Sunday, 13 July 2014

Patriotism or Prosperity

Patriotism, defined as a national loyalty which does not extend farther than peaceably wanting what is best for the political jurisdiction of one's passport, is seldom the recipient of any scorn and rarely argued against, yet a well-known result in trade theory clearly indicates that patriotism of precisely this variety makes the world poorer.
The well-known result is that restricting exports of something not widely produced in the rest of the world can benefit the home country, and it is easily explained by analogy to the textbook treatment of monopolies. A monopolistic firm earns profits by restricting supply, so that its reduced level multiplied by the higher price minus costs comes to something more than does the same calculation for higher output, lower price, and a different cost structure.
So, if a country happens to be the sole (or a really big) producer of something that is valued in the rest of the world, its politicians' restricting the country's (competitive) firms' exports to the outside world makes its citizen-"monopolists" richer. But just like consumers would gain more surplus than the monopolist loses in the textbook treatment, if supply and prices were at perfectly competitive levels, the world as a whole loses from this restriction in free trade.
So, if one gets behind the statement that a good dash of patriotism - in the sense of "merely" wanting what is good for the political jurisdiction issuing one's passport - is only sound, one must also stand for this sort of restrictions in trade and concomitant reductions in worldwide prosperity. If this is what it means to be a patriot, then being a patriot means to be against general prosperity. I have never seen a more harmless definition of patriotism anywhere; if this is the kindest definition possible, it stands to reason that patriotism is actually quite pernicious.

No comments:

Post a Comment