help Smith would have destroyed the basis for future exchange. This would have made it more beneficial for Jones to return to his self-sufficient lifestyle, leaving Smith once again with his long workday. Let the exchange take place free from coercion and both parties will gain.

Free trade also promotes a greater awareness of the needs of others. When Smith and Jones were self sufficient, there was no need for· communication or understanding; each was an island unto himself. However, that first Saturday when J ones was looking for a way to help himself by trading with Smith, he had to make a conscious effort to understand Smith's needs. As Jones continues to enrich himself by trad ing with others in society, he will become more useful to others, en hancing his cooperative ability. Smith, likewise, will grow. As they become more aware of the needs of others and more dependent on trade for their higher standard of living, they will also tend to behave more peacefully toward their fellow men. When Smith and Jones were self-sufficient, it was of little con cern to either of them what hap pened to the other. Now that they are exchanging labor and thus en joying a higher standard of living, injuring one would also hurt the other. Just as peaceful exchange brought benefits to both, violence would bring injury to both. Thus free trade encourages peaceful co operation and discourages violence.

The final lesson to be gleaned from this example is the importance of freedom for the increase and enjoy ment of wealth. Obviously, had Smith and Jones been prevented from exchanging their services there would have been no resulting bene fits. Nor can anyone else make ex changes for them. Only they know if an exchange will be beneficial since value and wealth are matters of per sonal judgment. What if Smith had enjoyed hoeing his garden more than anything else? It would have been wrong to force him into the ex change "for his own good." Both his 628 THE FREEMAN freedom and his satisfaction would have been diminished, resulting in loss rather than gain. Mutual bene fits can only occur when individuals are left free to exchange according to their own values. These often overlooked benefits of free trade remind us: individuals can cooperate for their mutual gain; the unskilled, as well as the skilled, have No Restrictions the opportunity to advance; free trade promotes greater awareness of the needs of others; and freedom is nec essary for this whole process of trad ing for mutual benefit ... the ends of man not necessarily being in the pile of goods and services he accu mulates, but in the opportunity to engage in the peaceful activity of his choice. , IDEAS ON LIBERTY FREE TRADE, as I would define it, can only exist when there are no restrictions on either side. Therefore, it is absurd to think of its existing in the world today with practically all countries operating under some degree of socialism. But, I would argue that it is to our own advantage to remove our restrictions, then trade as best we can under the restric tions imposed by other nations. It would be far from ideal, but their restrictions are basically their responsibility and not ours. My entire argument is based on what I think would be best for our own citizens, as producers and consumers, and I am not too much concerned with policies of other nations, however foolish I may think they are. Perhaps I should say I am concerned, but it is not within my province to try to force their reform ....

I believe that the principle most commonly lost sight of in our discus sions of trade is that consumption is the sole purpose of production. We sometimes tend to think that the preservation of an industry or a par ticular firm or a man's job is the important thing to preserve. This leads to all sorts of uneconomic measures which adversely affect the con sumer-the king. W.M. CURTISS, "Removing Our Trade Barriers"