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A Mathematician’s Free Trade Reading
List
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PRIMARY READING LIST (PRO)
The case in favor of international free trade is
almost exclusively mathematical. Jagdish Bhagwati—an acknowledged
expert in the field—finds in just three mathematical papers what he
describes as “analytically satisfactory proof” that the costs of
free trade can’t possibly exceed the benefits. Sadly, their
mathematical content prevents virtually everyone (especially pundits
and legislators) from evaluating the arguments presented.
Murray Kemp, “The Gains From International Trade,”
Economic Journal 72 (1962), p. 803-819.
Paul A. Samuelson, “The Gains from International Trade Once Again,”
Economic Journal 72 (1962), p. 820-829.
Jean Michel Grandmont and Daniel McFadden, “A Technical Note on
Classical Gains from Trade,” Journal of International
Economics 2, (1972), p. 109-125.
Each of the three cites the following as an important precursor:
Paul A. Samuelson, “The Gains from International Trade,”
The Canadian Journal of Economics and Political Science 5,
(1939) p. 195-205.
Mathematicians seeking to become informed on the subject need only
skim the above four publications to verify that the main content is
faithfully summarized in the tutorial posted on this web site.
Samuelson (Nobel prize 1970) explained as follows why the case for
free trade is so brief: “there are more arguments against free trade
than for it, since there is essentially only one argument for free
trade.” That one argument—first enunciated by David Ricardo in
1817—rests on the acclaimed “principle of comparative advantage,”
which serves as THE fundamental theorem of international trade
theory.
Proponents of free trade have often been able to advance their
agenda merely by stifling debate on the subject. They have somehow
managed to convince opinion makers that trade debates, like Möbius
strips, have only one side. As a result, even those who occupy bully
pulpits (as do Senators Sherrod Brown and Byron Dorgan) find it
difficult to bring their objections to public attention.
It is here that a few vocal and informed mathematicians could make
an important contribution. By insisting that Ricardo’s principle is
essentially irrelevant to the policy process, they can help unleash
the long bottled-up debate on the cost—denominated in jobs,
opportunities, and once-thriving industries—of NAFTA, CAFTA, the WTO,
and other artifacts of Anglo-American commitment to free trade. To
learn how this might be done, see:
Naomi Oreskes and Erik M. Conway, MERCHANTS OF DOUBT: How a
Handful of Scientists Obscured the Truth on Issues from
Tobacco Smoke to Global Warming (Bloomsbury Press, New York,
2010).
The authors explain how a few politically astute and well-financed
former scientists managed to preserve an illusion of active
scientific debate concerning the adverse effects of tobacco smoke,
acid rain, atmospheric chlorofluorocarbons, and global warming—not
to mention the feasibility of President Reagan’s Strategic Defense
Initiative (aka SDI, or “star wars”)—long after the acknowledged
experts had reached firm consensus on those issues. Their story is
relevant to the battle over free trade because many of the
techniques they employed have been used to sustain the illusion that
the merits of free trade, and the folly of resisting it, are beyond
dispute. The publishers of virtually every English-language
newspaper, from the Washington Post to the New York Times to the
London Economist seem subject to that illusion.
For empirical arguments in support of free trade, see:
Daniel Griswold, MAD ABOUT TRADE: Why Main Street America Should
Embrace Globalization (The Cato Institute, Washington DC, 2009).
Patrick Love and Ralph Lattimore, INTERNATIONAL TRADE: Free,
Fair, and Open? (Paris, OECD, 2009).
Griswold’s strategy is to compose a list of favorable economic
developments since the passage of NAFTA and the founding of the WTO,
then claim that they were all driven by trade liberalization. L&L
present a rather more focused compilation of facts about
international trade.
The case against international free trade is largely
non-mathematical, and is admirably summarized by:
Ian Fletcher, FREE TRADE DOESN’T WORK: What Should Replace It and
Why (U.S. Business and Industry Council, Washington DC, 2010).
Leading critics of free trade, including senators Sherrod Brown (D,OH)
and Byron Dorgan (D,SD), TV host Lou Dobbs, former presidential
candidate Ross Perot, and his economist co-author Pat Choate, argue
on empirical grounds that (liberal) U.S. trade policy simply hasn’t
worked. As they see it, the advertised benefits have failed to
offset the ruinous costs.
Sherrod Brown, MYTHS OF FREE TRADE: Why American Trade Policy Has
Failed, (New York, The New Press, 2004).
Byron L. Dorgan, TAKE THIS JOB AND SHIP IT: How Corporate Greed
and Brain-Dead Politics Are Selling Out America, (New
York: Thomas Dunne Books, 2006).
Lou Dobbs, EXPORTING AMERICA: Why Corporate Greed Is Shipping
American Jobs Overseas, (New York, Business America Press,
2006).
Ross Perot (with Pat Choate), SAVE YOUR JOB, SAVE OUR COUNTRY,
Why NAFTA Must Be Stopped—Now, (New York, Hyperion, 1993).
Pat Choate, DANGEROUS BUSINESS: The Risks of Globalization for
America, (New York, Alfred A. Knopf, 2008).
Ha-Joon Chang, BAD SAMARITANS: The Myth of FREE TRADE and the
Secret History of Capitalism, (New York, Bloomsbury Press,
2008).
Victor Menotti, ed., THE CASE AGAINST FREE TRADE: GATT, NAFTA,
and the Globalization of Corporate Power, (San Francisco,
Earth Island Press, 1993).
Douglas A. Irwin, FREE TRADE UNDER FIRE, (Princeton, Princeton
University Press, 2002).
William J. Bernstein, A SPLENDID EXCHANGE: How TRADE SHAPED the
World, (New York, Atlantic Monthly Press, 2008).
Chang argues that—by imposing ever freer trade—the developed nations
are denying the less developed ones access to the very policies by
which they themselves grew rich. Menotti’s edited edition consists
of essays by critics of the Uruguay round of GATT negotiations, to
warn that a secretive and anti-democratic World Trade Organization (WTO)
was about to be formed. Irwin’s book is a compilation of traditional
(mainly nineteenth century) arguments for and against free trade,
while Bernstein’s is a sweeping history of international trade, from
prehistoric times to the present, by a confirmed free trader who is
nevertheless surprisingly frank about the harm being done to various
populations in the name of free trade. See also:
James K. Galbraith, THE PREDATOR STATE: Why Conservatives
Abandoned the Free Market and Why Liberals Should Too (New York,
The Free Press, 2008)
Ron Hira and Anil Hira, OUTSOURCING AMERICA: The True Cost of
Shipping Jobs Overseas And What Can Be Done About It, (New
York, AMACOM, 2005).
Prof. Galbraith devotes only one chapter to free trade, but does a
better job of demolishing it as a practical strategy than most could
do in an entire book. He also exhibits a rather limited
understanding of Ricardo’s principle, before dismissing it as “so
much hot air.” The brothers Hira count and classify the jobs already
lost to other countries via “trade liberalization” and identify the
ones likely to be sacrificed in the foreseeable future. Finally,
David Cay Johnston, FREE LUNCH: How the Wealthiest Americans
Enrich Themselves at Government Expense (and Stick You With
the Bill), (New York, Portfolio Trade Books, 2008).
Johnston illustrates the futility of current attempts to soften the
impact of free trade by inserting “worker and environmental
protection clauses” into existing trade agreements like NAFTA and
CAFTA, mainly by documenting the impunity with which US corporations
routinely violate U.S. labor law. He seems somewhat less troubled by
the fact that U.S. environmental laws are violated with equal
impunity. Will foreign governments be less likely to violate similar
restrictions?
It should be noted that any dissent against free trade is
economically radical, but that some are more so than others. Among
the more conservative
Elhanan Helpman and Paul R. Krugman, MARKET STRUCTURE AND FOREIGN
TRADE: Increasing Returns, Imperfect Competition, and the
International Economy, (Cambridge MA, MIT Press, 1985).
Ralph E. Gomory and William J. Baumol, Global Trade and
Conflicting National Interests, (Cambridge MA, MIT Press, 2000).
It should be noted that Krugman, a Nobel Prize winner in 2008, made
his original reputation in the field of international trade. Much of
his thought on the subject is summarized in the foregoing volume.
Gomory and Baumol base their quite compelling argument on the fact
that the businesses nations compete to attract are the ones that
serve imperfectly competitive markets.
More radical than any of the above, in that it suggests that
international trade be treated as a macroeconomic problem, rather
than a microeconomic one, is the model sketched near the end of
Chapter 13 in
James Case, COMPETITION: The Birth of a New Science, (New York, Hill
& Wang, 2007).
Anyone who has read even half the foregoing books should apply for a
medal to news@list.FreeTradeMath.org
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