If we were talking about bananas, everybody would see immediately the foolishness of seeking “banana independence.” Nobody would fall for half-baked arguments about our addiction to foreign bananas or our love affair with banana bread. It’s obviously uneconomic to grow millions of bananas in this country; it could be done, but doing it would entail much greater costs than buying them from producers in places better suited to their production (that is, places where they can be produced at lower opportunity cost).
There might be some good reasons to be skeptical of free trade in oil, but I doubt those are what politicians have in mind when they urge us to “break our addiction to foreign oil.”
[HT: Arnold Kling]
Trade Diversion 