ARC's 1st Law: As a "progressive" online discussion grows longer, the probability of a nefarious reference to Karl Rove approaches one

Friday, June 01, 2007

Stossel - The Double 'Thank You' Moment

Cafe Hayek pointed me to this article at Real Clear Politics by John Stossel is excellent. Excerpted in full:

The Double 'Thank-You' Moment
By John Stossel

Some people hate me because I defend free markets. Once someone accosted me on a New York City street and said, "I hope you die soon."

Why the hostility to commerce? What could be more benign than the freedom to trade with whomever you wish?

I suspect ignorance about economics leads many to believe that when two people exchange goods and money, one wins and the other loses. If rich capitalists profit, the poor and the weak suffer.

That's a myth.

How many times have you paid $1 for a cup of coffee and after the clerk said, "thank you," you responded, "thank you"? There's a wealth of economics wisdom in the weird double thank-you moment. Why does it happen? Because you want the coffee more than the buck, and the store wants the buck more than the coffee. Both of you win.
I don't know what fantasy world Stossel lives in, but if you're paying for someone to pour you a cup of coffee and hand it to you, chances are that you're paying over 2 bucks a cup.
Economists have long understood that two people trade because each wants what the other has more than what he already has. In their respective eyes, the things traded are unequal in value. But this means each comes out ahead, having given up something he wants less for something he wants more. It's just not true that one gains and the other loses. If that were the case, the loser wouldn't have traded. It's win-win, or as economists would say, positive-sum.

We experience this every time we have that double thank-you moment in a store or restaurant.

It doesn't matter that you wish the price of coffee were lower. We want the price of everything to be lower (except the price of what we're selling, whether it's our products or labor). What matters is that you bought the coffee for a buck.

The story doesn't change if you buy from someone in another city or another state. It doesn't change even if you buy from someone in another country.

That's why I worry when I hear politicians say things like, "I believe in free trade, but it has to be fair trade". That particular quote is from a presidential contender, Mike Huckabee, former governor of Arkansas.

Huckabee's candidacy is toast.
"Fair trade" is code for protectionism disguised as retaliation against other countries that may or may not practice protectionism, and it's a bad sign when even Republicans talk about "fair" rather than "free" trade.

We should practice free trade no matter what others do. Why? Because freedom is good in itself. If foreign governments want to hurt their citizens, it's no reason for ours to hurt us.

People who live in different countries are divided by a political boundary, but boundaries are accidents of history or the results of politicians' arbitrary decisions. Political boundaries are economically irrelevant. When left free, people trade across them as naturally as they do across state lines. Trade is trade. Buyer and seller both benefit. "Thank you." "Thank you."

If you're worried about a trade deficit with, say, China, imagine that China became the 51st state. We'd immediately forget all about that so-called deficit. Who cares if New York runs a trade deficit with Pennsylvania? As Adam Smith wrote, "Nothing . . . can be more absurd than this whole doctrine of the balance of trade."

Sheldon Richman expands on these ideas in The Freeman magazine, writing, "In reality, then, there are no imports and exports. There is only what I make and what everyone else makes. ... Few people would want to live just on what they themselves could make."

Unless you're No Impact Man or part of the Buy Local crowd.
Once we choose trade over self-sufficiency, we're just arguing about how big the free-trade zone should be. Since trade is always mutually beneficial, the answer is: The bigger the free-trade zone the better.

Worldwide is best of all.

Next week I'll report on the orgy of hand wringing and commerce-hatred fed by media reports of this month's new "record price" of gasoline. By the way, it's not a record.

Of course, the 'Double Thank You' moment exchanged between the buyer and seller of a cup of coffee needs to be regulated by the government, just like all capitalist enterprises. As I mentioned above, the price of coffee is at a record high. I think we should chart out the price of coffee over the past 30 years and show how much it's increased. And it would be interesting to understand the correlation between the increase in price and the growth in the number of Starbucks locations around the world. Clearly, this is price gouging since the cost of coffee (hello, the main ingredient is WATER!!!!) is extremely low and the slack-jawed yokel that hands it to you isn't paid a living wage. I would like a Congressional inquiry into the price of coffee, with special attention paid to Starbucks. And any "excess profits" that are found to have been exploited by the Coffee Cartel should be taxed and put to good use by the government. And, is it really a good idea to be held hostage to the Foreign Coffee? I mean, we should bring coffee bean production back into the US. I'm sure we could get some good Colombian beans to grow in Nebraska or Kansas. We must close the trade gap in coffee beans!!!

Regular readers already know that ARC is a fan of John. Previous posts on John here and here.

Your Co-Conspirator,
ARC: St Wendeler

Comments (1)
Anonymous said...

People that have never been challenged to provide for them selves have a tendancy to not want to see the truth. They are sponges on society. Therefore they have to act like they get ripped off or they cannot justify their behavior.We call this getting something for nothing they call it hard work and deserve more. When aperson is provided for they rot, from the inside out. When they are challenged, they grow and use their minds and succeed. So it's not that they don't understand, thy don't want to.