Today's Quote of the Day...

…is from page 2 of Vernon Smith and Bart Wilson’s 2019 book Humanomics: Moral Sentiments and the Wealth of Nations for the Twenty-First Century:

If the solidarity and love for our fellow compatriots that we do not personally know led us to forbid the importation of goods from other producers that we also do not personally know - say, like those in Asia or Europe - we would destroy the ability of markets to support specialization and thereby create wealth and human betterment. Such conflict prominently takes the form of sharp controversies over inequality in the distribution of income and wealth, and whether or to what extend wealth creation generates inequality through innovation and the subsequent distribution of its benefits.

JMM: Absolutely correct. The arguments against trade are legion, and like those demons of the Biblical story, they serve to tempt man away from a virtuous path. Trade promotes virtue among its participants. That is not to say that all people in commerce are virtuous, of course, but that markets tend to promote virtue.

Concerns about inequality and distribution of gains from trade are always around. But, as part of my dissertation discusses, and what Smith and Wilson discuss in their book, how we build relationships with those who serve us affects those distributions. This relational knowledge encourages producers to share more of the gains with us (and vice versa). We truck, barter, and exchange with those who serve us best, with those whom we trust, with those whom we have a relationship with.

When markets are disrupted, through politics or what-have-you, that ability to build that relational knowledge is disrupted. Virtuous behavior is replaced by vicious behavior, where commerce becomes not about serving your fellow man but by scoring political points or manipulation of the system in your favor.

The market system may not always be perfectly “fair” (however one wishes to define that), but the alternatives are worse.