Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.
PART 3 Markets and Welfare
Chapter 9 of 36 Application: International Trade
Section 17 of 18
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"Generally speaking, do you believe free international trade has helped or hurt the economy, or hasn't it made a difference to the economy one way or the other?"
Survey results:
· 27 percent said free international trade helped
· 44 percent said it hurt
· 29 percent said it made no difference or they were unsure
Economists mostly support free international trade.
They know free trade allocates production efficiently and raises living standards.
The United States is an ongoing experiment that confirms the virtues of free trade.
The U.S. allows unrestricted trade and assets movement among the states and has greatly benefited from the resulting specialization and efficiencies.
Each state does what it does best and does not try to do everything.
The economy is not burdened with interstate tariffs and other obstacles to trade.
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How much bigger would the world economy be if there was free trade and free movement of assets and people among countries, same as among the U.S. states?
ChatGPT:
If there were completely free trade and movement of assets (such as capital, labor, and goods) among countries, similar to the conditions within the United States, the world economy could potentially grow significantly, though estimating the exact size of the increase is complex.
Here's a breakdown of how free trade and asset and people movement could impact global economic growth:
1. Elimination of Trade Barriers
Tariffs, quotas, and subsidies would be eliminated, leading to a more efficient allocation of resources.
Countries could specialize in industries where they have a comparative advantage.
This would likely lead to an increase in overall global trade and economic output.
A study by the World Trade Organization (WTO) estimated full trade liberalization could increase global GDP by around 2-3%, which amounts to trillions of dollars annually.
2. Free Movement of Labor
If labor could move freely across borders, workers could move to where their skills are most valued.
This could reduce global unemployment and underemployment and allow people to earn higher wages in more productive economies.
Estimates from economists suggest fully opening borders to labor could result in a global GDP increase of 50-150% over time, primarily by increasing labor productivity in developed countries and boosting wages for workers from developing nations.
3. Free Movement of Capital
Allowing unrestricted movement of capital across borders would enable investments to flow to areas where they can achieve the highest returns.
This would improve efficiency in global markets and could help boost innovation and economic growth.
The effect would likely be more pronounced in developing economies, as access to capital could accelerate industrialization and infrastructure development.
4. Economies of Scale
The removal of barriers would lead to larger markets and more competition.
Firms would be able to produce goods and services at lower per-unit costs due to increased scale, which would improve efficiency and productivity.
This could further boost economic output by several percentage points.
5. Reduction in Transaction Costs
With free trade and asset movement, there would be a reduction in costs related to currency exchanges, legal restrictions, and regulatory compliance.
Businesses would be able to operate more efficiently globally.
Conservative Estimate of Total Growth:
Combining the above factors, economists generally estimate that global GDP could increase by 20-60% over a few decades if there were fully free trade and movement of capital and labor among countries, similar to the interstate system in the U.S.
This estimate assumes a gradual adjustment as economies, industries, and workers adapt to the new environment.
However, this is an approximation, and actual gains could vary depending on how quickly countries adapt to free movement, resolve political and social challenges, and leverage new opportunities.
Some challenges, such as disparities in regulations, social integration, and political opposition, would likely still arise.
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How much bigger would the world's GDP be if everyone in the world spoke the same language?
ChatGPT:
If everyone in the world spoke the same language, global GDP could increase by an estimated 5-15%.
This boost would come from reduced transaction costs, increased international trade and investment, improved labor mobility, enhanced global collaboration, and better access to education.
The long-term impact of a single global language would compound over time as international cooperation and innovation accelerate, leading to further economic benefits.
… …
disparities in regulations
kisei no fukinkō
規制の不均衡
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