Wednesday, December 01, 2010

Explaining A "Libertarian Contradiction"

Johan Eriksson points to a contradiction between two arguments made by certain prominent libertarians-namely the argument that all countries benefit from specialization from other countries through free trade and the argument that EU farm subsidies hurts poor countries.

He is in fact right to note that there is an inconsistency. True, one could argue that there is a difference because the advantage of EU countries in farm products isn't the result of a natural comparative advantage, but government subsidies. But whether the advantage is natural or artificial is irrelevant for the developing economies. If EU countries can for whatever reason offer a product for a lower cost than the dometic cost of production, than it is good for them. So, the argumemt that EU farm subsidies is bad for developing economies is clearly wrong.

The case against these subsidies rests instead on the fact that they are bad for the people living in the EU. Both because domestic production is diverted from more productive causes and because subsidies of farm exports in effect represents a give away from the EU to others. The case against EU farm subsidies thus doesn't rest on the in fact non-existing harm to others. It rests on the harm it does to EU tax payers and consumers.