I intend to write a more lengthy and detailed post on this subject, but let us start with a very simple example.

You live on a desert island. You have nothing, everything you need you make yourself. You have to cut down trees, fashion leaves into clothing, gather water, fish, gather coconuts, everything. You do it all yourself. Let us keep it simple. Suppose you can either catch 10 fish in a day or gather 20 coconuts. So, doing everything yourself, in a given day, you could produce 5 fish and 10 coconuts.

Now, suppose a champion fisherman shows up on the island. In a day he can catch 20 fish or gather 10 coconuts. So, if you both act independently, he will produce 10 fish and 5 coconuts, and you will produce 5 fish and 10 coconuts, for a total of 15 of each. If he specializes in fishing, and you in coconuts, he will produce 20 fish, and you will gather 20 coconuts, for a total of 20 of each. Of course, you will need to trade for what you get, but as he will be willing to trade at any rate which values a fish worth 1/2 coconut or more, and you would be happy to trade at any rate which values a coconut at 1/2 fish or more, it should be possible to arrange a trade anywhere between 0.5 fish per coconut up to 2 fish per coconut. In the first case, you would end up the same, with 5 fish and 10 coconuts, while he would end up much better off, with 15 fish and 10 coconuts. At the other end, you would end up much richer, with 10 fish and 15 coconuts, while he would be the same with 10 fish and 5 coconuts. Any point in between would leave you both better off than the original situation.

Then again, it probably comes as no surprise that finding a trade partner who is good at what he does will be beneficial. But what about a true incompetent? What if your new island mate could only catch 2 fish or gather 8 coconuts? Well, working independently, you would still produce 5 fish and 10 coconuts, while he would produce 1 fish and 4 coconuts, for a total of 6 fish and 14 coconuts. Now let us suppose he specializes in producing coconuts. He makes 8 of them. You still need to produce 6 fish, so thought hat is not your best area, you spend 60% of your time producing them, leaving 40% of your time to gather 8 coconuts, giving a total of 6 fish and 16 coconuts, 2 coconuts better than working independently. So, even with a trade partner incompetent in all ways, even if his best field is the same as our own, we still end up better off by letting him specialize in his best subject.

So, what is the point of all this? Very simple, that trade makes everyone more wealthy. That allowing specialization, even when dealing with inferior partners, makes the total wealth of all parties greater. Admittedly, bad agreements can cause more benefit to accrue to one or the other, but provided no one makes truly idiotic agreements, the division of labor makes everyone more wealthy.

And that is one of those simple facts that is ignored by those calling for trade barriers and other forms of protectionism. By ignoring wealth, by ignoring the fact that we produce in order to consume, they focus entirely on the act of production and become upset that division of labor reduces the amount of work required. In other words, they want us to do more work to produce less, and thus they come tot eh conclusion that trade, that the division of labor in general, is a bad thing.

It is an absurd position, and one no one would follow in their own lives. Yet, while in everyday life we always pursue labor savings, many still seem to think that labor savings on a national level are something to be shunned. And that is the absurdity of the protectionist, the elevation of labor to the position of end goal rather than means to an end.

But, as I said, I will be writing much more about this shortly, I simply wanted to offer this simple example to illustrate a point I have made over and over again. So keep watching for my next essay on this topic, as I hope to put together a quite comprehensive presentation of all the arguments against the protectionist position.

POSTSCRIPT

Normally I would not have bothered with this "prelude", and simply waited until I was ready to present the full essay. But I saw someone making all the usual spurious protectionist arguments in comments to the articles by the professional pundits, so I felt that I had to offer some rebuttal. Of course it would have been better if I could have offered up my comprehensive essay, but as that was not ready and I didn't have the time to write it, I figured something was better than nothing.

POSTSCRIPT II

In some ways, this is another application of my dictum that things are only "crises" when viewed form specific perspectives. In my original example, I mentioned how the housing bubble bursting was a boon for first time home buyers who could now afford a decent home. (And, though I didn't mention it, also promised a reduction in rental prices, as rents are always tied to a combination of the potential sale price of the house and the ease with which it would sell. Thus, when houses both no longer sell quickly and bring lower prices when they do sell, rents will inevitably drop as well.)

In this case, the protectionists make the crucial mistake of seeing man only in his role as producer, or, even more specifically, in the role of seller of his labor. They completely ignore that every laborer is also a consumer, as he sells his labor to obtain money for purpose of consumption. So, while foreign trade may reduce his wages slightly, it is more than made up by the reduction of the prices he pays. It is similar to the mistaken arguments against the free movement of labor, which look solely at wages without considering that wage earners are also consumers.

Perhaps that would be the most useful article I could write, a more general description of how myopic analysis can mislead those who try to examine only one aspect of a given problem.