Friday, July 29, 2016

Belief vs Knowledge

People mostly believe they understand what they know.

Take "Free Trade", for example. It's held as common knowledge that import levees, export duties, taxes and the like are contributing factors to measuring the degree of free trade between countries.

"Free Trade" is a myth.

Or more precisely, "Free Trade" is an arbitrary, hypothetical metric that establishes an unattainable standard of uninhibited trade between distinct market entities. Arbitrary, because there has never been a documented example to reference against. Hypothetical, because no one can describe how to realistically achieve such a transaction. Unattainable, because no transaction can be cost free.

"Free Trade" is a fictional economic standard to be forever striven for. As such, it serves as a mechanism whereby all trade can be comparatively analyzed to measure the relative costs of separate and otherwise incompatible transactions. From this, the actual transaction costs can be distinguished from the rest of the component costs that contribute to "value" (itself a largely individual standard irrespective of the item(s) being measured).

Free trade is also frequently a political illusion, served up to distract the voters from the blatant manipulations imposed on trade transactions by, or in response to, government.

Of course, if government went away with the morning sunrise, free trade would still be unattainable since all parties to a transaction would still have to exert some measure of expense in order to effect a transaction at all. Government makes sure the traders aren't the only one's to get something from the deal. Theoretically, in exchange for that added cost, government provides an independent recourse for dis-satisfied traders to seek recompense less directly than might otherwise be the case.

Because free trade is something people believe in, they think it must also be "real" in the same sense items being offered for trade are. Just because we know trade exists, doesn't mean we understand it.

No comments: