Economics is not hard; it’s just that key concepts are politically inconvenient. Here’s a remedial lesson in the economics of trade.
• All resources are scarce; demand and supply determine their value. Gravel and gold both have limited supplies. A pound of gold has a higher price than a pound of gravel because the supply of gold is scarcer relative to its demand.
• Markets are more effective than governments at setting prices. Adam Smith’s “invisible hand” operates through supply and demand to establish prices and allocate resources. In a free marketplace, millions of individuals strive to maximize well‐being by producing goods or services, then buying other goods and services that they want. Free trade promotes economic growth by ensuring that scarce resources are put to their highest‐value uses. Governments that use trade restrictions to control markets will cause resources to be used less efficiently, thus making their people unnecessarily poorer.
• Costs outweigh benefits for a country imposing import restrictions. Because domestic consumption has included imports, domestic producers have supplied less than 100 percent of consumer demand. An increase in the cost of the restricted product will be paid by all users, but any benefit to domestic producers will only apply to the portion of the marketplace that they serve. Trade restrictions reduce economic welfare.