'Trade Is Made of Win,' Part 1: Wealth Creation

How does trading make people better off? Economics professor Art Carden explains in this quick lesson on one of the most important concepts in Economics 101: trade creates wealth. Part 1 of 3.

[Luciustick]

Did anyone else notice Fritz looks like Friedrich August von Hayek and Lou looks like Ludwig von Mises? LOL :D

[FletchforFreedom]

The point that I was making is that, economically it doesn't make the slightest bit of difference whether one country is free and the other is statist to the benefit of reducing or, better yet, eliminating any and all subsidies and tariffs that interfere with free trade. That all sorts of such barriers have been erected is true but doesn't change the fundamental fact in the slightest.

[joecow]

Brilliantly true. Free trade is also great because you're not forced into it. If you don't like a deal for any reason, you have the choice not to partake. This concept works for anything. I'm not willing to trade my cash for a $200 set of Dr Dree headphones, it's a rip off. However, I'll shop amazon for another set I feel is worth the money. No force, only choice.

[LucisFerre]

[[When economists say voluntary trade is mutually beneficial, they assume the existence of private property rights]]

This is part of the Subjective Theory of Value. What it's 'opposing' basically is the Labor Theory of Value. So we're not simply talking about private property, but labor too, i.e. anything that can be traded for something else of value. This "trade is made of win" principle can apply to commerce, labor, or even personal social/emotional exchanges or interactions.

[insidetrip]

I'm not suggesting that holding someone at gunpoint is the only kind of coercion. You can make implicit threats without crime. This is essentially what any serious and succesful salesmen does (if you don't buy my product you're going to experience such and such a consequence).

And you're right. If you force people to make choices you think are best you're a tyrant. But don't act like just because one makes a choice on their own volition makes it a good choice. I've never advocated tyranny.

[obits]

It should be noted that this only proves that specialization of labor creates wealth. Trade (e.g. between nations) is a tricky subject because different nations could be subsidizing different industries. This is why trade negations are important.

[boleroinferno]

I recommend looking up "Confessions of an Economic Hitman" which will explain how corporations systematically use their resources to control weaker government. How corporations influence the American government is often more subtle, but this can be researched too.

First think of the economy as the foundation for everything that happens in our society, for truly there is almost nothing which has not been affected by economics.
Next consider who owns the economic foundation. It is not 'consumers'

[BitcoinMotorist]

@Salvysahagun In this case they are not using currency, they are directly trading a good for a good. The principle still holds if you use currency. Trade doesn't just mean international trade. You do not have to sew your own clothes or raise chickens in your home. You specialize in what you are good at and use money to buy everything else you need for cheaper than it would cost for you to do it yourself. Money makes this process easier.

[justincase]

Thank you that was very well explained.

[pawbard]

Learn Liberty I've watched this video five times and I have questions. 1. What if the price mechanism is greater than the capacity for one of the producers? 2. What if the wealthy producer imposes severe conditions onto the poorer producer? 3. What if one of the producers is a wage earner and therefore has no "produce" to sell? 4. How does this apply to goods, which are infinitely reproducible (if at all)? I've furnished enough questions for another video, I realize, but I don't want viewer to take the principle of wealth creation on faith or by credence, but to deeply grasp the full implications of the idea. Lastly, what text do you recommend to explore this basic principle fully?

[Draanor]

Gobal total wealth increases whenever labor is involved in producing a product. Labor is intangible but it is very much a trade-able item. The best example of this is the production of software. Unlike a sock or ear of corn, computer software is intangible and is primarily created through labor. Whenever computer software, an app, movie, game, etc., is created, total wealth in the world goes up! (The pie gets bigger). If people are smart, they trade that which they create best.

[godfatherk]

alright, thanks.I wasn't aware of the comparative advantage theories, but i belive absolute advantage is what i was thinking about. I guess in this case the party wich is underproductive can do nothing but minimise loss by, yet again, trading.

[kmarinas]

From the standpoint of "economic profit", you can certainly arrive at win-win situations. Example: US and China together produce more when they trade vs. when they do not.

However, from the standpoint of "accounting profit", trade can lead to win-lose situations. Example: US runs trade deficits and loses jobs to China, and as a result the US has more people depending on the government and youth on their parents, while China gets millions with greater longevity and out of abject poverty.

[AKGunner]

Anyone else notice that Frits is Frederick Hayak and Lou is Ludwig Von Mises? freaking awesome.

[jon]

Just wondering, does this include the variables of price and demand? Despite how mathematically true this is, why would someone create 1000 stalks of corn when they could create 200 socks and 600 stalks of corn, therefore eliminating the "need" to trade with Lou when Lou affects a mere 2.5% of Fritz's profit?

I may be wrong, but I don't know if P & D affects this example.

[LucisFerre]

[[Trade should not be viewed as good or bad.]]
-
The argument that rational trade is "good" because it's win/win INCLUDES the idea of either party NOT trading when it's not to their benefit. Both actions, trading or not trading, support the same premises, that one should trade if he's better off afterwards for doing so, compared to ones alternatives. What would refute the "goodness" of the Subjective Theory of Value is if trade necessarily involved a zero sum condition, i.e. win/lose scenario.

[Lucasbessey]

@loghery Try thinking about it like this. If you and I decide to trade, it must be that you value my item more than you value yours, or else you would not make the trade. In this sense, trade necessarily creates value.

Lets say that I have a new computer and you have a vintage comic book. Further, suppose that you don't even like comic books and you really need a new comp. You would rather have the comp, I would rather have the comic, so we trade. It must mean that both of us are better off.

[studentofsmith]

@thereisnofirmament This discussion is about control over the means of production, not the accumulation of wealth. Your '10% owns 80%' is not central to our discussion.

Most franchises operate under their own ownership and management and for their own profit. They should be considered independent businesses. But even if we exclude them we still see about 40% of employees working for small, non-franchised, businesses as franchises account for 13% of all employment in the U.S. (Census Bureau)

[stephentsang]

@Welsh77
Free Trade & Comparative Advantage would true for creating more wealth, if and only if the surplus redundant workforce of both countries were able to be absorbed into newly "invented" jobs. Get what I mean?

[Salvysahagun]

@Duke1839
Currency is based on the goods produced and denominated. Therefore Currency should be factored into trade