Saturday, April 12, 2008

Labor is by definition finite, but potential jobs infinite

February 21, 2008
A Review of Don Boudreaux's Globalization By John Tamny

When trade is free, workers are able to specialize at one task, while letting others achieve their own comparative advantage in other areas. Closed markets retard this process in that while the average New Yorker may be good with numbers, that same person may not be good with a sewing machine. Free trade solves this in that the Wall Street analyst is able to “produce” clothing thanks to numerical and industry-specific knowledge, whereas a haberdasher over in Hong Kong is able to produce a stock portfolio through a unique ability to design the clothes that Wall Street-types want.

And there lies the problem with tariffs. Beyond impinging on the individual freedom that allows us to purchase what we want from whom we want, tariffs redirect scarce resources of the human and mineral variety into “industries where, as a group, these resources produce less value than they would produce with free trade.” Owing to the sub-optimal allocation of resources that tariffs necessitate, according to Boudreaux, “the ability of American workers, in general, to earn higher wages is thwarted by protectionism.” Simply put, tariffs allow us and sometimes force us into professions that don’t maximize our talents. Markets and consumers sniff this out, and it’s reflected in our pay... John Tamny is editor of RealClearMarkets, and a senior economist with H.C. Wainwright Economics. He can be reached at 9:41 AM

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