Home > International Trade > Does Trade Really Make Everyone Better Off?

Does Trade Really Make Everyone Better Off?

Few concepts in economics are more widely accepted than that of the benefits of trade. The argument is more or less settled: rich countries benefit, but so do poor ones; exporters benefit, but importers do, too. It’s a somewhat counter-intuitive idea. Many of my freshman students have trouble accepting it. They’ve been almost exclusively exposed to the idea that trade benefits the rich and exploits (or at least disadvantages) the poor.

After a few more classes, most of my students will get it. The argument for trade is logical and fairly easy to teach, even if not intuitive.

The question that unsettles this tidy argument for many of my students is corruption. Why is it that some countries seem to achieve no benefit after decades of trading away resources (often, oil), for example?

I like the pairing of “markets are a good way to organize economic activity” (#6) and “government can sometimes improve outcomes” (#7). These two principles complement each other well.

It seems to me “trade makes everyone better off” (#3) needs a matching principle, something like “governments often diminish or even completely destroy the potential benefits of trade.”

Until we get to Chapter 3, I encourage students interested in this topic to keep reading.

Advertisements
Categories: International Trade
  1. Mellisa Winata
    November 3, 2011 at 1:26 am

    Trade makes everyone better off because it allows people to specialize in activities they do best and in which they have comparative advantage. So there’s no such a winner and loser in trade-off. But sometimes these benefits can’t be received by the societies fully because of corruption. So if a country want to make its societies wealthy, then the leader of the country should clean up the government from corruption.

    • vicky
      February 17, 2013 at 9:35 pm

      🙂

  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: