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Trade

JUNE 30, 2009

Trade is defined as the voluntary exchange of goods and services. Trade allows the parties involved to the reap the benefits from each others specialization, provided the action is free of coercion and voluntary. Trade is made possible by the comparative advantage gained by transactions and the division of labor, which allows for greater specialization. It is important however, to make sure that all trade remain voluntary and mutually beneficial to both parties. It is through trade that countries have the opportunity to prosper.

Many economists stress that the exchange be untainted by interference. This means that the government cannot interfere with the transaction and insert artificial barriers whether they be tariffs, quotas, price ceilings or floors, subsidies, etc. Without trade, no specialization would take place and we would be a lot less wealthy from the transactions that never took place. Frederic Bastiat, one of the most influential economists of his time,  said that “By virtue of exchange, one man’s prosperity is beneficial to all others.”

Articles on Trade