Why economists oppose "fair trade"

By Tim Worstall | 17 May 2005

Have you ever wondered why economists are so vehemently opposed to the idea of fair trade? Why there is this insistence that attempting to make sure that everyone is treated "fairly" is unworkable?

Don Boudreaux at Cafe Hayek, in his list of the twelve books that have had the most influence upon him, provides one of the answers. It's in a short monograph called I Pencil from back in 1958.

Very briefly, it is a look at the thousands, if not millions, of people who have to interact to make the (pre-inflation) ten cent pencil. One can read it as a tribute to the co-operation inspired by markets, as praise for the way in which the price system allocates resources or, if you were to use it to analyse fair trade as opposed to free trade, as identifying a major problem.

With even a simple product like a pencil, we find that there are tens of thousands of people involved in the production process. How are we to allocate "fairness" across these multitudes? Worse, there is no one person (or organization) which actually knows how to manufacture a pencil. We simply do not, in any centralized place, have all the information to actually analyze the process. So again, how, without such knowledge, can we allocate "fairness"?

This might sound a little harsh but it appears to me that the pursuit of "fair trade" is a fool's errand. We do not, and cannot, know enough to be able to allocate "fairness". So we should stop trying and return to the system which we know does work, that of free trade.