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Fight the Dragon

by Oren Cass

China’s threat to the economic peace

The standard economic model treats free trade as obviously positive, creating prosperity for all participants. Conservatives, and most neoliberals, have embraced that view and consistently press for further liberalization while condemning as backward and reactionary “protectionism” any proposed obstacles to the free flow of goods and services. But the model is incomplete, and blind allegiance to it only weakens the U.S. economy and the health of the international trading system as a whole.

Rather than an easy win-win for all involved, trade policy presents a variation on the prisoner’s dilemma, the classic game-theory problem in which two people must choose whether to cooperate with or betray each other. Each has an individual incentive to betray, but responding to those incentives and betraying leaves both worse off than had they cooperated. 

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