How can you get what you want? Years ago, Clarence Carson pointed out that fundamentally, there are four ways, and Paul Cleveland and I explored this in a 2010 article in The Freeman. They are worth revisiting: You can make something yourself, someone can give it to you as a gift, you can steal it, or you can trade for it. Doing it yourself is fun sometimes, but unless you’re doing it recreationally, DIY is the road to poverty and starvation. Adam Smith is correct:
It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy…What is prudence in the conduct of every private family, can scarce be folly in that of a great kingdom.
Cutting ourselves off from the rest of the world is a recipe for economic, cultural, and social stagnation. We’re paying too much for washing machines because of tariffs. That’s money we’re not able to use for something else. Furthermore, culture and cuisine flourish where immigrants dwell. The more isolated and less cosmopolitan an area, the less dynamic it is. They are exciting places to visit and might have fascinating folkways, but when the option presents itself, people tend to move toward people and prosperity.
Second, you can get what you want or need as a gift. Gift-giving rituals are rich with social meaning, and as Anthony Gill and Michael D. Thomas argue, they are dynamically efficient even though they are statically inefficient. Receiving gifts has its limits, though, because it’s easy to get neurotic about what you can enjoy if you’re supposed to give everything away all the time. There are also fundamental knowledge problems. Everyone has stories about bad gifts they’ve received. If the people who know us best and care about us most aren’t very good at getting us what we need or want, how much worse are we at deciding what strangers need and want?
If you don’t do it yourself or receive it as a gift, you can steal it. Or if you don’t like the language of theft, you can elect someone to take it from someone else and give it to you. A community of thieves, however, is not likely to last long unless, as Adam Smith explains, they have at least a rule everyone observes of not robbing one another. It’s easy to get people to object to naked theft because it’s easy to see and imagine. You can enter into sympathy with a victim handing his wallet to a guy putting a gun in his face. Taxation and redistribution make the act a little less evident by dressing it in the language of virtue and justice, dressing the robbers in suits and ties, and giving them fancy titles with an organization called the Internal Revenue Service. After all, revenue is good, and who doesn’t like service, especially service with a smile?
The beggar-thy-neighbor policy is another route to poverty because people don’t have incentives to produce when they know it’s just going to be taken by someone else who will dispose of it on their behalf. Incentives will reward predation and protection–trying to take others’ stuff and keep others from taking your stuff–rather than production. It’s the stuff of life in a war of each against all, that is, predictably solitary, poor, nasty, brutish, and short.
Consider tariffs again. If we know anything in economics, we know taxing trade routes is “bad.” It impoverishes most people to serve special interests. The “bargaining” between interest groups that can deliver votes, and politicians who can deliver policy, consumes income and wealth, on net. Politicians are “trading” what’s in consumers’ wallets without giving them an offsetting benefit.
The fourth way to get what you want is to trade for it. In an excellent parody video, Remy sends up the song “Havana” and makes a case for free trade, singing, “free trade’s like a magic wand/ turns what you make best into what you want.” We get more goods and services at lower prices when we can trade. Trade produces the cornucopia. Incentives to trade turn people’s regard for their own interests to regard for others’ interests because the way to get people to work for you in a commercial society is to give them something they want at prices they are willing to pay. You get rich by making it easier for others to get what they want by buying it from you.
For most of our existence, life was solitary, poor, nasty, brutish, and short for pretty much everybody. Then we became a society of traders rather than a society of raiders. Raiding, of course, still happened; however, it became less and less frequent as a share of the human experience, and more and more honor and riches accrued to merchants and innovators. We embraced integration rather than isolation. We began to tolerate the honorable pursuit of one’s own interests. We stopped stealing as much and started producing and trading more. We became makers rather than takers. And at the end of the day, we all got richer.
Courtesy of The American Institute for Economic Research.