Reading trade

Read our article in the Cayman Financial Review Magazine, eversion 

 There’s no better place to start reading about trade than with Daniel Defoe’s classic Robinson Crusoe (1719), which is not only a classic of English literature but a trade story.

Alexander Selkirk, who many believe to have been the real life model for Crusoe, was in the South Pacific because of trade; Crusoe and Friday embody comparative advantage in their behaviour. 

Trade predates even Selkirk’s expeditions, of course. It also predates the modern state, leaving merchants on their own to organise law to govern their transactions across jurisdictional lines. The classic text is Leon Trakman’s The Law Merchant: The Evolution of Commercial Law (Fred Rothman & Co 1983 ed).

A more conventional history of trade, William J Bernstein’s A Splendid Exchange: How Trade Shaped the World (Grove Press 2008) was both a finalist for the Financial Times/Goldman Sach’s Business Book of the Year and winner of the 800-CEO-Read Business Book Award for Globalisation. Bernstein effortlessly mixes economic theory and historical detail to set out a compelling case that trade is “an irreducible and intrinsic human impulse, as primal as the needs for food, shelter, sexual intimacy and companionship”.

As a result, trade “has profoundly affected the trajectory of the human species”.

Debates over trade issues are integral to political discussions around the globe. The best statements of the pro and con sides are Jagdish Bhagwati’s In Defence of Globalisation (Oxford University Press, rev ed 2007) and Joseph Stiglitz’s Globalisation and Its Discontents (W W Norton & Co rev ed 2003).

Bhagwati gives a nuanced and powerful defence of a world built around trade, directly confronting critics of globalisation. He doesn’t shy away from problems, but insists that the benefits outweigh the costs and that developed economies in particular must confront the critics of a global economy.

Nobel Prize winner Stiglitz offers a sophisticated critique, drawing on his experiences at international institutions and in advising the US government to make a strong case that existing international institutions, including those that shape trade, are deeply flawed.

The best modern overview of the economics of trade remains Douglas Irwin, Free Trade under Fire (3rd edition 2007, Princeton University Press). Irwin sets out both the politics and economics in clear language, with well chosen examples and thoughtfully discussed data. Nobel Laureaute Paul Samuelson, whose textbook educated generations of economics undergraduates, termed the theory of comparative advantage one of economics’ few “nonobvious and nontrivial” contributions. Irwin makes trade economics accessible even to the non-specialist.

For history of the international trade regime, John H Barton, et al, The Evolution of the Trade Regime (Princeton University Press 2006) gives a concise account of how we got to where we are today. A relatively dry academic work, it is nonetheless highly readable. Perhaps not one to take to the beach, but good for a rainy afternoon at home.

You can take Paul Krugman’s Pop Internationalism (MIT Press 1997) on a beach holiday. His writing is lively, like his New York Times columns, but informed by economics rather than unhinged political screeds as his columns often are. If you’ve encountered Krugman only through his columns, this will serve as an introduction to how he made his reputation as an economist. Although the book is dated, the issues it discusses remain relevant.

Even better for the beach is Joe Bennett’s Where Underpants Come From: From Checkout to Cotton Field, Travels through the New China (Simon & Shuster 2008). New Zealander Bennett wondered how the cheap package of “Made in China” underwear he bought in a supermarket got there. Easy to read, it sets out how trade actually works.

Finally, to introduce trade issues to a college student, consider Russ Roberts’ The Choice: A Fable of Free Trade and Protection (3rd ed Prentice Hall). Written as a novel, this brief book sets out international trade theory in understandable terms. If you are planning to give economics books as holiday gifts, this one definitely tops the list.

 

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Andrew P. Morriss

Andrew P. Morriss, Chairman, is the D. Paul Jones, Jr. & Charlene Angelich Jones – Compass Bank Endowed Chair of Law at the University of Alabama School of Law. He was formerly the H. Ross & Helen Workman Professor of Law and Business at the University of Illinois,Urbana-Champaign. He received his A.B. from Princeton University, his J.D. and M.Pub.Aff. from the University of Texas at Austin, and his Ph.D. (Economics) from the Massachusetts Institute of Technology. He is a Research Fellow of the N.Y.U. Center for Labor and Employment Law,and a Senior Fellow of the Institute for Energy Research, Washington,D.C., as well as a regular visiting faculty memberat the Universidad Francisco Marroquín,Guatemala. He is the author or coauthor of more than 50 scholarly articles, books, and bookchapters, including Regulation by Litigation (Yale Univ. Press 2008) (with Bruce Yandle and Andrew Dorchak), and is the editor of Offshore Financial Centers and Regulatory Competition (American Enterprise Institute Press 2010).

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