David Ricardo – On the Principles of Political Economy and Taxation
If Adam Smith was the first great modern economist, David Ricardo was the second. His textbook has its faults, but Ricardo plants all manner of seeds that later economists would grow into the quantity theory of money, denationalized currency, the law of one price, and the subjective theory of value, among other things.
Ricardo’s most famous contributions are to the theory of international trade and comparative advantage. On these issues, like nearly all economists, he stands almost exactly opposite President Trump.
Henri Pirenne – Economic and Social History of Medieval Europe
Though written before Mohammed and Charlemagne, it continues the Pirenne thesis up through the 15th century.
Trade never stopped during the medieval period, but it was geographically confined for political, military, and religious reasons. Eastern goods such as cloths and especially spices all but disappeared from Europe. The ultra-high prices merchants could command for these goods made remaining long-distance trade very lucrative.
When political and cultural change in the Near East eventually let more trade through, it quickly led to the birth of modern finance and banking—though Europe’s own cultural restrictions, such as prohibitions on usury and a popular disdain for commerce, slowed the process.
It also led to both the rise and decline of the Champagne Fairs and similar big annual events. Long distance trade went from almost nothing to enough to support large annual fairs, then finally became commonplace enough to make faraway goods available year-round in every city, making the fairs obsolete. In a weird way, both the rise and the fall of the Champagne fairs were evidence of progress.
Italy, especially Venice, and the North Sea traders from the cities comprising the Hanseatic League were some of the biggest drivers of the economic revival. It is not a coincidence that the Renaissance began around this time.
Henri Pirenne – Mohammed and Charlemagne
The Pirenne thesis is that barbarian invasions didn’t collapse the Roman Empire in 476 AD—economic isolation did, two centuries later.
Most barbarians wanted to assimilate, not destroy. They eventually became soldiers, senators, and even emperors who gave their lives fighting for the Empire, sometimes against their own former countrymen. Government and everyday life stayed pretty much the same after Romulus Augustus’ 476 overthrow.
The real change happened about two centuries later, when Arabs conquered most of the southern, eastern, and western Mediterranean. The new conquerors were uninterested in trading with the Romans, and mostly ignored them. This isolated the old Empire from existing long-distance trade.
Isolation from trade caused Europe’s economic decline, as the archaeological record shows (later historians have since confirmed this in detail). Papyrus was replaced by costlier parchment, and churches were lit by ineffective wax candles instead of oil-burning lamps. What once was open became isolated, and that’s what caused the Dark Ages.
Highly recommended, and relevant to today’s trade and immigration policy debates.
Kenneth Rapoza, in a Forbes column, quotes Iain Murray and me on trade:
“Over the past two years, President Trump doubled tariffs in the United States, allies and adversaries have reciprocated, and the economic effects are already visible,” Competitive Enterprise Institute fellows Ryan Young and Iain Murray wrote in an op-ed published on the Fox Business Network website on February 3 [correction: January 3]. “The president may not reverse course on trade, but Congress should take action,” they wrote, telling the new Democratic House of Representatives to “repeal all of the new tariffs” and prevent the president from unilaterally enacting new ones.
Read the whole piece here.
Pierre Lemieux – What’s Wrong with Protectionism: Answering Common Objections to Free Trade
A “principles of” primer that starts strong and stays that way. Highly recommended, especially for people new to trade policy. The opening chapter on comparative advantage is probably the clearest explanation I’ve seen—countries with an absolute advantage in many industries, such as the U.S., should specialize in what they’re “more better” at, such as capital-intensive technology, aircraft, and services.
Countries with an absolute disadvantage in productivity, such as China or Bangladesh, should specialize in what they’re “less worse” at—mostly labor-intensive assembly and low-skilled manufacturing. This kind of specialization reduces opportunity costs.
If the U.S. had a billion-dollar garment industry, for example, it would have to sacrifice more than a billion dollars of value it could have created elsewhere. This is a recipe for poverty, not prosperity or national strength. It can create more value by specializing in those highest-value-added sectors, and leaving the rest to others, even if they’re less productive in absolute terms.
The rest of the book is just as good, especially the chapters on manufacturing and the trade deficit.
Tomas Larsson – The Race to the Top: The Real Story of Globalization
Larsson is a Swedish-born journalist who lived in Thailand for ten years and studied in the U.S. In this quick-reading book, he shares real-world stories of people who globalization has enabled to become entrepreneurs, to move from bicycles to cars, from outdoor farms to air-conditioning, from word-of-mouth to the Internet, and more.
Since the book’s 2001 publication, many of the statistics he shares are now dated—they have almost all moved in a positive direction, which only makes his pro-trade and pro-openness arguments stronger.
This week Rep. Mike Gallagher (R-WI) introduced the Bicameral Congressional Trade Authority Act, which would reduce the president’s authority to unilaterally enact new tariffs by citing national security concerns. The Senate sponsors are Sens. Mark Warner (D-VA) and Pat Toomey (R-PA). The Democratic co-sponsor in the House is Rep. Ron Kind (D-WI).
Their bill contrasts with Rep. Sean Duffy’s (R-WI) bill to increase President Trump’s tariff authority, which I have written about before.
For reasons politically expedient at the time, Congress delegated some of its taxing power away under Section 232 of the Trade Expansion Act of 1962. In light of current abuses of this authority, it is time to restore taxing authority to Congress, where it belongs under Article I, Section 8 of the U.S. Constitution.
The Congressional Trade Authority Act would implement one of the planks of CEI’s new agenda for Congress, and has attracted a large, bipartisan group of co-sponsors. It has also garnered significant outside support. The National Taxpayers Union, along with more than three dozen other groups, including the Competitive Enterprise Institute, have sent a coalition letter to members of Congress urging them to rein in Section 232 abuses.
As recent tariff hikes begin to hurt the economy and obstruct the U.S. government’s foreign policy objectives, many politicians are realizing that trade is one area where sound policy is also sound politics. For a more thorough case on why tariffs are economically harmful, see Iain Murray’s and my paper “Traders of the Lost Ark.”