Washington Times Letter: A Response to Paul Craig Roberts

(Don Boudreaux)

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In this letter published in the January 22nd, 2004, edition of the Washington Times, I challenged Paul Craig Roberts’s assertion that the case for free trade fails when factors of production – ‘capital’ – is mobile across political borders:

In “The jobs problem … or is it?” (Commentary, Sunday), Paul Craig Roberts claims that the case for free trade does not apply when factors of production are as mobile as goods. He’s wrong.

Free trade is beneficial whenever comparative advantage exists. Comparative advantage exists whenever one individual can produce something with market value at a lower cost than someone else can. Further, someone who has a comparative advantage at producing, say, computer software, necessarily has a comparative disadvantage at producing other things.

Contrary to Mr. Roberts’ suggestion, the principle of comparative advantage explains with no less power the specialization and trade that take place in a single town than it explains the specialization and trade that take place internationally. Just as this principle is not weakened by the easy mobility of resources within a single town, nothing about greater international mobility of resources renders this bedrock principle of economics inapplicable to international trade. The case for free trade is in no way, shape or form weakened by the increased international mobility of factors of production.

DONALD J. BOUDREAUX
Chairman
Department of Economics
George Mason University
Fairfax