Unreasonable Reasonableness

by Don Boudreaux on May 2, 2008

in Myths and Fallacies, Seen and Unseen, The Future, Trade

Here’s a letter that I sent today to the Wall Street Journal:

Adhering to the general practice of saying that free trade has both winners and losers, you introduce two letters on Nafta with the heading “Nafta Has Helped Some, Hurt Some” (Letters, May 2).  But this familiar endeavor to appear reasonable misleadingly implies that trade across political boundaries has a unique propensity to help some and hurt others.  In fact, any economic change helps some and hurts others.

Would you introduce letters on the polio vaccine with “Vaccine Has Helped Some, Hurt Some”?  After all, the vaccine eliminated jobs for workers who made crutches, wheel chairs, and iron-lung machines.  Of course, the benefits of the vaccine – especially over the long run – far outweigh the costs.  Likewise with consumers’ freedom to spend their incomes as they choose.  And free trade is nothing more than consistently allowing consumers to spend their incomes as they choose.

Sincerely,
Donald J. Boudreaux

This earlier post of mine addresses the same point in a slightly different way.

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{ 23 comments }

Tim May 2, 2008 at 12:02 pm

Don,

Your ability to nothing short of NAIL the perfect analogy almost every time is nothing short of amazing to me.

You really help out the general public understand some of these concepts that are mutilated by both "sides" of the media.

I'm sure you get kudos all the time, but I just wanted you to hear one more time that what you do every day really does help people understand how things truly do work around here.

Thank you!

Jim Gannon May 2, 2008 at 2:26 pm

Here, here. Don, this is beautiful. I've always loved the analogy of how the invention of the automobile helped some-hurt some because it put buggy makers out of business. But, your polio analogy is orders of magnitude better!

Please distribute this as widely as possible.

Jd May 2, 2008 at 2:35 pm

I completely agree with Tim above. If there is ever an Oscar for 'Best Analogy Producer', you would get it for sure.

Ken May 2, 2008 at 4:36 pm

Things like this seem so obvious, I am always very surprised when people remark that there are losers as well as winners, then trying to make it sound as if what was lost washes out what was won. Why do you think that people are so oblivious to the fact that most of the winners win far more than the losers lose and that the losers are losers only in the short run?

Cassandra May 2, 2008 at 5:47 pm

Excellent letter. Well said, sir.

Mathieu Bedard May 2, 2008 at 6:31 pm

I love your example of the polio vaccine. I'm definitely going to remember this one!

David P. Graf May 3, 2008 at 12:19 am

We seem to have forgotten that those who had lost their jobs making things like wheelchairs had other good paying alternatives. Where are those kinds of jobs today?

My father's generation was able to buy homes, raise a family, take care of their bills and have a good retirement based upon a single breadwinner in the family. Today, even two working may not be enough to make ends meet as prices continue to jump. From that perspective, I think we're worse off than we were before.

The Dirty Mac May 3, 2008 at 6:55 am

Isaac could have included other meausres such as: Eat no pre-prepared foods and eat out rarely (except possibly for pizza). Get rid of the air conditioning, CD players, iPods, computers, extra TV's. Drink Pabst Blue Ribbon. Many of these strapped two-income families could like quite well if living well was defined in terms of consuming the basket of goods and services generally available 30-40 years ago

Th Dirty Mac May 3, 2008 at 6:59 am

..,of course, if David wants to reply to Isaac in the manner of the good old days he would have to send an airmail letter.

Ken May 3, 2008 at 10:51 am

David,

To put things in perspective, those considered poor today have the same material living standard as the middle to upper middle class had in 1970.

In addition to your foolishness that Mac and Isaac pointed out, you are ignoring medical advances that are available to us. My mother had breast cancer about 12 years ago, from which she has fully recovered. If she were part of the earlier generation you idiotically think had a better life than us, then she would have gotten breast cancer in the middle of the 70's… and died.

My grandfather died of a heart attack in 1971. His third heart attack. The treatment he got, between '65 and '70, after his first two , was bed rest. He was a middle class man and the state of the art treatment was bed rest! If he were poor today, he'd still be alive, even after 3 heart attacks. Instead, I got to never meet him.

As a society, we are 2-3 TIMES as wealthy as we were in 1970. In short you do not know what you are talking about. The wonderful life the previous generation had that you lionize SUCKED.

David P. Graf May 3, 2008 at 11:04 pm

Ken,

No one is saying that there have not been some good things that have happened over the years. However, that does not change how much harder it is for ordinary people to be able to do the same kind of things that their parents were able to do on a single income.

Having raised a family, I feel sorry for the young couples of today who are trying to make ends meet. The cost of energy and food is going to make things a lot harder for them than it was for my wife and me.

Th Dirty Mac May 4, 2008 at 10:30 am

I had childhood asthma during the affluent 1960's. I was regularly pumped up with amphetamines.

vidyohs May 4, 2008 at 8:32 pm

David,

Please, put your mind in a receptive gear and go back and read again what Issac and Mac wrote to you. Then don't reach for the keyboard, think about it until tomorrow and then if you think you can give them an intelligent retort, go for it.

Ken May 4, 2008 at 11:29 pm

"However, that does not change how much harder it is for ordinary people to be able to do the same kind of things that their parents were able to do on a single income."

It's sad when someone just won't even take a cursory look at the facts. This is wholly untrue. I am an ordinary person and have a far better life than my parents' had when they were my age. This is true for both my brother and sister. This is true for nearly every single one of my friends.

Of course, there are those who just can't get their act together and act as a leech on society.

But you are very wrong when you say life is now harder for 'ordinary people' (nice condescending term there, too). The MEDIAN income in this country has increase by 40% since 1970. This is after adjusting for inflation.

A car built today does cost more than a car built in 1970. Of course, a car built today has air bags (passenger, driver and side impact) air conditioning, a digital radio with built in CD and iPod ready, power locks, windows, keyless entry, and on and on. Oh and don't forget that today the average family owns TWO cars, not just one.

A house built today, also, costs more than one built in 1970, but it has 40% more living space (interesting how that lines up with the increase in salary, huh?), more bathrooms, gourmet kitchen… well you get the point.

Exactly what do you think is harder for 'ordinary people' to do that was so easy for you parents?

And, by the way, don't feel sorry for us younger folks. Tell you what, why don't you just stop stealing our money (i.e., medicare, medicaid, and social security) you leech?

Lastly, you apparently are unaware that food and energy expenditures per household has dropped as a percentage of household income over the last few decades. The increase in the cost of food is because we now buy much higher quality food. And energy costs are increasing because the idiots of your generation (with whom I'm going to lump you) decided it was best to not build nuclear power plants, the safest, cleanest, and most inexpensive way to generate power. And you've decided to put huge disincentives to innovate in the energy sector by nationalizing that sector, then strengthening that strangle hold government has on that sector.

Thanks. Next time, try not to create a problem, them say you feel sorry for the people who have to deal with it. Just keep your ignorant nose out of it to begin with.

Hammer May 5, 2008 at 11:13 am

Yea, I don't know about every young couple, but all the ones I know have it pretty good. In fact, my wife and I could buy my parent's current house twice over for the price of ours, at current market prices. I find I don't spend much time thinking of the "good old days" as a result.

David P. Graf May 6, 2008 at 9:18 am

Ken,

I don't consider the term "ordinary people" to be condescending. Neither did others like Lincoln. I wouldn't be so quick to blame the older generation for so many of the world's ills. Each age has its own follies and so will your generation.

We do agree on nuclear power. Given the new generation of reactors which more efficiently process fuel rods, there's no real reason why we shouldn't be pushing its use. Nuclear power doesn't drive up the price of food as can be the case with biofuels and there's already a distribution system in place which works as compared to other alternatives like hydrogen fuel.

Ken May 6, 2008 at 9:41 pm

David,

My point is that with all the 'world's ills', the people of my generation will have far better lives than yours. As the generation after me will have better lives than mine. You're suffering from the pessimism bias, which is ubiquitous and well documented.

And why not blame the older generation? They are the ones in charge, passing counter productive laws. Even with all this non-sense, it is still not enough to undermine American entrepreneurship and hard work.

The welfare state breeds a nice sense of entitlement that is hard to kill, though. Tell me, since you are so well off and you think my generation is not, are you still going to collect your welfare, I mean social security check? Or do you feel so entitled to my money, you will still vote for politicians to steal from me to give to you? Do you not even recognize the damage this does? How much it deters the people to work hard? Why work so hard if it's going to be taken? Why save when I can just steal from the young when I'm old?

Lastly, not having nuclear power is not the main problem. Having energy be a state run affair is the problem.

David P. Graf May 7, 2008 at 8:48 am

Ken,

I can hope that your lives and those of your children will be better than that of each previous generation. However, history is replete with examples of where things didn't quite work out that way due to a society's stupidities and follies. Realism is not pessimism if we deal with our problems.

Please understand that I did not say that everyone was going to be worse off. However, I think it will be harder for people making below the median income given the increase in energy costs and food. I am concerned about their prospects.

If you wish to blame the older generation much as they did their own elders, it may be an enjoyable exercise, but it does little to actually rectify any problems.

Considering that I've worked hard and paid into social security my entire life as an adult, I don't see it as a deterrence at all. I know that it's a losing proposition for me personally, but if it helps keep elderly people from being slammed into poverty then that's a good thing. I think that we do have an obligation toward others. I may not like the chunk it takes out of my paycheck, but there's more to motivation than money. By the way, my wife and I do have savings for retirement.

Considering that the governments of many oil producing countries do it as a state run affair, exactly how do you plan to change that?

Ken May 7, 2008 at 2:48 pm

"…if it helps keep elderly people from being slammed into poverty…"

It doesn't. The elderly is the most affluent segment of out population. A lifetime of wealth accumulation tends to make you fairly wealthy. Many, and I'm assuming you are one of them, equate income with wealth; they are not the same. I know that the very old make less than the middle aged, but that's mostly by choice. My mother and step father are semi-retired, by choice, and are 59 and 62 respectively. The house they have, for just the two of them, could fit 3 of mine. They have two cars, a truck, 5 motorcycles, a yard over 5 times as large as mine and, of course, a savings account that has decades worth of money in it. They both work part time and still make more than me. They are not unique. Most old people I know are in similar situations.

It's petty and mean to make younger people pay for their retirement. Social security is not about keeping old people out of poverty; it's a system in which old people think they are entitled to younger people's money simply for being old.

"Considering that the governments of many oil producing countries do it as a state run affair, exactly how do you plan to change that?"

So the idea that other governments actively hurts its citizenry, we should too? What kind of sense does that make? I don't plan on changing the way other governments or even my own government from changing the way it does business. I'm pointing out that the primary reason energy could even remotely be considered in some sort of crisis (which it is not), then almost the entire blame rests with the governments strangled regulation of that industry. Of course the public is to blame for being ignorant and letting politicians do what they do.

The problems this nation faced in the early 70's with gas was a direct result of OUR policies, not OPEC's. In 1968, OPEC reduced oil production by even more than in the 70's, yet the market system responded and handled the problem without it becoming a crisis.

Then Nixon came along, imposed price controls and voila: shortages, which most economists predicted. This gave the power grabbing government (not just Nixon) an excuse to strengthen its grip on the energy sector. Now the government actively discourages innovation in this industry, all in the name of safety and the 'public good', but it's really about the government maintaining its control over the public. Stopping nuclear power is only one of them and, in my opinion, minor in the long run.

Kevon May 8, 2008 at 11:42 am

Trade must help both sides in the long run to work whether the benefits are large or miniscule. Trade will almost always help one side more than the other but that is just the nature of the game, but there are "rarely" losers in trade. Both parties generally believe they are getting the better part of the deal or receiving something that the cannot get on their own or else there would be no trading process in the first place. The needs of one country may be greater than that of another so something as little as rice may be more influential than that say of oil to the country with the booming economy.

Methinks May 8, 2008 at 8:35 pm

We seem to have forgotten that those who had lost their jobs making things like wheelchairs had other good paying alternatives. Where are those kinds of jobs today?

Not true.

If the people making wheelchairs had better alternatives, they wouldn't have been making wheelchairs. Therefore, the elimination of those wheelchair making jobs meant that they had to accept less desirable jobs. Yet, somehow, they and their offspring survived to bask in the glory days of the 1950's & 60's.

Of course, it's very telling that you find these to be the glory days. You are not a woman and you are not black. Did it ever occur to you that not all women were so enamoured of the economic opportunities they were presented with (read: none)? That is, not all women delighted in the changing of crappy diapers and serving you single-earners your meet and potatoes night after endless night. And, of course, it's difficult to compete for jobs if you can't even drink out of th same water fountain as whites. Ah yes, the glory days of yore. Something tells me that your life today is filled with so much more material wealth than it was in the days of your fictionalized youth. We all get sentimental in our old age. Just don't let it cloud your perception of reality – both then and now.

David P. Graf May 9, 2008 at 7:29 pm

Methinks,

I didn't say that they had "better" alternatives. I said they had "other" alternatives. Big difference. Nor did I ever suggest that things were wonderful for women and blacks back in the times of my parents' generation. However, most workers did have viable alternatives. Can we say the same thing today for people without a college education?

Howard J. Harrison July 31, 2008 at 3:31 pm

I am unpersuaded that this blog is interested in discussion. The blog is not required to be so interested, naturally, but do you not think the gratuitous abuse David has received here shameful?

Believe it or not, a theoretical grasp of Ricardo's law of comparative advantage does not make one a superior human being. The brittleness of the manner in which the Ricardan argument is flaunted here is unflattering, to say the least.

A fair number of free traders are collected here. Perhaps one of them will answer the following question. When confronted by protectionist objections, why are free traders so wont to substitute the straw man of autarky for the legitimate objections of the protectionist? On the political right particularly, an economic nationalist prefers to offset income taxes by restoring traditional American tariffs. Even in theory (and you free traders believe theory way too much), the loss of utility due to distortion in prices caused by such tax substitution is at worst a second-order effect. Have you not considered that Americans who would rather depend on foreigners for less rather than more are unenthusiatic about globalization, and are willing to pay a small, theoretical GDP penalty to reinvigorate American-owned, American-manned industry here in the United States?

Why is that so wrong? How does David earn such abuse? No one disputes that the theory predicts a second-order GDP penalty. What they dispute is whether the penalty (if it actually exists) is the only thing that matters.

As for the notion that everything is just peachy here in post-industrial America, that there is nothing to worry about except failure of the Doha round, it's flabbergasting. Globalization may or may not be to blame for the economic insecurity many Americans evidently feel, but to rule the possibility out because of devotion to some differential equation? You may not be concerned that America now depends on foreign suppliers for parts for her military and naval arsenals; and you may not worry that we import so much of our oil; but I don't see how, in good conscience, you can impugn the motives or denigrate the education of people who are concerned—especially when, according to your own theory, only a second-order economic benefit is on offer.

Something is out of balance here. You free traders need to rethink.

Howard

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