Today is the fifth anniversary of my first blog post at Cafe Hayek. I stand by it still.
April 19, 2004
Still alive in the long-run
Don Boudreaux
Trade’s documented effect on employment is clear: freer trade does
not reduce the aggregate level of employment (and nor does it increase
it). Skeptics of free(r) trade frequently respond “Sure, in the
long-run new jobs will be created. But what about workers who are
unemployed now? The long run is no good to them. Even an economist,
John Maynard Keynes, recognized that ‘in the long run we’re all dead.’”
This justification for protectionism – that protectionist policies
are justified because they diminish pain and anxiety today, while the
costs of protectionism emerge only in the less-significant tomorrow –
is faulty on a variety of fronts. Perhaps the biggest flaw of this
justification is that it’s a lie. No one really believes that short-run
consequences should take precedence over long-run consequences.
You see, people who really believe that long-run effects should be
ignored or significantly discounted in favor of short-run effects
would, in addition to supporting protectionism, support also the
following policies:
- eliminating environmental laws (because these impose substantial
costs today in return for benefits that arise mostly in the long-run);
- Uncle Sam’s current, unprecedented budget deficit (because the
benefits of the deficit are enjoyed today while payment for today’s
benefits need not be made until tomorrow);
- eliminating Social Security (which forces people to forego consumption today in favor of the long-run).
If no sensible person accepts the mantra “in the long run we’re all
dead” as an argument against environmental laws and efforts to reduce
the budget deficit, why does this mantra have credence in debates over
free trade?
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I'm missing the point here.
Not surviving the long run is no justification of protectionism, it is an explanation.
Gr.
Daan
Is this the long run yet?
And is trade really freer?
Happy anniversary!
Needless to say, I celebrate your birth at Cafe Hayek, but I reserve the right to nitpick.
It could be a justification for protectionism, or it could be a justification for welfare state programs like unemployment insurance and continuing public education. Many liberals understand the perils of protectionism and advocate these alternatives instead, but they confront opposition to the alternatives as well.
What remedy, if any, for the dislocations created by shifting comparative advantage do you favor?
Can factors other than real comparative advantage, like subsidies, create these dislocations?
I suppose an economy could benefit from another economy's subsidies by progressing further along a developmental trajectory (developing a new generation of more valuable goods while allowing the subsidized goods to displace domestic production). I don't suppose this progress can occur at an arbitrarily high rate.
If my economy is a small fraction of the world economy, and if some other economy somewhere subsidizes practically everything (each economy subsidizing different goods), won't my free economy (without any subsidies) be perpetually in "development" mode without ever producing anything it can trade or even consume itself?
Could international patents solve this problem? [No. First, the patents are unenforceable. Second, even if the patents are enforceable, nations dominating production of the current generation of goods will also produce the most useful innovations while my economy only dreams of pie in the sky.]
Much of the deficit doesn't really involve borrowing from the public that must ultimately be repaid. It involves "borrowing" from the Fed, through nominally "private" intermediaries, and the Fed creates the money to "lend". Congress pays no interest on bonds held by the Fed, and it routinely "borrows" more money from the Fed to repay what it "owes", so the debt never falls, and payment for today's benefits doesn't really occur tomorrow. It occurs today in the form of inflation.
Basically, this inflation is a tax on holding cash. If you hold cash or cash equivalents (like Treasury securities), you pay this tax, and I don't really have a problem with that. Under the circumstances, "lending" to the monetary authority should be a losing proposition.
Of course, excessive monetary credit expansion can also create an Austrian boom/bust cycle, and holders of cash anticipating the bust can benefit during its deflationary phase. That's a separate problem.
Social Security does not force people to forgo consumption today in favor of the long-run. It forces people to transfer their entitlement to consume currently to other people who consume currently. That's the problem with it. If it were truly a system of foregone consumption in favor of investment, like this alternative, it might be less problematic.
Fantastic post to begin Cafe Hayek. Congratulations on your anniversary @ Cafe.
Muirgeo is back with two off-topic links
Social Security does not force people to forgo consumption today in favor of the long-run. It forces people to transfer their entitlement to consume currently to other people who consume currently.
Exactly, because the money paid into SS is not invested in future production, rather it is merely a redistribution of 'entitlement to consume' from those who earned it to those who were led to believe that their SS witholdings represented some kind of investment.
Martin,
Fair points all, but in my post I was referring to the way — or one significant among the several ways — that these programs and positions are justified publicly.
I'm sufficiently soaked in the public-choice literature to understand that democratically elected politicians are among the very last people on earth to intentionally act for the publics' benefit over the long-run. Put differently, politicians are not likely to be found taking steps to improve matters over the longer run if doing so involves short-run pain to their constituents or to well-organized interest groups.
But the OSTENSIBLE reason for Social Security is that we put money aside today in a "lock box" (remember that term?) — the ostensible reason given by the party out of power for opposing deficit financing is that such financing sacrifices the future for the sake of today.
Muirgeo is back with two off-topic links
Posted by: S Andrews
Referencing data on global unemployment numbers is off topic?
Anyway the links have apparently been disabled.
Data is here apparently off topic while making claims of "freer" trade ( without defining what that means) or claim of consistency of aggregate employment with no evidence to support the claim is apparently good enough for you Andrew?
So explain to me, do you accepts the claims above based on some other data of which you know of or do you simply accept anything you read here as it's spoon feed to you? If you or anyone has data I'd love to see it.
I just returned from the Yucatan unable to buy a locally made hammock or some Sauza Tres Generaciones Anejo Tequila on any basis that I would claim was "free trade". I suspect my best deal on hammocks and Tequila from Mexico would be to buy them from Walmart or BevMo since Free trade is really set up to benefit them more then the ordinary consumer.
Putting money in your mattress or in a lock box for any significant length of time is foolish as anyone who understands the time value of money knows. Because prices usually rise over time, your stagnant money becomes less valuable. I see nothing wrong with spending what someone pays into the social security system being used to pay someone who is receiving benefits. That logically can't be a bad thing if the alternative is sticking it in a box and burying it. You have a PhD in the subject matter at hand, so please stop with the sophistry.
All of this ostensible reasoning creates a hell of a lot of confusion.
Muirgeo,
Defining free trade is simple: free trade exists when government imposes no special burdens on trade that happens to take place across political borders.
Free trade, so defined, doesn't mean that domestic trade is sufficiently free — but it does mean that the existence of a political border that happens to run between two parties who wish to exchange on terms that they've voluntarily agreed to will not serve as an excuse to hinder that exchange in any way.
As for the final sentence in your second comment on this post, it is utterly gratuitous and — like far too many of your assertions — reflects only your prejudices and not any evidence. You show me a high tariff or any other import barrier and I'll show you a firm (likely a corporation) pushing for it.
Do you ever pause to think about what you write? How is it that you conclude that a policy of allowing consumers to spend their money as freely as possible is one that is not designed to benefit "the ordinary consumer"? How is it that a policy that prevents "the ordinary consumer" from spending his money as he sees fit, without respect to political borders, is a policy that benefits this "ordinary consumer"?
And how is it that a policy that protects producers and suppliers from competition is one that is in the interest of "the ordinary consumer"?
I await your answers.
Muirgeo,
One further point: unlike protectionism, free trade is not "set up." It is simply what exists when government grants no special privileges based upon the nationalities of producers or their geographic location.
"It is simply what exists when government grants no special privileges based upon the nationalities of producers or their geographic location."
What "simply exists" ? The stuff that people freely or unfreely trade had to come from somewhere at a prior point in time. I learned in biology class that people used to believe in spontaneous generation, until Louis Pasteur definitively debunked the notion. Piaget show that children at certain stage of development believe that if you crumble a potato chip, you get more potato chips. It is an extension of the concept that God created the heavens and the earth in 6 days then rested on the 7th to believe that goods that are traded simply exist. Stop with the sophistry, please. You know better.
Oh, perhaps you were meant that the amorphous thing called "free trade" simply exists as if by magic. I don't believe that either. Complex phenomena don't "simply" do any one thing. That is why people study and debate them endlessly in an attempt to better understand them.
By the way, if no political borders were to exist, which "ostensibly" you advocate then no tax haven could exist, which you also advocate. We'd be one world, which we actually are. How do you reconcile your internal contradictions? They'd keep me awake at night.
"Lock box" was Al Gore's BS, not Don's.
"Time value of money" is more BS. Money has no time value, as you note yourself. Real capital has time value, but one's money only denominates his current entitlement to obtain real capital in a capital market, at some risk. If one simply holds money, the value of this entitlement invariably decreases, as it should. Simply holding an title should not entitle someone to ever more entitlement. I understand why established title holders want this entitlement to ever increasing entitlement, but I certainly don't want it.
Here's what's wrong with it. The expenditure doesn't increase the means of producing goods that contributers expect to consume when their turn to consume rolls around. If the demographic profile is stable, productivity need not increase to provide the real benefits retirees expect without depriving remaining workers of more of their fruits, but the demographic profile is not stable.
Even if Social Security (or some "privatized" system of "saving for retirement") tried to increase real means of production, I'm not sure that it could have increased them fast enough to provide baby boomers the benefits that their parent now receive without imposing heavier rents on the generation behind us.
In reality, human labor is the most productive means of production, as economists from Mises to Simon explicitly concede and as empirical measurements consistently show, but we have a "baby boom" in the first place because we substantially cut our production of new labor in the sixties and haven't increased it since.
Given the demographic changes in recent decades, the "saving for retirement" BS is based on the dubious and completely untested assumption that we can always replace any amount of human labor in any productive process with non-human capital as rapidly as we like, so throwing money at bankers to extend credit can always increases real means of production in proportion to the volume of money thrown.
But that's exactly what the Austrians tell us we can't do.
That's not the alternative.
Thanks for 5 years of great posts. I've read nearly every one of them! Keep up the good work; it is heartening to read of abstract free market ideas applied concretely, especially these days.
"Defining free trade is simple: free trade exists when government imposes no special burdens on trade that happens to take place across political borders."
Then we do not have free trade. Am I missing something? Do you really think the rules for corporations and for individuals are equivalent? I don't think my last statement was gratuitous at all. Maybe I am miss informed and the multinational corporations have to go through the exact same hoops I as a indivdual was put through but that would require proof for me to believe it. If I could have bought as much tequila and hammocks as I wanted and shipped them back without regards to regulation I would say I had access to free trade. But that obviously wasn't the case as my wife was held up in customs because of apparent "hammock export regulations" and my Tequila had to be handed to me as I boarded the plane least I pay "duty" as set by I presume the Mexican government and well placed WTO corporate written regulations.
Now you didn't claim we had free trade but "freer" trade and again I would argue "freer" trade is in the eyes of the beholder and needs some qualifiers.
"But the current trade policy is far from free trade, it is simply one-sided protectionism that is designed to redistribute income from less educated workers to more educated workers. Calling it "free trade" gives a policy designed to redistribute income upward a legitimacy it does not deserve."
Dean Baker
Don maybe I don't think about my positions well as I am no expert but there are plenty of qualified experts of your caliber with well made contrary positions. I'm simply comparing both sides and trying to see who's positions fit the facts. It must be nice to have so much certainty on these issues as you have but from where I stand things certainly seem a little more muddled then you profess.
“I see nothing wrong with spending what someone pays into the social security system being used to pay someone who is receiving benefits.”
Unfortunately, the government does (unless, of course, you are the government). If you were to run your company’s retirement plan like this then you would go to jail. Your proposal was recently tried by a certain Bernard Madoff and did not work out so well for him.
“I just returned from the Yucatan …” I sincerely hope you enjoyed your vacation. There are those who oppose free trade who would have you stay at home and not let you take money out of the country (as was done in the UK in the late 70s). I am very glad you got to go (I have been myself and found it beautiful), and I am sure the local populace enjoyed being exploited by your tourist dollars. However, why did you not think to visit Toledo? Instead, you off-shored your vacation to a foreign country. Think of all the hardworking Americans in the hospitality industry who would benefit if we barred folks from traveling oversees. I love how people deride free trade and materialism until it comes to something they like, but consumers can be like that.
P.S. Don thanks for the blog—it has been a part of my day since September of 1994. Also, sorry if any of my comments have been a little bit out of line–like you I get very passionate about leaving people alone and the terrible destruction wrought by the state and those who love it.
Yes, it is. Unless, you can tell us what the correlation of this unemployment is with free trade.
Don is just bring back memories of a post from 5 years ago, which happened to be his first post at Cafe. Does the fact that he posted on this topic 5 years ago have any correlation with "free trade" or lack there of?
You ask the question "is trade really freer?". Is that a rhetorical question? what are you suggesting. the article you linked doesn't make it's position clear one way or another on that topic. Totally off topic.
I "know" you "weigh" both sides of the argument. If that is the case, you must have some points of agreement with the Cafe on matters relating to economics. List a few of those. If you can't come up with it, I would have to call your bluff: I will have to conclude that you have a prejudiced mind, your mind is made up and is not open to any new ideas or thoughts. Let's take it from there.
Muirgeo,
Where to begin?
I in Virginia can freely trade with someone in California. That's free trade. We have it. The political borders between me and my trading partner in California serve as no basis for special restriction on our trade.
The fact that national governments almost always impose some trade restrictions does mean, yes, that complete free trade is absent from this world.
Your question about multinational corporations and individuals being subject to the same rules is too general to make any sense. You imply that there's one book of rules out there (where?) for multinational corporations and another book for individuals. It's tempting — both for leftists such as yourself and for libertarians such as me — to say "darn right!" But any serious reflection on reality shows that that belief is juvenile.
If ExxonMobile, say, wants a patent it must go through the same process that I must go through to get it. If General Electric covets land that I own, it has to buy it from me; it cannot take it. And it has no more privileged access to the prospect of buying my land from me than you do.
Now I quickly add that government often does illegitimately bestow special privileges on corporations — privileges that these corporations ought not have as a matter of economics and as a matter of ethics.
One such privilege is protection from foreign competition. Anyone who argues that only a policy of protectionism – that only a policy of restricting consumers' rights to spend their money as they see fit – will bring the legal rights of ordinary people into closer alignment with those of corporations has it totally backwards. Such a person knows nothing of what he or she speaks.
Finally, your quotation from Dean Baker proves nothing but that Dean Baker does not support free trade — that Dean Baker believes that, at least in some circumstances, economic prosperity is enhanced by protecting domestic producers from competition by restricting domestic consumers' rights to spend their money as they deem best.
What evidence does Baker offer for his position? How does that evidence stack up against the evidence offered by other researchers? How does Baker's theorizing stand up to that of other theorists?
Muirgeo,
You say that you want to learn about these issues. If so, read solid scholarship on trade. You can start with Douglas Irwin's Free Trade Under Fire (Princeton University Press). I think that the 3rd edition is out.
Also read Irwin's Against the Tide (Princeton University Press, 1996).
Read Paul Krugman's Pop Internationalism.
Read Martin Wolf's Why Free Trade Works (Yale Univ. Press, 2004).
Go to a library and find a collection of articles by real economists on international trade; the American Economic Association put together a nice volume back in the '50s or '60s.
Reading the likes of The Nation, William Greider, Dean Baker, and Jeff Faux will teach you nothing except how disingenuous or uninformed people can be when writing about international trade.
Trumpit wrote: "It is an extension of the concept that God created the heavens and the earth in 6 days then rested on the 7th to believe that goods that are traded simply exist. Stop with the sophistry, please. You know better."
The only time manna fell from Heaven is when Moses was in the wilderness. Everyone knows that BMWs don't spontaneously appear in one's driveway. You have created a straw man that is a non seaquitor. Your last two sentences apply exactly to you.
Don,
Why do I see this statement as having to narrow a scope?
"Defining free trade is simple: free trade exists when government imposes no special burdens on trade that happens to take place across political borders."
I can't help but think, and believe, that political borders are irrelevant to the definition of free trade.
In the discussion of what constitutes free trade, my individual trade is just as important as any political border.
I'll even grant that claim to muirduck's trade as well.
Read Martin Wolf's Why Free Trade Works (Yale Univ. Press, 2004)
Is'nt the correct name
Why Globalization Works?
"I just returned from the Yucatan…" – VI Mierduck
Our greedy health care profiteer returns! I wonder how many poor people might have been able to afford their tetanus shot if Mierduck wasn't making such an exorbitant profit. One that allows him the luxury of trips to Yucatan, Alaska, etc.
Ray,
You are correct. The title of Martin Wolf's data-packed 2004 book is Why Globalization Works.
Thanks for catching my careless error.
Don
"I just returned from the Yucatan unable to buy a locally made hammock or some Sauza Tres Generaciones Anejo Tequila on any basis that I would claim was "free trade"."
You fraud muirduck, granted you may have been in the Yucatan, we have no way of disputing that, but that statement implies something more than probably what happened.
If you got off your lazy socialist butt and stopped waiting for some government to do it for you, and actually left your nice Cancun hotel and went to a local market, who knows what kind of trade you may have found.
vidyohs,
The deeper problem with Muirgeo's complaint that he wasn't able to buy what he yearned to buy during his visit to the Yucatan is his presumption that trade patterns that dissatisfy his own preferences are somehow flawed.
Perhaps he in fact was unable to purchase in the Yucatan what his heart desired. I wonder, though, if he asked himself why.
Perhaps the reason is that freer trade with the U.S. and Canada makes it more profitable for Mexican producers of these things to sell them in the U.S. and Canada rather than in Mexico. To the extent that this effect is part of the explanation, does Muirgeo believe that he has some moral claim on the livelihood of Mexicans? Would he support a return to less-free trade because it would give him greater joy during his visits to the Yucatan, despite this restrictive policy's contribution to keeping many Mexicans poorer than they would otherwise be?
….
I absolutely adore the music of the Beatles, but I would never have supported slavery even if someone had told me in, say, 1977 that a return to slavery could be used to reunite John, Paul, George, and Ringo. The degree to which my personal consumer preferences are satisfied is not the metric by which I judge the merits of social institutions.
A few years back, I drove 3 hours to get to Tijuana to buy some Kaluha, and other alcoholic beverages and some prescription drugs at a cheap price compared with what I pay in the U.S. I had to wait an hour or two in the heat to get back across the border, having to be submitted to U.S. customs. The customs agent confiscated most of my alcohol and demanded to see precriptions for the drugs I was buying. Never again will I engage in "free trade" buy going into Mexico. Forget it. The alcohol industry in the U.S. is a monopoly and they intend to keep it that way even for someone who plans to buy a few bottles for personal use. The practice of medicine is a monopoly controlled by the need for a prescription to medicate myself. I have to pay an M.D. hundreds of dollars to get the prescription, too. Outrageous! Why are the drugs so much cheaper in Mexico and why can't I buy them? Because the pharmaceutical companies are more monopolies that won't give the consumer a break. Until the monopolistic corporate swine are destroyed there can be no real free trade. Down with them and the false pretense of free trade that you and your cohorts espouse.
"Everyone knows that BMWs don't spontaneously appear in one's driveway."
That's a barefaced lie if ever there was one. Practically every ceo on wall st. has one of those or even more likely a Lexus. They do appear spontaneously. You are simply misguided and wrong.
http://news.yahoo.com/s/ap/20090420/ap_on_re_us/pharmawater_factories
Speaking of drugs, you may be getting them for free after all – in your drinking water of all places, courtesy of big pharma. Maybe I was too hasty to dismiss Mexican Kaluha. It may be cleaner and safer than what you are getting out of your tap.
http://news.yahoo.com/s/ap/20090420/ap_on_
re_us/pharmawater_factories
Congrats on your 5th year at Cafe Hayek, Don.
One of your first writings I ever read was your debate with a Harvard Law professor on the Wall St. Journal's website about eminent domain and private property rights.
You waxed the floor with that Harvard slick.
Although this is my first post, I've been a regular Cafe reader ever since.
Hope you and Russ keep up the good work.
"Why Globalization Works", By Martin Wolf was the book that got me hooked on economics. For someone like Muir who supposedly likes to look at the data, the book is loaded with it. Anyone know when/if wolf is gonna update the book?
Ooops I meant September 2004, and I cannot wait for us to engage with freer trade with Cuba–I am sick of smuggling in stogies from Europe. But what a favour we must be doing the Cuabns by embargoing them so. I am also reading a book on FDR and who knew he did the Japanese such a favour by cutting off shipments of scrap metal and oil–they must have been so thankful–I guess bombing Pearl Harbour was just their special way of showing their appreciation.
Uhhhh, so not being able to buy stuff in Mexico and bring it accross the border is somehow "free trade." You statists really confuse me sometimes, so how does allowing foreign competition help greedy corporations again? Most of the corporations I know hate foreign competition. Thankfully they have anti-corporate people to–uhh-help corporations make more money. You people crack me up–you inadevertantly help what you hate, which makes every comment you make icing on the cake for the rest of us.
I never said I couldn't buy stuff in Mexico. We bartered and traded, a dollar and a Pokemon to each for these pictures, with all sorts of willing local Mexicans and Mayans but the problem was at the border where restrictions where placed on what, how much and what duties I would be charged to take things across the border. Again there is no free trade. Its controlled by corporate oligarchs and these children and people like myself have little input into the rules of trade.
It really amazes me how comfortable you all are giving up so much power and freedom to the corporatist. The enemy is always the government of the people while the corporatist behind the curtain running the show are the supposed good guys running the Free market and Trading "Freely". You pay so much more to these corporatist then you do in taxes. And a good hunk of your taxes goes to them as well. But you've convinced yourself if we just scaled back the government and taxes that the corporatist power over you would some how go away or be minimized.
I've been to Mexico and Canada and I live in the USofA. The contrast of a weak government with a strong well run one is clear. I'll take Canada over Mexico any day. But from the free market perspective Mexico does have the richest man in the world so it must be better and I guess that's why people have been pushing these last 30 years to make us more like Mexico.
"[T]he problem was at the border where restrictions where placed on what, how much and what duties I would be charged to take things across the border. Again there is no free trade. Its controlled by corporate oligarchs and these children and people like myself have little input into the rules of trade."
Another brilliant non sequitur from the master. Government passes laws restricting you from taking items across the border, and you blame corporate oligarchs.
Carlos Slim Helú may be the 2nd or 3rd richest person in the world and is Mexico's richest. He owns all the phone companies there. Every time a dirt poor Mexican makes a phone call, Mr. Slim skims some pesos off for himself. When will the insanity end? Never if the libertarians get their way. They love billionaires; we should all be one. Get out there and start your own phone company, you lazy bums!
Don,
I have been having trouble lately in that some of my posts disappear into the ether. I replied to your comment above at about 9:15PM last night and it just disappeared. Much like the time a couple of weeks back when I thought I had been censored.
The essence of my post was to tell you that in the field of economics you are obviously a deeper thinker than I am, actually I like the way you and Russ cut clean to the core on most things.
I like to keep close to the street where I learned what I know. I have learned, and this Cafe reinforced my education, that typically what I call street knowledge is the most reliable indicator of the health and vigor of markets and trade. If it isn't good for the street, it isn't good anywhere.
Put simply, no government policy that is harmful to me as an individual market can be improved, or made better, by expanding it to include all markets.
That means government policy that interferes with international trade interferes with my personal and individual trade as well.
Government policy that interferes with my personal and individual trade will inevitably interfere with international trade as well.
muirduck is simply a fraud and a troll. His posts, I won't honor them with the word thoughts, can be dissected and shown to be nonsense in so many ways.
Bravo! Five years of puncturing the hot air balloons of rent-seeking politicos and similar charlatans. Here's to many more years.
Muirdog, you talk about all the RESTRICTIONS at the border and you call that free trade…
Not the sharpest tool in the shed.
Don -
1. I disagree with Dean Baker a lot too, but he is genuine and he is very well informed. The fact that I think he's often wrong doesn't contradict these qualities.
2. Could it be possible that the oft-derided "in the long run we're all dead" comment is not an argument for ridiculously high social discount rates, but is actually just a pithy suggestion that it's possible that some ostensibly long-run concerns amount to "cutting off our nose to spite our face", and that we shouldn't mechanically conclude that deferred gratification is always the best policy – I think that's at least a plausible interpretation of the line.
3. It's an interesting point, but I rarely here the "long run benefits vs. short term costs" arguments against trade precisely because it's so ridiculous. SOMETIMES you hear it as a way to jump-start developing countries, but I think that's the full extent of it. In developed countries you usually here the "diffuse benefits vs. concentrated costs" argument, which I think holds more water and may merit some policy intervention, but which still doesn't justify protectionism.
Don -
RE: My point 1.
I often find you to be quite wrong, but you don't come across as disingenuous or uninformed to me
*hear
I can't believe I did that twice in a row
I speak a lot on the topic of international trade. The single most common question I get from audience members is this one: "How do you justify freer trade to the worker who loses his job because of it? What do you tell him? Do you think that he's impressed with the fact that freer trade makes the economy stronger over the long-run?"
Don
2. Could it be possible that the oft-derided "in the long run we're all dead" comment is not an argument for ridiculously high social discount rates, but is actually just a pithy suggestion that it's possible that some ostensibly long-run concerns amount to "cutting off our nose to spite our face", and that we shouldn't mechanically conclude that deferred gratification is always the best policy – I think that's at least a plausible interpretation of the line.
I think it was an acknowledgment that the policy proposals referred to contain flaws that cause long term consequences but that current supporters and implementers of said policies won't have to suffer the consequences.
Don –
Right, and I suppose the first half of that question speaks more to what I feel like I hear around a lot – concentrated costs on those who lose their jobs, but dispersed benefits to those who enjoy lower prices and greater choice. I think to the extent that people are concerned about that, it's an argument for support for retraining and support during unemployment (obviously not a Cafe Hayek solution, but I think it's the appropriate one). An unambiguously inappropriate solution, in my mind, is to restrict trade to protect that job. So I don't want to confuse the fact that we're in agreement on that ultimate point – I just wanted to bring up that alternative approach from the opposition – an approach that I think is far more coherent than the "long run vs. short run" argument, and a real concern, but still doesn't justify protectionism.
Sam -
RE: "I think it was an acknowledgment that the policy proposals referred to contain flaws that cause long term consequences but that current supporters and implementers of said policies won't have to suffer the consequences."
One of the things I always love about reading Keynes is his quirky examples and turns of phrase that help you look at a problem from a different angle. If you really think he was so literal and so jaded as to mean this, no wonder everyone thinks he's so treacherous! I can't read Keynes's mind… but I doubt he'd come out and plainly say – and be famous for saying "this kind of policy will really screw things up but I don't care because I won't be around anymore". When you read a quote that sounds that ridiculous – it SHOULD be a good indication to you that there is a deeper layer of sarcasm, satire, or simple hyperbole. If it was really meant to be taken that literally, do you think it would be latched on to like it was?
It's like the digging holes to find buried bank notes – either you take everything Keynes wrote literally and assume he was nuts… or you take the hint that he was a fairly intelligent man and assume he didn't ACTUALLY want to bury bank notes, and he was simply illustrating a point.
Maybe I'm completely wrong, but I think you need to look a little beneath the surface on this one.