Harry Potter and the Gains from Trade

Interesting choice of examples from the Economic Report of the President‘s trade section:

For example, the ability to sell books across borders certainly enhanced the income J.K. Rowling was able to collect from writing the famous Harry Potter books. Had she been able to sell her books only in the United Kingdom, her audience and income would have been much smaller. In addition, millions of American readers benefited from the increased consumer choice and the ability to purchase her books. Similarly, more Americans can work as well-paid aircraft engineers or manufacturing employees for Boeing or as technology specialists for Apple because those firms are able to sell on a world market. At the same time, it is distinctly possible that some American authors who would have captured a larger share of the “magic-oriented book” market had there been no trade in literature were crowded out by Rowling’s success, or that some handheld music device engineer in the United Kingdom has had to find another career because of Apple’s success.

The CEA writes that this illustrates the desirability of progressive taxation and a strong safety net to ensure that the gains from trade accrue widely and therefore that the political foundations of open markets remain secure. Economic liberalization plus social welfare equals prosperity in other words. I take it that the idea of putting trade barriers on Harry Potter was chosen as an example because it’s calculated to sound outlandish to Americans, but Australia does engage in substantial book protectionism, driving up the price of books with a stated rationale of securing adequate revenues for Australian publishers to drive investment in Australian authors.