No Free Lunch: Economics for a Fallen World: Third Edition, Revised

Chapter Fifteen: Issues in International Economics 363 free trade. Some producers lose (those that don’t have a comparative advantage) while other producers gain (those that do have a comparative advantage). So why is there so much hostility to free trade? Well, I don’t have all the answers, but we’ll certainly look at some of the reasons and the economics driving them. Here is one hint: there is a reason this chapter comes after you’ve studied public choice in the preceding two chapters! COMPARATIVE ADVANTAGE—REDUX Let’s start by thinking through some rudimentary exchange choices, and then we will move to the more complex ones. Families are different, with differing responsibilities. But in almost all families, members tend to specialize. Sure there may be some jobs where everyone is expected to participate—perhaps cleaning up the dishes after dinner or cleaning up the dog messes in the yard. Families might make sure that everyone does their fair share. But most families also usually have a large amount of specialization . This specialization may be driven by social expectations of male/female responsibilities—or it may be just the opposite; but there is specialization. For example, it is an uncommon household that will have both parents balance the checkbook and pay the bills, unless they do it jointly. You usually won’t see one do it one week, then the other do it the next. In our family, my wife has given me an overt rule. I must kill any and all large bugs that enter our house. If any small animal dies in the yard, I have to get the shovel and get rid of it. That’s just the way it is. Then there are other jobs that I always do: everything car related. My wife’s sole responsibility for the car is to make sure there is gas in it. She doesn’t check oil, tire pressure, or coolant…that’s my job. Could she? Well of course she could—but she doesn’t. I specialize in any car maintenance items and she specializes in homemaking activities. This is undoubtedly in part due to social expectations, but it is also due to personal preferences. She loves a clean house. I do too…I just hate cleaning it. Likewise, she would hate getting grease under her nails…that’s just the way it is. So as you expect, I’m pretty good at changing oil in the car, and she is very efficient at keeping the house clean. By specializing, we have a cleaner house, better maintained cars, and more time for other activities. Now my wife and I engage in these types of trades all the time, and we both win as a result. But there are losers. People external to the trade could benefit if we had hired them instead of doing it ourselves. Jiffy-Lube and home cleaning services might object to our “free trade,” since it costs them business. Of course they wouldn’t exactly say it that way. Suppose Jiffy-Lube lobbies Congress for a bill to make changing your own oil illegal, claiming that spilled oil from “untrained” home mechanics gets into our water and poisons fish. While this action may seem unlikely, it certainly doesn’t seem outlandish given other proposed regulatory outrages. Specialization: This occurs when individuals in a production process of many steps each concentrate on a limited number of the necessary steps and become very proficient at those particular tasks.