Paul Krugman once remarked that an economist's creed would likely include the principles of understanding comparative advantage and advocating for free trade. Many economists, however, often complicate the message of trade when communicating with the public. To address this issue, we propose a new guideline: "KISS: Keep It Simple, Stupid."
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Edwin Cannan, a professor at the London School of Economics and president of the Royal Economic Society, delivered an insightful address in 1933 titled "The Need for a Simpler Economics." His message remains relevant today amidst criticisms of trade.
Cannan pointed out that people often misunderstand bargaining when they view it through the lens of nations rather than individuals. In everyday transactions, people generally aim to maximize their gains while minimizing sacrifices. However, in the realm of international trade, this mindset can shift to one that emphasizes giving over receiving—producing and exporting as much as possible while importing as little as possible. This attitude embodies the mercantilism Adam Smith criticized in his work, "The Wealth of Nations."
The misunderstanding continues with the perception of cheap imports as negative. In daily life, it is generally considered advantageous to sell exports at high prices and purchase imports at lower prices. American consumers tend not to complain when domestic sales offer discounts; thus, it is inconsistent to oppose low prices from foreign sellers.
Cannan also highlighted misconceptions around trade and employment. Many believe that exports create jobs while imports lead to job losses. However, jobs serve the primary purpose of generating income for basic needs. If trade means acquiring more goods with less effort, that should be seen as a positive development. While trade does shift job types, it does not inherently lead to higher unemployment rates, which remain near historic lows despite decades of globalization.
Inspired by Cannan's insights, we propose asking protectionists why they would want to prevent others from working for our benefit, especially when even prominent figures like President Trump likely understand the value of specialization.
If an outsider were to observe global labor distribution, they would see countless individuals engaged in tasks that ultimately serve others, often across great distances. For example, a worker in Brooklyn enjoys coffee brewed by someone across the ocean who has contributed to the global economy. Each side of the world collaborates while the other sleeps, allowing people's earnings to reach further than they would otherwise.
Free trade facilitates this arrangement, while protectionism disrupts it, halting progress toward shared prosperity. These ideas are further elaborated in the authors’ upcoming book from the Independent Institute, "Trade Wars: Why Freedom Trumps Tariffs."