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Why We Should Trade with Cuba

January 2008
The new science of neuroeconomics offers
new insights into old political problems

The 19th-century French economist Frederic Bastiat expressed a principle applicable in the 21st century: “Where goods do not cross frontiers, armies will.”

In my new book, The Mind of the Market, I describe in detail how in the modern world of nation states, economic sanctions are among the first steps taken by one nation against another when political diplomacy fails, as when the United States enforced them on Japan after its invasion of China in the 1930s, and these became a prelude (among other factors) to Japan’s retaliatory bombing of Pearl Harbor in 1941 and our involvement in the greatest war in history. More recently, economic sanctions were imposed by the U.S. and Japan on India following its 1998 nuclear tests, and more recently by the U.S. on Cuba, Iran, and North Korea.

Economic sanctions send this message: if you do not change your behavior we will no longer trade with you. And by Bastiat’s Principle, where our goods do not cross your frontiers, our armies will. Not inevitably, of course, but often enough in history that the principle retains its veracity. Economic sanctions are not a necessary or sufficient cause of war, but they are almost always a prelude to war, whether you are a consumer-trader or a hunter-gatherer. Consider the Yanomamö people of the Amazon, sometimes called the “fierce” people. There is good reason for the moniker because warfare has long been a part of Yanomamö life. As the anthropologist Napoleon Chagnon discovered, however, the Yanomamö are also sophisticated traders, and the more they trade the less they fight. The reason is that trade creates alliances. One village cannot go to another village and announce that they are worried about being conquered by a third, more powerful village, since this would reveal weakness. Instead, they mask the real motives for alliance through trade and feasting, and as a result not only gain military protection but insure inter-village peace. Most interestingly, even though each Yanomamö group could produce its own goods for survival, in fact they don’t; they set up a division of labor and system of trade. They do this not because they are nascent capitalists, but because they want to form political alliances with other groups, and trade is an effective means of so doing. The end result is that when goods cross Yanomamö frontiers, Yanomamö armies do not.

The cooperation that goes into making trade successful accentuates amity and attenuates enmity between strangers and can even be seen at work in brain scans. Scientists at Emory University had 36 subjects play an exchange game while undergoing a functional magnetic resonance imaging (fMRI) brain scan. They found that the areas of the brains of cooperators that lit up were the same areas activated in response to such stimuli as desserts, money, cocaine, attractive faces, and other basic pleasures. Specifically, there were two broad areas dense in neurons that responded, both rich in dopamine (a neurochemical related to addictive behaviors): the anteroventral striatum in the middle of the brain (the so-called “pleasure center”), and the orbitofrontal cortex just above the eyes, related to impulse control and the processing of rewards. Tellingly, the cooperative subjects reported increased feelings of trust toward and camaraderie with their game partners.

How does trust translate to trade? At the Center for Neuroeconomics Studies at Claremont Graduate University, Paul Zak has demonstrated the relationship between trust, trade, and economic prosperity. He shows, for example, how trust is directly related to neurological chemicals such as oxytocin, a hormone synthesized in the hypothalamus and secreted into the blood by the pituitary. In women, oxytocin stimulates birth contractions, lactation, and maternal bonding with a nursing infant. In both women and men, it increases during sex and surges at orgasm, playing a role in pair bonding, an evolutionary adaptation for the long-term care of helpless infants. In exchange games, the more subjects are behaving in trusting ways, the more money they exchange and the higher the levels of oxytocin that are released by the brain. To find out if cooperating and trust lead to the release of oxytocin or if increased levels of oxytocin lead to more cooperation and trust, Zak infused oxytocin into subjects’ brains through a nose spray that is quickly absorbed by the body and discovered that it causes them to act more cooperatively.

Although there may be legitimate political reasons for imposing trade embargoes on nations behaving badly, there are economic consequences that lead directly to a breakdown of trust. By contrast, free trade makes people more trusting and trustworthy, which makes them more inclined to trade, which increases trust … creating a self-enforcing cycle of trust, trade, freedom, and prosperity.

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5 Comments to “Why We Should Trade with Cuba”

  1. Leonid Says:

    I think the following historic examples may provide an interesting perspective.

    Making the case for trading with the capitalist countries Lenin once said: “The capitalists will sell us the rope on which we are going to hang them” and, as people in Eastern European countries can testify, eventually they did.

    In the years prior to the WWII, Germany proceeded to break international treaties one by one. Following one of the most flagrant ones (default on its financial obligations to the british creditors), UK government considered applying the trade sanctions. Given the dependence of german rearmament program on the imports from the british empire, the sanctions could have hurt pretty badly. However, for the fear of escalating the conflict and strengthening the “hawks” in the Reich, the idea was dropped.

    Later, during the preparation stage of the Barbarossa plan, when british imports were no longer available, the German Reich badly needed to increase the import of metals and grain. So the Fuhrer declared the export to the USSR, which was used as payment for the import, to have the same priority as the armaments production.
    So much for “a self-enforcing cycle of trust”.

    Certainly, arguments can be made in favor of trading with the regimes we don’t like. Just let’s not forget that at some point this trade may also backfire.

  2. RHM Says:

    You make some good points.

    The Cuban Embargo has been a miserable failure that we can add to our list of foreign policy blunders. It’s time to end this one and move on. Fidel and his cronies have yet to miss a meal since 1959. The Cuban people have suffered not just as a direct result of his policies, but because of our embargo.

  3. Tim Says:

    It makes you wonder why our great Empire is so afraid of a little island that has not been a threat since the Russians removed their missiles over 40 years ago. It can’t be because they are communist because the US has no problem trading with the biggest communist country of all, China, who even has hundreds of nuclear weapons to boot. Either our government is full of complete and utter cowards or worse, they are just a bunch of bullies picking on weak nobodies. Scary thought! Makes you wonder who they are going to pick on next…

  4. Frank C Says:

    During your speech at the Cato Institute on C-Span you mentioned how in a specific experiment if one of your “starving students” offered 10 to his partner and kept 90 (out of 100) for participating in the experiment, the partner typically refused due to a feeling of unfairness.

    I see a parallel between this and the Cuba dilemma. That is, we may feel that we are receiving much less than the huge gains that could be gained by the government (ie Communist Party) of Cuba. It may also be that by engaging in trade, we feel we may become a contributor to a continuance of human rights violations taking place in the island. If this is true, then it could provide an argument for being against trade, just as it is the argument for the partner student who refuses to take 10 knowing the other student is taking 90.

    Also, I would mention that many trade agreements (e.g. NAFTA) are not designed to provide equal gains for both sides, but rather each side tries to maximize his/her gains. Hence, many of these trade agreements contain more than 3000 pages worth of rules, regulations, and stipulations. A true free trade agreement would be one line that reads: “All tariffs and quotas will be removed along with any barrier mechanisms to free trade between both parties.” Unfortunately, this is never the case and this partly why there is so much opposition to so called free trade agreements.

  5. Jeremy Hogsten Says:

    well hell yeah michael glad to see that you’re doing some good. a few things i wish you’d address. as much as i seeing you and others attacking alternative medicine, how about going after western medicine and its failures. and how about lifting up those aspects of alternative medicine that have proven to be beneficial and legit? also i fail to see you give proper coverage to people like noam chomsky and edward s herman. furthermore why don’t you people foster real debate and scientific studies with those you don’t agree with. personally i find most of you skeptics and people that believe in the paranormal pathetic. you guys don’t investigate shit. you sit around and criticize each other. how about you investigate something for a change. also i found your personal experience with vitamin therapy to be quite, well fucking ridiculous. you mean to tell me you were taking vitamins predicated on the basis that you would win a bicycle race? i mean sometimes i feel like victims of this kind of stupidity and televangilists get what they deserve. you can dismiss all of vitamin therapy due to your own stupidity or naivete.