Here’s a letter that I sent today to the New York Times:
Richard Michalski insists that European-governments’ subsidies to Airbus harm Americans economically (Letters, Sept. 18). Not so. These subsidies are an economic burden, not to Americans, but to Europeans.
If your neighbor’s rich aunt gives him $100 a month to buy the lemons he uses to make lemonade for sale in his lemonade stand, he’ll be able to cut his prices and sell more lemonade than he would without his aunt’s largess. You and the rest of your neighbor’s customers will enjoy less-expensive lemonade and less-expensive other goods and services made possible by some of his competitors quitting the lemonade trade and finding other productive uses of their talents and resources. These benefits are real, and they arise all because of the generosity of your neighbor’s aunt.
Of course, your neighbor’s cousins – out of whose inheritance the aunt takes the money used to finance your neighbor’s lemonade business – are harmed.
Sincerely,
Donald J. Boudreaux
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No. It is the aunt’s money. Her relations are not harmed, though their expectations are disappointed. But if your neighbor’s aunt steals the money from her relations, then they are harmed. Are you morally entitled to profit from her theft and their harm? Are other lemonade sellers, who have no recourse to coercion, entitled to prevent her coercion-based distortion of their free market?
I agree with RogerD, I think there is a flaw in the analogy. While I agree with Don that it is not an economic burden on Americans if I were a European taxpayer whose money was forcibly taken from me to make things cheaper for Americans, I would have a problem with that. If its wrong to take from one American to give to another, shouldn’t it be wrong to take from one European to give to one American?
This represents a different argument than the one Don is responding to. While readers of this blog might agree that the European taxes are theft, most Europeans do not think so. They think their taxes are helping to support jobs and essential industry.
Are other lemonade sellers entitled to prevent [through coercion?] her coercion-based distortion…?
Should it be against the law to buy stolen goods? Since the taxes are paid as a result of a democratic government, I would say they are not strictly speaking stolen, so the argument is moot. I would have no problem with anyone attempting to persuade airlines who might purchase such planes not to do so, but using the force of government to prevent such purchases would not be justified.
True, greg, as pertaining strictly to the question of does foreign subsidies harm the domestic economy, the answer is clearly no.However, I don’t think the point brought up by RogerD is moot, it is related. Would you be as equally dismissive if the democratically elected U.S. government subsidized a company because a majority of Americans believed it supported jobs and essential industry? If right and wrong is simply based on what the majority believes, sadly many people would consider most readers of this blog wrong.I am not saying domestic government intervention is the answer, however simply saying that because the government intervention occurs elsewhere doesn’t mean we shouldn’t take advantage of it seems questionable. Sure, I can buy a stolen TV for cheaper than the local electronics store, but is it morally right?
you cannot choose how your neighbors behave.thats not a moral question at all. you want to live with them in peace even if they are mean chilbeaters.
if you want guilt,why not go all the way down to what your ancestors did to the native americans.that guilt alone should send you running back to europe (in general).
see how absurd that sounds?
Absolutely, people cannot choose how their neighbours behave, but that doesn’t mean they should turn a blind eye if they are infringing upon the rights of someone else. In your example, you better believe I would do something if I lived next to mean chilbeaters [sic] rather than simply living in peace with them.
If government subsidies are bad, shouldn’t they be universally bad not just when I am on the short end of the stick and it is my own tax dollars? Again, I am not advocating for government intervention as a solution, two wrongs certainly don’t make a right, but as defenders of freedom should we not extend that to everyone, not just those who happen to live within lines drawn on a map?
ooops.
What are you suggesting? Just that US citizens should voluntarily choose to act morally?–that’s a US government unilateral free trade policy.
Or intervention?–That the US government should punish those of its citizens who buy from foreign tax-dollar-receiving companies? That the US government should punish foreign companies which receive taxpayer funds? That the US government should punish the foreign government which does the stealing? In all of those cases, the US government itself hardly has clean hands. And the punishment can hardly be dealt out fairly, since supports are varied and complex. Other countries see that and simply use the same moral standard to respond in kind. Then you have a trade war.
Suffering a trade war MAY bring governments to their senses, but there are no heroes, and everyone suffers. And on what moral pretense can a trade war end?
Unilateral free trade, on the other hand, is a far better policy to encourage foreign governments to act morally. The country engaging in unilateral free trade benefits at the expense of the country engaging in supports. The latter country has two choices: (1) continue to support the free trade country at their own expense, or (2) stop inhibiting free trade. If they choose (1), the moral free trade country is rewarded and the immoral one punished. If they choose (2), both countries are rewarded.
And, of course, it is the easiest policy. No trade negotiations. No treaties. No agreements. No policing.
At some point you’ll have to come clean with a response to this.
Restated for the new analogy:
The are winners and losers in America. The competitors in the lemonade business are all harmed, including their employees even given that Americans as a whole are better off in the short term. So therefore it is true that Americans are harmed by Airbus subsidies, just not all Americans (or even the average American in the short term).
“The are winners and losers in America.”
Yes, but politicians shouldn’t be allowed to pick the winners and the losers.
The are winners and losers in America.
Even the “losers” in America are overall winners as a result of free trade. Our overall level of wealth, our low cost of subsistence and even luxury goods, our dynamic and (until recently) growing economy are all the result of free trade. Professor Boudreaux has made this point in the past. The jobs which are lost often only existed due to free trade.
I believe that the major problem is the very poor level of economic understanding. People are given to understand that if they learn a certain trade, or develop a marketable skill, that they should somehow be guaranteed a livelihood for as long as they wish to continue working.
Every time I hear another politician talk about someone who has “worked hard and played by the rules,” I know it is time to get out the hip boots.
Many business people understand the dynamic nature of the economy and the constant need to change and adapt. Unfortunately the schools do not seem to be teaching the basics of entrepreneurial capitalism, so many people are open to the demagoguery of politicians.
I don’t understand why Michalski is wrong. Wouldn’t Boeing have a bigger share of the market if Airbus didn’t get subsidies? Wouldn’t this lead to more jobs for Americans? True, Americans would have to pay higher airfares. But it’s not obvious that overall people benefit more from saving a few bucks on airplane tickets as opposed to having a few more American jobs.
There have been many clean and simple explanations/calculations which show that the net benefit from people buying cheaper goods(airbus) is far greater than the loss of jobs(@boeing). why we react emotionally,is because the job losses are visible while the gains are ‘not seen’.what is not seen is more important than what can be seen in economics as bastiat explained.
thousands of people saving on airplane tickets now have surplus money which would be deployed in places they deem worthy.paying more per ticket because of overpaid boeing workers is definitely not something people would voluntarily support.everyone wants the most bang for their buck .if you want to retain boeing workers ,please pay them directly with YOUR own money.there is no need to steal MY taxes or impose tarrifs on me.(tarrifs are always on the customer not on the producer)
What Are Jobs?
Donald J. Boudreaux
March 6, 2005
A quick and good read about what jobs really are to us.
I wasn’t arguing in support of tariffs or any other protectionist policies.
I just don’t see why France’s protectionist policies are necessarily a net
benefit for U.S. citizens. I don’t think the U.S. government should
retaliate, but I do feel that French subsidies should be viewed more
critically. Thanks for the link, though. It was a good read.
The beauty of Mr. Boudreaux’s reasoning about trade is that it abstracts from the existence of polities (nations, states, cities) and gets us to reason in terms of individuals. I believe that framework is clarifying, and I wish we could stick with it. However, some (like gregworrel) think democratically imposed taxes do not represent coercion. If that were true, then my objection would fail. Tax-based subsidies provided by democratic states would then be no different from philanthropic subsidies provided by wealthy individuals.
Vikingvista asks what I am proposing as a solution to the distortion of markets by coercion (such as tax-based subsidies). Voluntary abstention from coercion-produced goods is not necessary, unless one is aware of extreme coercion such as outright slavery. But those who are harmed by the coercion, such as those whose markets are distorted by the coercion, do have a moral right to respond coercively and put an end to the coercion-created harm, by preventing the trade of coercion-produced goods from taking place. They have a right to a free market. That was my only point. In order to translate that into political action, one would have to change Boudreaux’s line of argument and re-introduce the existence of polities. Which is no small task.
My only comment on the political realm is to reject the sentiment that Milton and Rose Friedman expressed in Free to Choose: “Suppose a foreign government gives such subsidies [to their producers], as no doubt some do. Who is hurt and who benefits? To pay for the subsidies, the foreign government must tax its citizens. They are the ones who pay for the subsidies. U.S. consumers benefit. They get cheap TV sets or automobiles or whatever it is that is subsidized. Should we complain about such a program of reverse foreign aid?” The Friedmans were positively celebrating the American consumers’ ability to profit from the coercion introduced into markets by a foreign government, and I think that is wrong. In fact, in the long run, and on net, I do not believe that a society ever does benefit from coercion’s being introduced into markets.
Here at the Cafe, the focus has always favored the individual [that's not to say that the role of the state doesn't get its focus, it just that the individual is the default favorite as correct-thinking advocates of liberty consistently demonstrate].
So, in other words, you’re suggesting that in order to get the right to/for that free market, it becomes neccessary to erect barriers to the free market and cause it to be less free? Explain how this works in theory or in practice.
So, how can you possibly agrue from two different positions? First, that you object on moral grounds that we’re benefitting. And now, that you think that we’re not actually benefitting in the long run. It might just be me but it seems that you’ve just flip-flopped on everything that you’ve been arguing over the last few days.Here’s another good and short read that I’ll link to:
Why We TradeBy Russell RobertsPosted November 2007Sample/money quote from that article:
However, some (like gregworrel) think democratically imposed taxes do not represent coercion.
Actually I believe that all taxes represent coercion. Does that mean that I should refuse to drive on the roads because taxes built them? Do I stay out of the tax funded parks? Do I refuse to go to a tax supported zoo? Do I refuse to open a checking account in a tax supported bank? The list is endless.
On a practical level it is impossible to avoid benefiting from taxes involuntarily taken from others while leading a normal life. My approach is to decry taxes every chance I get.
Advocating trade barriers to avoid benefiting from taxes imposed in other countries is merely imposing a local tax which is just as wrong as the foreign tax. It does not make sense to shoot a hole in our end of the boat just because the Europeans shot a hole in their end.
I would have no problem with voluntary boycotts or protests. The major argument however is that our economy is harmed by such subsidies and that is not true.
Yeah, Its just a threat to americans earning money making airplanes, who prefer to carry on making airplanes than taking new, uncertain jobs which might be hader and pay less (or the other way around, who knows?)
I’m beginning to see how these kinds of arguments become persuasive. The man in a state of nature certainly clarifies disputes over the nature of man and man’s actions. But arguments from a a state of nature are not reliable guides for practical policy.
Subsidized lemonade harms non-subsidized lemonade producers. Don never mentions these non-subsidized producers. The switching costs can be huge. They have to find sources of other drinks, or perhaps move into another form of production altogether. The switching costs can be large. It can bankrupt some producers. Those are direct harms.
So, even in Don’s state of nature, we have significant harm. The subsidized producers and their customers benefit at the expense of the non-subsidized producers.
But in the real world, it’s worse. Capital can flow freely and quickly. Skills cannot morph so quickly or so cheaply. In a state of nature, workers at failing, non-subsidized lemonade producers could take their skills to the subsidized producers and do well. In the real world, they can’t cross state boundaries and get work. Now the workers have to retrain, but they worry that another subsidy might wipe out their new labor market.
Certainly, that’s not an unfounded concern. Probably, it’s a serious material harm of foreign subsidies.
Do Subsidies Doled Out by Foreign Governments Harm the Domestic Economy?
Yes, but not in the way the anti-trade crowd thinks. Government subsidies in Europe mean that comparative advantage isn’t allowed to do all it could. A less efficient Europe is no favour to America.
A concrete example from another country: Suppose the Indian government decided to give every American a free Hindustan Ambassadors in the late 1950s. At that time, the Ambassador might have been comparable in quality to the Ford Fairlane, and most Americans would have been happy to get it as a gift. But things are different now. Because India’s auto industry has been paralyzed by subsidies and central planning, Hindustan motors still produces vehicles nearly identical to the Ambassador. Today, most Americans probably wouldn’t take one of Hindustan Motor’s cars unless paid to do so. Wouldn’t it be better if India and America had developed in tandem, so that India’s motor companies might produce something Americans would want to buy?
All this is true. But it’s also true that US car drivers and the Indian car producer would benefit at the expense of US car companies and the Indian taxpayer.
We have government taking money from one group and giving it to another group. That’s just plain old government redistribution of wealth. If on the back end people freely respond to the false prices, it’s still redistribution. It still harms people.
This is obvious.
But it’s also true that US car drivers and the Indian car producer would benefit at the expense of US car companies and the Indian taxpayer.
No! In the long run, the loss of potential gains from trade swamp the gains from receiving the increasingly worthless gifts.
“We have government taking money from one group and giving it to another group. That’s just plain old government redistribution of wealth.”
But that is a DIFFERENT government. What do you want to do, go to war? Any retaliation the US government takes against India will likely wind up in a spiraling and much more mutually harmful tit-for-tat. The BEST way to encourage India to stop those destructive policies is a consistent policy of unilateral free trade. Unilateral free trade is a self-sustainable economic policy and gives nobody an excuse for trade retaliation. Extensive draining economic supports, on the other hand, in the presence of competing free trade countries, cannot sustain itself.
What if we put a tarrif on India’s tax-subsidized exports (equalling the subsidy, as we best we can calculate it), and then gave the money back to the Indian people? Since they are the ones giving us “foreign aid” (as the Friedmans called tax-subsidies), let us return it to them as foreign aid—in some form likely to spread economic knowledge.
I wouldn’t go for that. And I don’t believe that many U.S. Americans would.
I know that this will not come out tactfully but it sounds like a very nutty idea.
And while we practice unilateral trade, we should eliminate our own subsidies.
That is redundant. Subsidies are a violation of free trade.
“Any retaliation the US government takes against India will likely wind up in a spiraling and much more mutually harmful tit-for-tat.”
Actually, game-theoretic simulations show that tit-for-tat works best. Count me in favor of tit-for-tat. Count almost all the all the research on tit-for-tat against you.
“The BEST way to encourage India to stop those destructive policies is a consistent policy of unilateral free trade.”
That’s a really bad argument. Incentivizing something doesn’t get rid of it. Maybe subsidies go away of their own faults, but unilateral free trade free trade isn’t going to get rid of them.
“Extensive draining economic supports, on the other hand, in the presence of competing free trade countries, cannot sustain itself.”
Probably true, but it’s a red herring. The question is whether anyone is harmed. Lots of people are harmed in the unilateral free trade country. Don’s analogy is incomplete.
“Count almost all the all the research on tit-for-tat against you.”Since international trade is not a prisoner’s dilemma, I’d be interested to see the “the research on tit-for-tat” that is against free trade. Of course I’m not an expert on game theory like you, but it does sound like something someone would say who has no idea what he’s talking about–which undoubtedly includes many economists.Compared to the alternatives, the free trade nation wins NO MATTER what other countries decide to do. The winning strategy in that game is obvious. It isn’t even a game, since success is a unilateral decision.”That’s a really bad argument. Incentivizing something doesn’t get rid of it. Maybe subsidies go away of their own faults, but unilateral free trade free trade isn’t going to get rid of them.”Don’t confuse bad argument with your inability to understand. Incentives drive human behavior in world changing ways. To utter that “incentivizing something doesn’t get rid of it” exposes a dreadful ignorance of human behavior and economics, not to mention reasonable expectations. It is a policy of national impoverishment for a country to employ tax-payer funded supports for local industries to sell products in a foreign free trade country whose consumers gladly accept those supports. Think of it like a “cash-for-clunkers” program. The more “successful” the subsidized industry is, the greater is the transfer of wealth from local taxpayers to foreign consumers. Targeted trade retaliation only serves to lower those costs and perpetuate the subsidy. Remember, the subsidy is always a political payoff. If it doesn’t impose large enough costs on local taxpayers, the politicians can easily get away with it. Free trade makes corporate cronyism a victim of its own success.”The question is whether anyone is harmed. Lots of people are harmed in the unilateral free trade country. Don’s analogy is incomplete.”Maybe in this one post Don did not go at length to explain the full context, but his argument, as described across many writings, is not incomplete. You’re argument is that some people in a free trade country are hurt because they must find new productive endeavors. THAT is an incomplete argument, because it is not considering the alternatives. Switching employment in a growing dynamic economy full of opportunities is not the same as switching in a more stagnant economy stifled by government protections. And trade retaliation is never surgical–it always leaves victims, resentment, and legitimate excuse for counter-retaliation. It is a game that only serves the political class.
In response to Lowcountry Joe: 1. I agree entirely that talking about trade in terms of individuals is very helpful. That is why when I discuss state interference in trade, I try to avoid reintroducing polities and speak instead of traders who use coercion, the individual counterpart of state action. 2. How can the use of coercive barriers against traders who employ coercion make a market more free? Well, a labor market becomes more free if one erects coercive barriers against the importation of slaves. The same principle applies to the importation of tax-subsidized goods. 3. Don’t I contradict myself by objecting to people’s benefitting from coercively produced good, then saying we aren’t actually benefitting. I don’t think so. I said that a society does not benefit–on net, and over the long-term–from having its markets distorted by coercively produced goods. In the short term, individual people (e.g., thieves) certainly do benefit from coercion.
>>I agree entirely that talking about trade in terms of individuals is very helpful.<<It’s not only very helpful for me, it’s the only manner in which I choose to think about trade. Inevitably, countries do not trade with one another…rather individual/businesses trade with one another and the measured results of these transactions just happen to show up as country-specific aggregated numbers.>>That is why when I discuss state interference in trade, I try to avoid reintroducing polities and speak instead of traders who use coercion, the individual counterpart of state action.<<The traders themselves CANNOT use coercion because they are powerless to introduce it. They can, however, use leverage based on their positions and their trading partners willingness to exchange that much more than they, themselves, are willing to. Leverage is not coercion in my point-of-view.>>How can the use of coercive barriers against traders who employ coercion make a market more free? Well, a labor market becomes more free if one erects coercive barriers against the importation of slaves. The same principle applies to the importation of tax-subsidized goods.<<I’ve had the slavery analogy used on me at the FreeRepublic when discussing trade with current-day China or trading with Germany during WW2. I see the morality play and have a hard time defending trade with countries like this (if one really wants to believe in Chinese slaves, though, no doubt, Jewish prisoners did make stuff in 1930s Gemany). But to suggest that a society like ours should become considerably more unfree just so that we do the moral thing is something that I find abhorrent. And then there’s the whole unsavory thought of what tyrannical societies would do with their slave populations should there not be any need for the produce of their slave labor — part of me thinks the “Live free or…” motto applies here. The larger parts of me wonder what those of you who are sensitive to this whole issue would think if slave populations were put to death because there would be no incentive to keep them around. So, what are your thoughts on that?>>3. Don’t I contradict myself by objecting to people’s benefitting from coercively produced good, then saying we aren’t actually benefitting. I don’t think so.<<I would have never saw that reply coming!>>I said that a society does not benefit–on net, and over the long-term–from having its markets distorted by coercively produced goods. In the short term, individual people (e.g., thieves) certainly do benefit from coercion.<<The society that you discussed benefitting and then not benefitting was the free society who imports such goods from where subsidies/slavery were occuring. If the individuals (the individual consumers are benefitting) then how can they not benefit in the long run as well? And why do you equate these individuals who buy such products from abroad as theives? That’s extremely offensive. I’m sure that to you, if I choose to seek such imported goods, that I’m reprehesible to you. But for you to push your morality on me through the use of any kind of politically-induced embargo is every bit as reprehensible; in fact, such manuvering is a sure fire way to become one of the countries whose behavior toward their own citizens is the very thing that infuriates you.
To gregworrell: The question of whether or not to buy coercively made goods is two-fold: How much coercion was involved and how badly do I need the good? If my farming neighbor employed slaves and I was starving, I might say “Too bad for them.” If his slave-produced farm goods merely lowered my grocery bill by $20 a week, I would probably buy from farmers who used free labor. But the real question concerns the actions of farmers whose products cannot be sold because they use free labor: Do they have the moral right to prevent the slave-using farmer from selling his goods in their markets?
I find this concern about foreign subsidies a little disingenuous. What about the subsidies in our own country?
First, you should stop eating because the agricultural industry in the US is heavily subsidized which hurts farmers in other countries whose products we would be buying more frequently if not for the subsidies. Also stop buying from companies that take advantage of tax abatements for opening or moving plants or stores. Next stop watching or supporting professional sports since most of them play in tax subsidized stadiums.
Worrying about taxes imposed by a foreign government on citizens of another country that works out to my benefit is WAY down on my list of worries.
To gregworrell: I have been an advocate of pure laissez-faire capitalism since 1962. I bow to no one in the purity of my theoretical libertarianism. But I have come to realize that libertarians, because they are so anxious to advocate free international trade, tend to be indifferent to the distortions of domestic free markets caused by foreign coercion.
So this is my starting point: A quotation from Milton and Rose Friedman in Free to Choose that seems to pervade many commentaries by Don Boudreaux: “Suppose a foreign government gives such subsidies [to their producers], as no doubt some do. Who is hurt and who benefits? To pay for the subsidies, the foreign government must tax its citizens. They are the ones who pay for the subsidies. U.S. consumers benefit. They get cheap TV sets or automobiles or whatever it is that is subsidized. Should we complain about such a program of reverse foreign aid?”
I say yes, on libertarian grounds. My primary point is not that you should be morally concerned about the taxes that go to subsidize the foreign goods that you buy. (It is, however, a secondary point of mine that you should not celebrate–as the Friedmans seem to do–your profiting from the taxes extracted from foreigners.) My primary point is that those among us who are economically harmed by the introduction of coercively produced goods into their market have a legitimate complaint. This seems to be something libertarians seem to deny. And I don’t understand why.
Of course, what to do about the situation is another matter entirely.
Exactly, rdonway.
I agree with the premise on subsidies and the application to Europe and America. However, is the same true of developing nations? In places like Africa, where farmers displaced by European and American subsidies (and food donations), for instance, have few if any other options for employment, it seems to me there is harm done.
In ordinary lemonade making, let them give all the subsidies they want and you are most probably better off (though you might lose out on the lemonade making educational value for your neighborhood´s kids)
But what if the future was in the lemonade making race, would you be just as sanguine if someone else was paying off the judge to get the pole position?
LowcountryJoe: People who buy imported slave-made goods benefit, because their costs are less. Their neighbors, who produce the same goods through free labor, are hurt because many of them may not be able cannot compete. Those neighbors are being harmed by coercion (slavery). Therefore, under libertarian theory, those neighbor-workers have the moral right to use coercion to keep themselves from being harmed by coercion; they have the moral right to secure for themselves a free market: one not distorted by coercion. I believe (such is my palmary faith) that if the members of a society thus insist upon a free market they will (on net, in the long-term, overall) prosper more than if, for partial and short-term profit, they allow their markets to be distorted by coercion, such as tax-subsidized goods. I do not know how I can say this more clearly.
Securing a free(er) market by restraining your own domestic market? We’re back to square one here. Unless, of course, what you are really advocating is instituting regime changes in those countries using coercion.
So, can you clearly explain how one goes about insisting upon a free market by suggesting that the other society’s markets are not free and therefore the home market needs to cease its trade with that other society? And, again, what happens to the slave-labor of that other society once its planners realze that there’s no incentive to keep its slaves around?
LowcountryJoe, you ask: “Securing a free(er) market by restraining your own domestic market?” I ask: Is a society’s domestic labor market more free or less free if it coercively restrains its citizens from importing slaves?
Gee, thanks for dodging my question then expecting me to answer yours.I’ll give you the courtesy that you seek. Importing slaves would, by definition, make at least some of your [if you choose to view yourself as the planner in that society] labor force unfree and thereby creating a less free domestic labor market.
Now that I’ve extended you the courtesy of an answer, please add this question to my list of unanswered questions of you: who is advocating importing slaves in any of these examples? Because importing goods made by slaves is not the same thing; it’s a gig-time analogy fail.
Where is muirbot to weight on why we need a trade war?
LowcountryJoe: Truly, I do not wish to avoid any question. I agree that there is a distinction between importing slaves and importing goods made by slaves. But I do not think that the distinction is relevant to my argument. In either case, free labor is being harmed by coercion. And those who are being harmed by coercion have the moral right to use coercion in stopping that harm.
Specify other questions I have dodged, and I am at your disposal to provide responses.
How do you feel about instituting regime change in countries that use slave labor (explain either way)?
Can you clearly explain how one goes about insisting upon a free market by using government in the domestic market to ban its trade with other societies that do not have free markets…doesn’t this create two unfree markets? Isn’t this more than likely going to lead to us eventually becoming more like our unfree trading partners?
And if we do cease trade with an unfree market, what happens to the slave-labor of that other society once its planners realize that there’s no incentive to keep its slaves around? Do you not care about them? What are you willing to do to mitigate the harm that is sure to come to them?
Q1. How do you feel about instituting regime change in countries that use slave labor (explain either way)? A1. You are reintroducing nation states, whereas Boudreaux’s examples try to abstract from them. But since you merely ask about my feelings, OK. I think that relatively free polities should use the entire panoply of means available to them to move relatively unfree polities in the direction of freedom. Precisely which means they should use depends upon the degree of threat posed by the unfree polity and the amount of benefit to be gained by its freedom. It is a cost-benefit analysis. The appopriate means can range from making books of libertarian economics available in consulates to fomenting revolution. Which means are most appropriate is matter for prudent statesmen, not ideology.Q2. Can you clearly explain how one goes about insisting upon a free market by using government in the domestic market to ban its trade with other societies that do not have free markets…doesn’t this create two unfree markets? A2. If one can clearly demonstrate that certain goods have been coercively produced (by slave labor, say, or by tax subsidies), then I see no libertarian objection to banning them. Forbidding citizens to trade in goods that are coercively produced abroad does not “create an unfree market,” any more than forbidding citizens to trade in stolen goods creates an unfree market domestically. Q3. Isn’t this more than likely going to lead to us eventually becoming more like our unfree trading partners? A3. Quite the reverse. The Friedmans say: “Consumers benefit from the coercion exercised by foreign governments!” The obvious response of domestic workers is: “If there is nothing wrong with benefiting from coercion, why should I not benefit from U.S. coercion?” But suppose one says: “Long term, on net, overall, our society does not benefit from introducing coercion into trade. Therefore, we are going to block the apparently beneficial effects of foreign coercion.” Then, you have given domestic factions no philosophical excuse to seek benefits from coercion. Q4. And if we do cease trade with an unfree market, what happens to the slave-labor of that other society once its planners realize that there’s no incentive to keep its slaves around? Do you not care about them? What are you willing to do to mitigate the harm that is sure to come to them? A4. A two-part answer: Since you have reintroduced polities, the fact is that a polity’s first concern must be with its own citizens. But, answer part-two, what to do about shunned countries becomes a problem for prudent statesmen. They might take a thin-edge-of-the wedge attitude, such as: “Slave-made goods are banned. Serf-made goods we will import for at least the next twenty-five years.”
Question one was to find out where you stood on just how far you personally would take retalitory coercion; you seemed to say you’d support an entire means available to achieve having unfree countries to move in the direction of freedom and then later stop short just with fometing revolution. Okay, just checking but that wasn’t so clear so I assume this means that fomenting revolution is an acceptable limit but outright warfare isn’t. Question answered.
But then your answer leads to discussing prudent statesmen, not ideologies. Very few statesmen are prudent and look out for anyone’s welfare but their own. And if they are prudent, they most certainly have ideologies (even the non prudent asshats do). I wont ask a follow-up here but I did find this to be strange.
Question two was answered by you and you wrote: “If one can clearly demonstrate that certain goods have been coercively produced (by slave labor, say, or by tax subsidies), then I see no libertarian objection to banning them.”
You do realize that many U.S. industries are subsidized. Will you lead the charge in condemniing our federal government from doing these things? Shall we as consumers ban our own consumption of things we’re already paying for (agriculture, airline services, banking needs, auto manufacturing) out of principle? Shall we further persuade foreign consumers and their governments to not trade with us because we do not have truly free markets?
Question three: based on questions one and two answers, is it possible that we should not be in any position to talk of coercion since we are doing the same things (minus the slavery)?
In answering question four you write: “Since you have reintroduced polities, the fact is that a polity’s first concern must be with its own citizens.” And isn’t this what the whole arguement boiled down to when Don suggested that we have unilateral free(er) trade if that’s the way other countries would want to have it? Because, if the foreign governments are subsidizing their industries or using slave labor, our consumers are reaping the benefit of these subsidies while our domestic labor is conserved for its next productive and value-added useage — typically more service related and higher income earning opportunities.
Again, this last answer of yours seems to dismiss your earlier concerns about worrying about anybody but ourselves first. You cannot have this both ways as a ‘prudent statesman’ might want it
Try it this way, suppose a foreign government offered to send you rebates for purchasing products made in its territory.
Would you refuse to participate?
But consider: The domestic pressure is for a tariff. And it is justified, because coercively produced goods are a market distortion. But the foreign perception is that these tariffs are a penalty. (And so, they lead to trade wars.) To obviate that perception, and those trade wars, make highly visible to foreigners the point that we are returning to them the money that their government has stolen.
Any domestic support for a tariff [it's misguided in the first place] would evaporate once the same [misguided] people discovered that the money would be given back as foreign aid.
Yeah, that’s right. I wasn’t even thinking of it that way.
Except for when you use [even more] subsidies as a tool to promote free(er) trade…however that’s supposed to work; I’m still trying to get the answer to that.
I thought we had gotten clear that opposition to coercively produced goods being introduced into–and thereby distorting–a market was not intellectually misguided.
No. Just because I didn’t specifically address it/refute it doesn’t mean I was agreeing with you. If I led you to believe I was siding with you, it was a mistake on my part for not addressing your point. I can only follow a limited amount of contradictions at the same time. I’d probably be more engaged, though, if you’d be more inclined to address more of my points that show you where you’re contradicting yourself.
Sorry. Point them out, and I shall address them.
They’re in plain sight and they were done up in a reply to you at the bottom of this page. Really it’s not this important to me that you answer. I’m losing interest waiting for replies.
“Since international trade is not a prisoner’s dilemma, I’d be interested to see the “the research on tit-for-tat” that is against free trade.”
I didn’t claim that. YOU brought up tit-for-tat. I only pointed out that tit-for-tat is usually the best strategy in game theoretic simulations. I add that trade signals, like subsidies and the like, are well modeled by iterated prisoner’s dilemmas.
“Compared to the alternatives, the free trade nation wins NO MATTER what other countries decide to do.”
That depends on what you mean by ‘win.’ If we accept the usual premises of Austrian economics, countries don’t win, only individuals do. Some individuals are harmed by unilateral free-trade in the face of foreign subsidies. Some ways of defining ‘win,’ particularly utilitarian ones, could let you claim a country wins. But let’s not smuggle in new concepts. That’s the main problem with Don’s analogy. It’s about individuals, but concludes about countries. That’s exactly where it breaks down.
“To utter that ‘incentivizing something doesn’t get rid of it’ exposes a dreadful ignorance of human behavior and economics, not to mention reasonable expectations.”
How?
“It is a policy of national impoverishment for a country to employ tax-payer funded supports for local industries to sell products in a foreign free trade country whose consumers gladly accept those supports.”
You’ve missed the point again. I’m not arguing that foreign subsidies don’t hurt the foreign economy. I’m simply pointing out that Don’s analogy fails to capture the harm done to domestic producers and foreign taxpayers.
“Switching employment in a growing dynamic economy full of opportunities is not the same as switching in a more stagnant economy stifled by government protections.”
Switching employment is often expensive no matter what. A common scenario in the US is someone who invested hundreds of thousands of dollars on an engineering education, yet because of foreign subsidies cannot find work in the US. Because of restrictive employment laws and engineering licensing laws, he’s stuck in the US market. His switching costs are huge.
“Targeted trade retaliation only serves to lower those costs and perpetuate the subsidy.”
There are a number of counter-examples to this. Trade retaliation, tit-for-tat, very often convinces nations to drop subsidies altogether. sometimes, only the threat is necessary. The negotiations that lead to such outcomes are iterated prisoner’s dilemmas. Tit-for-tat usually leads to the best outcome for both sides.
“Of course I’m not an expert on game theory like you, but it does sound like something someone would say who has no idea what he’s talking about”
Uncalled for.
“Don’t confuse bad argument with your inability to understand. ”
Uncalled for. You know. You’re just not someone I want to have a discussion with. You have the last word.
“I didn’t claim that. YOU brought up tit-for-tat.”
Had I known you were a game theory expert, I might have thought your brain was stuck in that context. I can’t help, however, if “tit-for-tat” entered the English language before your specialty ever existed.
“I only pointed out that tit-for-tat is usually the best strategy in game theoretic simulations.”
Oh no, you said MUCH more than that. Game theory is nice and clean–free of confounders, mitigating factors, and precisely defined. You were making claims about international trade.
“countries don’t win”
Very good! Another reason Prisoner’s dilemma doesn’t apply. The decision-makers (the states) are not the only players, and the state does not bear the full cost or benefit of their decisions.
“That’s the main problem with Don’s analogy. It’s about individuals, but concludes about countries. That’s exactly where it breaks down.”
You just aren’t familiar with his whole argument. You might consider that he’s been thinking and working on this for some years, with a lot more written than this blog post. I tried to move you in that direction in my last post, but….
“How?”
Because economics is almost entirely about incentives. Econ 101.
“You’ve missed the point again.”
No. You just like to respond without reading.
“His switching costs are huge.”
And so with lawyers, CPAs, CFAs, and doctors, and all manner of certified specialists and Ph.D.s (although I don’t know who spends hundreds of thousands on an engineering degree). And I’m glad you care about them, since almost NOBODY defending protectionism is talking about protecting anyone but union labor.
And nobody doubts that. But you are missing the whole picture. You aren’t seeing the whole context.
“The negotiations that lead to such outcomes are iterated prisoner’s dilemmas.”
How can that be, if there is no reward for defecting? If your trade partner chooses to subsidize your consumers, your best choice is free trade. If he doesn’t, your best choice is still free trade, even though you would wish that he’d keep subsidizing your consumers.
I think you are confusing international trade with cartels.
“You’re just not someone I want to have a discussion with.”
That’s okay. I’m happy to reply in any tone you care to set. If you play that way, though, you really should have a thicker skin.