Consider this question: Is your family better off if everyone pitches in and helps? I hear my mother giving an answer to that question clear back in my childhood. Is it better if everyone does each task together or if some do one thing while others do something else? For example, Sally vacuums while Sammy does the dishes. In our house that will work much better than having to clean up the mess if two children try to work in the sink at the same time. If the goal is to teach the children about cooperation then perhaps working together may be an efficient means to that end. However, if the goal is a clean house then some amount of specialization can improve your outcome.
Now consider this question: You just adopted the neighbors on both sides, do the answers to our first two questions change? I wouldnâ€™t think so. Will you all be better off if some of your new family members specialize in particular house cleaning tasks? Clearly yes. Now you can have vacuuming, dishwashing, dusting, and picking up all happening at the same time â€“ your house will be spotless in no time and you will have more time to play a wonderful game together!
Is there a dark side to this happy story? Is something terrible happening because of all this cooperating? The longer you cooperate and specialize the more you will come to depend on each other. That increases your vulnerability while increasing your welfare. If your neighbors aren’t trustworthy then you may want some assurance that they will hold up their side of the bargain. But if you can achieve that you will be better off cooperating with your neighbor.
Now expand your family even farther. Does the same logic of specialization and cooperation apply to a larger family? One of the most interesting differences between us and all other animals is that we evolved to cooperate with strangers to achieve mutual ends. No other animal does that â€“ they cooperate with relatives, but not with strangers. It seems to me that this fact tells us that cooperating between larger groups does indeed produce some advantage, at least from an evolutionary point of view.
Why then do some people get so bent out of shape by international trade? Why should we consider trade with China to be any less good than trade with our adopted neighbors? We will certainly want to establish some rules and enforcement mechanisms to ensure contracts are honored since it is harder to walk next door and demand payment, but the volume of international trade tells me that we have perfectly adequate solutions to this issue. If specialization and cooperation â€“ trade by another name â€“ with our neighbors helps make life better, why wouldnâ€™t we want to open up to a wider range of options and trade with anyone and anywhere? The logic of those opposed to international trade and globalization and suspicious of trade with China escapes me.
[Edit on February 14, 2011]
A nice, short post by Donald J. Boudreaux on Cafe Hayek illustrates some of the faulty logic of arguments against the benefits of trade.