Monday, October 4, 2010

Why Economic Education

The answer lies in this article from today's edition of The Wall Street Journal. It seems that as high unemployment lingers in this period of slow growth, people are becoming increasingly skeptical about the benefits of trade. And the skepticism cuts across all job, income and party affiliation brackets.

People are increasingly unaware of or unconvinced about the benefits of trade. They appear to be more concerned about job security than the corresponding impact on prices. In fact, I am reminded of a line from the musical play 1776. At a critical point of the debate, John Dickinson, a delegate from Pennsylvania, is reminded by his fellow delegate, Ben Franklin, that those who would sacrifice freedom for a little security can end up losing both. In the play, Franklin speaks of political freedom. But the same can be said for economic freedom. By sacrificing the freedom to trade to gain job security, we may sacrifice the benefits of competition that come with trade, and face a reduced number of jobs in the long-run.

This brings me to a related opinion piece in today's Journal. In it, the author uses a doomsday clock analogy to argue for renewing the Bush tax cuts and moving forward on free trade. I'm not about to discuss the tax cuts in this post. But his discussion about trade agreements is relevant. He likens the increasing calls for protectionism in various guises to the Smoot-Hawley Tariff that was a contributing factor to the Great Depression.

The analogy is not quite perfect, but the result could be. By cutting trade, we stand not only to face higher consumer prices, but to put ourselves at a disadvantage as world markets pull out of the slowdown and kick into high gear. If the U.S. isolates itself from the growing world market, we shouldn't be surprised if potential customers shop elsewhere.

So this brings us back to the topic of today's post. As economic educators, we need to be sure that students understand all sides of the trade issue. There are not just costs of trade, but benefits from trade. And the benefits can have long-term implications. I'd welcome your thoughts.

No comments: