Channeling goods
By channeling goods and resources to those who value them most, trade creates value and increases the wealth created by a society’s resources. Because preferences differ among individuals, the value of an item can vary greatly from one person to another. Therefore, trade can create value by moving goods from those who value them less to those who value them more. The simple exchange between Janet and Brad also illustrates this point. Imagine for a moment that Brad and Janet had never met and instead were both eating their salads alone. Without the ability to engage in this exchange, both would have eaten their salads but not had as much enjoyment from them. When goods are moved to individuals who value them more, the total value created by a society’s limited resources is increased. The same two salads create more value when the trade occurs than when it doesn’t. It is easy to think of material things as wealth, but material things are not wealth until they are in the hands of someone who values them. A highly technical book on electronics that is of no value to an art collector may be worth several hundred dollars to an engineer. Similarly, a painting that is unappreciated by an engineer may be of great value to an art collector. Therefore, a voluntary exchange that moves the electronics book to the engineer and the painting to the art collector will increase the value of both goods. By channeling goods and resources toward those who value them most, trade creates wealth for both the trading partners and for the nation.