Should Trade’s ‘Losers’ be Compensated?: An Exploration of the Welfare Economics of the Losses and Costs of Economic Change
Law & Economics Center at George Mason University Scalia Law School Research Paper Series No. 22-003
24 Pages Posted: 21 Oct 2021 Last revised: 10 Mar 2022
Date Written: October 21, 2021
Abstract
A commonplace claim about international trade is that it “has losers” – a claim often taken to imply that the case for a policy of free trade rests upon the assumption that trade’s “winners” will compensate its “losers.” In this paper I argue that this claim is mistaken. The mistake, specifically, is to misidentify the payment of costs of participating in the modern competitive economy as the incurrence of losses of property interests or entitlements. At stake is more than semantics. Confusing “costs” with “losses” misleading suggests that compensation for these costs is necessary to make international trade economically efficient and ethically acceptable.
Keywords: trade, welfare
JEL Classification: F1, KO
Suggested Citation: Suggested Citation