Rethinking Free Trade

*Work in Progress*

I used to be a partisan of Free Trade. Obviously Free Trade has benefits, but does it have any drawbacks to consider?

Economics in One Lesson by Henry Hazlitt

Henry Hazlitt opens his work “Economics in One Lesson” with the following claim: “Economics is haunted by more fallacies than any other study known to man.” This, he says, is because of 2 reasons:

1. “[T]he special pleading of selfish interests. While every group has certain economic interests identical with those of all groups, every group has also, as we shall see, interests antagonistic to those of all other groups. While certain public policies would in the long run benefit everybody, other policies would benefit one group only at the expense of all other groups.”1

2. “[T]he persistent tendency of men to see only the immediate effects of a given policy, or its effects only on a special group, and to neglect to inquire what the long-run effects of that policy will be not only on that special group but on all groups. It is the fallacy of overlooking secondary consequences.”2

Combining these two then, Hazlitt argues “[T]he whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence. The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.”3

Hazlitt’s Rule Applied to Hazlitt - A Critique

Hazlitt’s Rule seems like a good one. But does it necessarily mean that Free Trade is superior to Tariffs?

Take Hazlitt’s First Reason - If groups can have interest antagonistic to each other, might you not have a situation where a large part of society has lost out due to free trade? And why would we assume that every group has certain economic interests identical with those of all groups? Sure everyone wants lower prices, but can you really disaggregate lower prices from the loss of fields of industry? Is there such a thing as the general interest?

Or Hazlitt’s Second Reason - What are the secondary and long-term consequences of industries dying, of people being left behind and not being able to transition fields Free Trade might produce an immediate influx of goods at shorter prices in the short term, but if in the long term you get the Rust Belt, despair and the opiod crisis due to the failure of 60yos to learn to code, all so that those succeeding in the new economy can have cheaper consumer goods - is it worth it?

Adam Smith - Two Non-Sequitors

Henry Hazlitt was unquestionably a Free Trade partisan.4 He states his case by citing Adam Smith:

“In the century and three-quarters since The Wealth of Nations appeared, the case for free trade has been stated thousands of times, but perhaps never with more direct simplicity and force than it was stated in that volume. In general Smith rested his case on one fundamental proposition: ‘In every country it always is and must be the interest of the great body of the people to buy whatever they want of those who sell it cheapest.’ ‘The proposition is so very manifest,” Smith continued, “that it seems ridiculous to take any pains to prove it; nor could it ever have been called in question, had not the interested sophistry of merchants and manufacturers confounded the commonsense of mankind.”5

Except, contrary to Smith, it is not at all self-evident or an obvious logical necessity that it’s in the general interest, or the highest good, to have lowering consumer prices as the highest priority. Why, for starters, should we focus or start the analysis on consumption, rather than production? Adam Smith’s sumum bonum, his highest good of lower consumer prices, is not necessarily the sumum bonum of the great body of the people. And as Smith admits, he has not demonstrated it. He’s just wrong in feeling he doesn’t need to.

“It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy. The tailor does not attempt to make his own shoes, but buys them of the shoemaker. The shoemaker does not attempt to make his own clothes, but employs a tailor. The farmer attempts to make neither the one nor the other, but employs those different artificers. All of them find it for their interest to employ their whole industry in a way in which they have some advantage over their neighbors, and to purchase with a part of its produce, or what is the same thing, with the price of a part of it, whatever else they have occasion for. What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom.”6

This also does not follow. In a family, everyone has the same interest, and the parents are looking out for the interests of all of their children. But in a kingdom, as Hazlitt himself admits, people have different and competing interests. Therefore, contrary to Smith, what is prudence in the conduct of every private family might actually not be a model for a great kingdom of many families. Smith’s statement is a non-sequitor.

Further Reading Recommendations from The American Tribune

Finally, as part of making sure we apply Hazlitt’s Rule, the following articles from The American Tribune helped reshape my views on Free Trade vs. Tariffs. I would recommend each of them as additional food for thought:

Friedrich List vs. Adam Smith

Unintended Political Consequences of Free Trade

How Free Trade Destroyed Britain

Why/What Should We Trade with Vietnam?

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This article originally debuted at The Steamboat Institute’s debate “Be it resolved, the use of tariffs is beneficial to the American economy,” between Manisha Singh arguing the Affirmative and Dan Mitchell arguing the Negative on October 15th, 2025 at The University of Texas’s Rowling Hall, Austin, Texas