A few weeks ago we found out something interesting about our son of 5 years old. At school he had apparently set up shop running a burgeoning trading business. His actions got me thinking about the functions of commerce in the modern world. Specifically the concept of a global world where trade is free.
We have not formally trained my son in how to sell things or the art of trade. I doubt we have even mentioned the concept to him. But that doesn’t change that he discovered it on his own. What did he do?
Our Child the Trader
Well at the kindergarten where my son attends they give out tickets for good behavior. These tickets are utilizable for special things later, like erasers, snacks, etc. My son’s behavior is somewhere middle of the road, he is not the kid getting tickets daily but he is not going to be expelled either. So he is not the kid with all the tickets, but because of the special things he wants to be.
So what did he do? Well, each day my wife sends my son with his lunch, including a pack of Teddy Grahams. He begain telling my wife he was hungry at school so she increased his supply of the crackers. Then one day he came home with a bunch of tickets and a note for a bad behavior day. Some prompting revealed he had been trading the crackers for tickets. On the one hand I found it frustrating that he had abused the system, on the other I was quite impressed that he had figured it out.
My son had determined that his supply of crackers was plentiful and cost him nothing. He had determined meanwhile that to others the tickets were easier to come by. So, he traded his ample supply of crackers to those with an ample supply of tickets. He took advantage of his comparative advantage, the basis of all trade.
Comparative Advantage and You
All of modern society is based on the theory of comparative advantage in a way. The ability of each of us to specialize in an area where we have some advantage or relative advantage to some other area. This is why each of us has a specific job rather then everyone just having self contained economies within their home.
The Sharing Economy and Trade
The sharing economy is a great example of this. In essence it is not about cheap taxi like services or apartment rentals. The service itself does not provide these things. No it’s about removing the costs of finding those to trade with, the friction between each transaction. Finding the right people in a timely manner can be the difference between a sale or none. It can also be the difference between a profit and not.
I’ve spoken in the past about immigration being beneficial and the easier it is the better. In that post I highlighted that labor itself is a market and the free movement of that market does much the same as the trade of the sharing economy or my son trading for tickets. It allows cheap labor to move where labor Is more expensive and needed.
The Costs of Free Trade
Also In the same way free trade is exceedingly important but can have a cost. It allows capital and finished goods to move freely between regions, from areas where it is cheaper to areas of great expense. Collectively it raises the world’s wellbeing and is a great thing for society.
But.. And there is a big but, there are always losers. What is good for the collective is not always good for the individual or vice versa. In the case of the immigrants the area of labor they enter in their new country suffers from decreased labor costs, hurting those individuals who can not adapt from working in that field. In the sharing economy the taxi drivers and hotel earners are harmed by increased competition. For my son, the overall view of the value of the tickets is disconnected from the goal of good behavior.
Example of Immigration and Trades Impact on Culture
As I wrote recently, I’ve spent some time in Barcelona recently. It’s not a wonder to me why I met one couple here that have not entirely integrated with the local culture. Their friends were all expats and they admitted they barely ever speak anything other than English. Counter that with talking to some folks that were here 17 years ago. When they came no one spoke English and they had to adapt to the local language or leave. More change due to immigration and trade. That’s that immigration I mentioned in effect. It’s a positive in allowing that couple to live there with little culture shock.
During my visit I spoken to some that have been in the area for a long time. I also spoke to a few people who came there in decades past. As is present in many places of the world the area is slowly losing it’s localness. I can find resturants open at an American Dinner time. Heck, I can find McDonald’s, Starbucks, and Burger King if I so desired.
That’s the other downside of low barrier immigration, capital, and trade. 20 years ago most of Barcelona was Tapas and restaurants that did not open before 8. These days the Turkish Kabab places are more present then Tapas. The Catalonian culture has suffered to some extent as a result. So have those local businesses that did not adapt to these changes. That is what their independence movement is about ultimately, trying to protect their local culture.
Trade/Immigration is a Tradeoff
It’s a tradeoff, the benefits to society as a whole versus the cost to select individuals, but the movement forward is also likely to be inevitable. So long as people have free will those that can adapt to the new norm will. Those that attempt to maintain the status quo will eventually fail, though they may be able to hold on for some time due to rules and regulations.
What is the Solution?
Does that mean all is a mess and we should all give up in despair? Well no. First as an individual the key is to keep yourself adaptable. Modify your skills to allow you to adapt to changes in the labor force whether it be from immigration, trade, capital, or technology. Don’t follow the misguided belief that you can fight free trade or immigration with laws, as ultimately it will fail. Instead adapt.
In addition work to keep your culture alive whatever that may be. All culture is local after all. Apply your patronage to your local businesses from time to time. Practice aspects of your culture at home. Visit your local cultural sites. Globalization is inevitable and other cultures will seep in. But the culture you have today can also be preserved to some extent. Just look at the culture you have today. Except where it was violently suppressed there are bits of every culture that has passed your area still present. That’s a testament that things can change and we not lose our heritage.