The Biz Bucks Blog provides former Biz Bucks students and other busy professionals with a summary and commentary of seminal articles from the opinion pages of the Wall Street Journal. You can be notified of a new posting by subscribing to the blog (enter email in box on right) or by following on Twitter: @BizBucksGuy.


Free Trade is Not a Zero Sum Game! October 18, 2012 11:00 AM | Tagged as Globalization Trade
WSJ 10/15/12 A17 The Retreat of Globalization by Warsh and Davis
 
Consider two fictitious islands in the Pacific. They are unaware of each other’s existence. On one island, all they eat are apples. On the other, all they eat are oranges. They have no other foods. Pretty boring existence, huh?. 
 
One day, while riding the ocean in their outriggers, they discover each other. They discover that each island has another type of food to eat. They make a commitment to meet at the same place in the ocean every day and trade apples for oranges. Now both islands have both apples and oranges to eat. The quality of their life is dramatically improved. So here’s the question:
 
“Which island lost?”
 
The informed answer is neither island lost. Both are better off. Trade helped both islands.
 
In our society, we tend to fall into a mind trap. We tend to see interactions between parties as win-lose propositions. In the stock market, the buyer of a stock wins if the price goes up and the seller loses the exact same amount. In a baseball game, there is one winner and one loser. In zero-sum games, the winnings must equal the losses.
 
However, in economics, not all transactions are win-lose. As our island example shows, both parties can benefit. Such is the case with many free trade agreements between nations. As Warsh and Davis wrote,
 
                “After all, globalization—connecting capital and labor, producers and consumers, emerging economies and their more mature counterparts—has led the world-wide surge in economic activity for the last three decades. It brought hundreds of millions out of poverty. It created hundreds of billions in shareholder value. Productivity and aggregate standards of living rose markedly.”
 
However, as Warsh and Davis recount, the trend toward a more global economy -- wherein sovereign nations do what is in their best interest and voluntarily trade with each other -- is slowing down. This will have a deleterious effect on the well being of people throughout the advanced world.
 
And of equal importance, nations that trade don’t war with each other. Free trade is a peace proposition.

Posted By The Biz Bucks Guy
Posted in Trade | 0 Replies

Subscribe to Our Blog

To receive email updates when a new post is made, please enter your email address in the box below and click Subscribe.


Keywords

Use these key words to search past blogs:


Archive:


Category:


1994 97% Alesina Recession Alinsky Allesina austerity Baloney BAT Binz bird kills Bogle Border Adjustment Tax Brulle Bryce capitalism carbon Carbon Dioxide CBO CFTC chains China Churchill Climate Climate Change Clinton Comparative Advantage Crichton Cronyism Cummins Curry Darwin Death panel demographics population economics Denier derivatives Dodd-Frank Drug dynamic Dynamic Scoring education electric car Energy Energy Policy Enron Debt Entitlements Eugenics Fat Fry Flat Earthers fracking free markets free trade Free Trade E-Verify Free Trade Zoellick Freedom Heritage Foundation Friedman gas lines Gas Prices glaciers Global Warming Global Warming Sustainability global warming subsidies IMF Globalization Trade God Google Gore Green Blob Grifo Groupthink Growth Hannity Hayek Hostess Hybrid Immigration Imports index funds Indexing Intellectual Denial investing investment IPCC JFK Joint Tax Kennedy Kerry Keynes Keynesian Keynesian Tax Cuts King Barak Bird Kills Koch Koonin Laffer Lamar Smith Lomborg macroeconomics macroeconomics;static; dynamic MACT Makiel markets Marxist medical care minimum wage Mitchell Model T Moore Morgenthau Navarro Neumark NOAA NY Times Obamacare ObamaCare Rove Health Insurance O'Reilly participation rate Patrick Moore peer review Peer Review EPA Piketty Pipelines plywood Presidential authority Price Controls Pruitt Racial divide Rare Earth Reagan Recession REE Renewable Portfolio Standards Renewables Ricardo Ridley robotics RPS Ryan Schlaff Science science integrity scoring Settled Science Shaffer shortages socialism socialized medicine Solar Panels Solvaldi Sovaldi static steel STEM Stephens Steyer stimulus subsidy sugar Supreme Creator tax policy Taylor territorial taxes corporate taxes Tesla Trade train wreck Trump unemployment wages Wind wind power women Zuckerman