Economists are often accused of ignoring moral consequences of trade, or in particular, being focused too much on material well-being (for example, see here). There is a lot of truth to this claim; much of our models to focus narrowly on measurable items like material wealth. I agree with this criticism very much and lots of my research focuses on ways of re-inserting moral man into economic models.
But it is incorrect to argue that free trade is either immoral or amoral. The earliest free trade philosophers (Adam Smith, David Hume, Frederic Bastiat) all approached trade from a moral point of view. Hume gives us a justice argument for free trade, Smith demonstrates the strong presumption of liberty in a modern society, and Bastiat shows how protectionism can quickly become a perversion of law and justice. Economists have long spent time considering the moral aspects of trade.
But one thing that really rubs people the wrong way regarding trade is the concept of competition. Firms and individuals compete with one another for scarce resources and that competition can sometimes lead to outcomes that make some observers uncomfortable (workers getting laid off in favor of machinery, for example. Or low-cost labor overseas). Because of the unpleasant nature of this competition, free trade often gets labeled immoral. But let’s look at the nature of competition and how it is used in economics.
Economics appears to begin with the assumption of a somewhat Hobbseian jungle world: all actors are self-interested and looking to maximize their own gains. From this, we derive the concepts of competition and the “invisible hand” which leads to improvement for everyone while appealing to their self-interest. To quote Adam Smith: “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.”
But surely altruism exists! Surely people are not so wrapped up in self-love they dismiss all of humanity! How can this dismal view of humanity, that we are merely self-interested, dominate economics? The answer is two-fold: 1) Everyone is, to some extent, self-interested (what Russ Roberts likes to call “the Iron Law of Me”). We tend to focus on events close to us and our loved ones far more than events separate from us. 2) This method of conceptualizing humanity makes our models robust. Lots have been written on #1, so I’d like to focus on #2.
The idea of self-interested humans makes economic models robust. In a sense, by assuming humans at their “worst,” it allows for humans to act at their “best.” For example, simple economics indicates that, after a disaster, prices should rise in order to incentivize people to bring more supplies into the area. The pursuit of profit will bring in people looking to make a buck. This is the self-interested story. But what happens if the community and nation band together and donations fly to the area? The effect is the same: an increased supply to where it is needed most. By weakening the assumption, the result remains: the model is robust.
So, why the assumption of self-love in the first place? Well, let’s reverse the scenario. A disaster strikes. People are altruistic and chip in and send supplies to the disaster area. People will band together when things get tough. This is our model. But let’s weaken the assumption of altruism. Disaster strikes. People are only self-interested. What happens? Nobody sends supplies. Since the results of the model change, it is not robust.
The concept of self-love does nothing to reduce the usefulness of our models. Whether true or false is irrelevant as the results of the model do not change. So long as the presumption of liberty is upheld, in other words, no central planning is attempted, then the assumption of human behavior and its results are largely irrelevant and economic models are robust to the changes.