I was having a polite conversation with someone today when they mentioned that protectionism, unlike free trade, creates jobs and prosperity by shutting off competition to domestic firms and workers. If Japan didn’t make cars, my peer argued, then jobs would spring up in Great Britain (or America) to make those cars. Quite low hanging fruit, I have to say.

I’d like to exclusively address the gains from free trade from comparative advantage. And rather than go over an economics lesson, I’ll make reference to Frederic Bastiat‘s tongue-in-cheek “candlestick maker’s petition”. In it, Bastiat argues from the point of view of a candlestick maker that a competitor is “flooding the domestic market with an incredibly low price” and that eliminating this competitor will encourage growth in other industries.

The competitor he is talking about is the sun. If the government managed to block out the sun, protectionists could argue, industries will have to fill in for the resources the sun provided:

If France consumes more tallow, there will have to be more cattle and sheep, and, consequently, we shall see an increase in cleared fields, meat, wool, leather, and especially manure, the basis of all agricultural wealth.

If France consumes more oil, we shall see an expansion in the cultivation of the poppy, the olive, and rapeseed. These rich yet soil-exhausting plants will come at just the right time to enable us to put to profitable use the increased fertility that the breeding of cattle will impart to the land.

The “petition” points out, pretty well I might add, the absurdities of thinking that eliminating competition is good for the general welfare of society.

Read all of Bastiat’s Petition here.

The World Economic Forum says the United States has been dethroned by Switzerland for the title of the world’s most competitive economy.

According to a new study, industry competition is positively related to employees’ trust levels.


An accomplished man, Paul Krugman has won a nobel prize, become a superstar economist with his column in the New York Times, blamed Bush for all of the world’s ills, and reminded me just a little bit of Saddam Hussein. He has been a very respectable voice to the economic arguments against libertarian assumptions and approaches to the economy. But sometimes, in an effort to boost his progressive views, he embraces government works a little too much.


In a blog post a few days ago, Krugman defends the DMV and post office as government operations that can work well. He says that the bad wrap the post office gets for being a bureaucratic nightmare is unfair when, in his experience, it has been pleasant and cheap. I’ll give the cheap thing to him. Our first class stamps are cheaper than pretty much anywhere else in the world. On the other hand, does anyone seriously think the DMV is an efficiently run enterprise, with the small number of locations, long lines, and grumpy service?

And how are we to know how good things could be if there wasn’t a legally enforced monopoly on snail mail? I bet everyone marveled when the post office could deliver packages in x amount of time for y dollars. But then, when UPS and FedEx bust out on the scene and gave the Post Office competition, it went even faster and did it even cheaper. If the Post Office is so great, let it stand the competition of other firms. There’s no way to tell for sure what the post office would be like if it was opened up to some competition, but I’m guessing it wouldn’t hurt.

Update: Tyler Cowen talks more about the post office, especially in regards to “innovation that might have been.” And here.