Final answer:
The gains from trade include both measurable increases in national income and less tangible benefits such as consumer choices, competition, and knowledge transfer. While these gains can be substantial, they are often undervalued by economic statistics, highlighting the importance of looking beyond mere numbers to understand the full impact of international trade.
Step-by-step explanation:
The gains from trade can be substantial and are often measured in the aggregate as increases in national income that range from hundreds of billions to trillions of dollars. These gains are not only financial but also include qualitative aspects such as the transfer of knowledge, technological advancements, and increased competition, which benefit consumers by providing a wider variety of products. When measuring the gains from trade, it is essential to consider both quantifiable economic statistics and less tangible factors such as consumer benefit, knowledge transfers, and advancements in production.
While economic statistics capture some aspects of trade gains, such as increases in GDP, they often undervalue the extent of these benefits because it is difficult to quantify consumer advantages and knowledge transfers that come with international trade. Firms splitting up the value chain of production contribute to these unmeasured factors which can lead to future growth in skills, technology, management, finance, and law. These unquantifiable elements are crucial in assessing the full impact of trade between nations, especially in smaller and lower-income countries, where the potential for economic gains may be especially high.