The logic of trade

The logic of trade is very simple. A brief analogy:

You have only 24 hours in a day. During that day you want to do many things. You want to brush your teeth, take a bath, put on some clothes, have breakfast, transport yourself to work, do your 9-to-5 job that earns you income, have lunch somewhere in between, get home from work an watch some TV, eat dinner, maybe read a book and then go to bed.

Now you could wake in the morning and start to make your own tooth paste and craft your own tooth brush. You could go and pluck the palm fruits to make soap to take your bath with. You could take a quick trip the farm to harvest that corn and beans to make that pap and moi-moi for breakfast. You get the gist.

Unless you are some type of super human, it will probably take you about 7 or 8 hours to do all that. At which point you would have missed work and lost out on your income from your job for the day. And we haven’t even gotten to lunch, dinner, and all the entertainment in between.

So what should you do? You know it. Just go to work, earn an income, take a fraction of that income and trade for the rest. It’s really that simple. Your life in infinitely better if you focus on one (or two) things that generate the most value for you and trade for the rest.

For example, if an hour at work earns you N10,000 but an hour cleaning your kitchen will save you N500 that you wouldn’t have to pay the maid, the best thing is to go to work, collect that one hour income, and use part of it to pay the maid. You are much better off if you chose to go to work than if you chose to not go to work to clean your kitchen.

Trade is so fundamental to an increased quality of life that almost everybody trades. It is so simple even the cave men (and women) did it.

As it is for in individuals, so it is for businesses. Banks are so much better off spending their time being banks than trying to build their own furniture and electrical equipment. They do the banking stuff and trade for the rest. Oil companies are so much better doing oil company stuff than trying to grow their own rice or manufacture their own pick ups. They do the oil company stuff and trade for the rest.

As it is for individuals and businesses, so it is for countries. As a country, you are infinitely better off if you can get the stuff that you don’t do from other countries who do it cheaper and focus on the stuff that you do. I know this is where some will say, “Oh but what if you do nothing, and blah blah blah”. But think about it for a second. No matter what a given country does, it can’t do everything. Any given country is still infinitely better if they do some things, and trade for the rest.

Trade is so fundamental to “development” that no country develops without it. You can pore through the history books and you will not find ONE country/state/civilization that “developed” without trade. Yes even communist countries.

Which is why it is so frustrating when you read stories like this: FG threatens to close land borders over rice smuggling. Seriously. What the hell man?

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2 thoughts on “The logic of trade

  1. Had to smile at the end…knew you were going somewhere with this, but didn’t realize the border closure due to rice smuggling would irritate you enough to pen the piece.

    Firstly​, it’s a weak threat, as there are unintended consequences to closing the border because of rice (think of the several other items that come in through those borders)

    Secondly, we don’t even have the capacity to police our borders properly, so even when shut, the smuggling isn’t likely to stop.

    On the flip side though, the statement (based on your blog) didn’t suggest Government was against trading, but rather against smuggling, which of course has implications on duties (revenue for FG) and importation of sub standard goods

    1. You are right. I don’t think they have the power to do it. But as our people say; na from clap dance dey start.

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