by Wayne Bereman

Created on: May 12, 2009   Last Updated: May 17, 2009

The United States was formed as and prospered, for roughly a century and one half, as a national, protected free market economy. This historical fact, however, is often unknown to policy makers, elected officials, educators, and to the general public. It's very important, therefore, to remind free traders of this fact before proceeding with a discussion on economic policy. After dispelling any misnomers about what is, and what is not a free market economy (the free market economy is defined as the imaginary construct consisting of a single division of labor, lack of government interference in the peaceful operations of the market, the existence of private property, and a single coercive government body to enforce contracts and establish rules), the next step is to remind the free trader that the idea of free trade is an idea that is foreign to the formation and growth of the United States into an economic powerhouse. A good next point of discussion is the theory upon which unilateral, unquestioned free trade is built; comparative advantage (or comparative cost).

The supposed superiority of free trade and the unassailable truth of comparative advantage is often so thoroughly indoctrinated into folks at the university level that to question it usually is met with a soap box and an arrogant retort to go back to economics 101, or international economics 201. In fact, it's so thoroughly reinforced that I believe most economists, policy makers and educators now accept it as dogma. So, let's go to the source of the 'brainwashing' and examine it. Let's go back to an economics text. There is an entire international economics text book available online. It was written by Steven M Suranovic, and is entitled International Trade Theory and Policy. A simple Google search will reveal it. It's not unlike most texts, and Suranovic is a very popular author of college economics text books.

In the first paragraph of the section entitled The Theory of Comparative Advantage Overview, Suranovic tells a story about Paul Samuelson regarding Samuelson's belief that comparative advantage is an example of a meaningful and non-trivial result of the economics discipline. Of course, Samuelson is correct, comparative advantage has been both meaningful and non-trivial. It is also false and destructive, but certainly not trivial.

Suranovic then begins his discussion of what Comparative Advantage is. Suranovic writes First, the principle of comparative advantage is clearly counter-intuitive.

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