Princeton University Press • 1996 • 275 pages • $30.00
Dr. Batemarco is director of analytics at a marketing research firm in New York City and teaches economics at Marymount College in Tarrytown, New York.
The economics of free trade has virtually nothing to do with professional boxing. Yet this book reminded me of the late heavyweight champ Joe Louis and what some sportswriters referred to as his Bum-of-the-Month Club: the weak field of challengers Louis fought in his prime years as champion. Who wouldn’t be a bum by comparison? Analogously, we see in the second half of this scholarly, well-researched book a fallacy-of-the-decade club. Improving the terms of trade, protecting infant industries and industries which enjoy increasing returns to scale, correcting distortions in domestic labor markets, and creating jobs are among the arguments in favor of protectionism that author Douglas Irwin scrutinizes.
While a proponent of free trade himself, the author disappoints somewhat in accepting the idea that the case for free trade is independent of the case for laissez faire in general. This is most evident in his discussion of the theory of domestic divergences, which posits that interferences with free trade are not required to correct certain market failures because purely domestic interventions can correct them more efficiently. An example of what this means is that we should not use tariffs to reduce unemployment since increased government spending could do so at lower cost. I think most readers of The Freeman know what is wrong with this argument. The Austrian insight that the presence of international boundaries does not change the essence of economic activities is sorely needed here. But, alas, no Austrian school economist except for Gottfried Haberler (in a context which reveals none of his Austrianism) rates so much as a mention.
By the book’s final chapter, however, the point is made that even if an argument for protection could pass analytical muster, it would never be implemented in a way to achieve its purported benefits. It seems to me that this argument applies every bit as much to domestic interventions as to restrictions on international trade.
It should be noted that many of the controversies dealt with here are of a somewhat technical nature. Thus, Against the Tide is likely to be of much greater interest to professional economists than to the general public. Still, the writing is much livelier than that found in the average economics book. Despite my reservations about some aspects of this book, I found myself in full agreement with the author’s concluding statement: Yet if the historical experiences described here continue, free trade will remain one of the most durable and robust propositions that economic analysis has to offer for the conduct of economic policy. In other words, it’s free trade by a knockout.