Here’s a letter that I sent yesterday to Associated Press reporter Jennifer Loven:
In your report today published at Money.AOL.com under the headline “US penalizes Chinese tires, infuriating Beijing” you write about “President Barack Obama’s decision to impose trade penalties on Chinese tires.” Both the headline and your report miss what’s going on.
Tires are not sentient creatures; they cannot be penalized. And although Chinese government officials are displeased with this protectionist move by the White House, the ultimate parties who are penalized by these higher tariffs are American consumers. American consumers choose to buy increasingly large numbers of tires from China; the fuel that powers the rise in U.S. market share of Chinese-made tires is voluntary spending by American consumers; and so American consumers will suffer by being forced to pay a hefty tax simply to do what they’ve been doing now for years.
Uncle Sam’s tariffs and other trade restraints pick the pockets of Americans; they penalize each and every American for having the audacity to spend his or her money in ways that he or she – rather than industry groups and politicians – believe his or her money is best spent.
Your headline would have been far more accurate had it read “US penalizes American consumers, pleasing special-interest groups.”
Sincerely,
Donald J. Boudreaux
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Good point, Don.
For some reason journalists tend to view barriers to trade from the angle of “us” versus “them (foreigners)”, rather than special interest groups (and vote-hungry politicians) versus the general interest of consumers.
Naturally, the Chinese are hurt too – but that’s only one side of the coin.
Krugman has a very challenging defense of tariffs, as a means of imposing the costs of pollution on the consumers.
If the American consumers wish to buy Chinese tires, they should be willing to pay the costs of pollution incurred in their production. And, if the Chinese won’t impose those costs, it is up to the Americans themelves to do so, at their borders.
That seems to make sense.
But, as a practical matter, wouldn’t that make it more likely that the tires that would have been made in China would be made in America instead, and the pollution that would have occurred in China would occur in America instead?
And if the tariffs are not actually protecting us from pollution, but making us more vulnerable to it, what are they protecting us from, but foreign competition, as usual?
The pollution arguement only makes sense to me if all tires were taxed so we start using stone tires because it is cheaper.
“the costs of pollution”
How do you price that?
Mankiw posts of a coming trade war with China. I think he is spot on and so is Don. Trade barriers only hurt the consumers and workers. You’d think by now, we (as a society) would understand that by now.
My main concern is about how much do we export to China? If it is significant, then why is Obama risking falling back into recession just to appease a union and environuts?
Just mark me down as one of those run of the mill consumers who never ask or care where their tires were made. I’d be willing to bet that I am just one of a huge majority.Standing in line at the Discount Tire store, or waiting in the customer lounge area, one thing I have never heard, ever, is the question, “Uh sir, were those tires made in China?” I have never heard it as part of any conversation in, around, or near a tire store. That question has never come up in any conversation I have ever had with anyone at anytime when the subject of tires came up.The only tire related subject, ever, is the price. It either went up or it did not. Why that happens has never been addressed.So, who knew that BF Goodrich (example only, not an accusation) tires were being made in China, who cared enough to ask?The last time I was in Discount Tires they sold me four new Yokohamas at a decent price. Now I made the assumption that they were made in Japan, but in retrospect that might well be an invalid assumption as there is no reason that the Yokohama Tire plant isn’t having tires made in China as well. One thing I can tell you is that I have not been curious enough to actually go look at the tires. They are wearing very well and I am pleased.That’s enough.My point is that I’d bet the farm that most of America is just like me in that respect.Now we are told that the Chinese are being shitheads by making products that satisfies us…..who knew the evil ones could be so damned sneaky…..pleasing us at a cheaper price…..damn that is evil.
Wow… two Minarchipitidies in one day.
“Now we are told that the Chinese are being shitheads by making products that satisfies us…..who knew the evil ones could be so damned sneaky…..pleasing us at a cheaper price…..damn that is evil.”
From Minarchman… now a defender of communism… even though hates it.
Vidyohs likes their tires. You like their totalitarian medicine.
Vidyohs has no intention of forcing me to buy their tires. You, however, have every intention of forcing me into totalitarian medicine.
Brotio,
Amigo, I am actually interested and glad that muirduck has decided he is big enough dog to get off the porch.
As with his chosen two examples of Minarchipitidies he only reveals how really stupid he is, so let him go. It will be good for laughs, I guarantee it. His #1 shows that he knows shit about the constitution and his #2 shows (at best) his inability to read and understand satire, and of course (at worse) his socialist willingness to lie and distort anything. So let him go, it will be fun.
But, you’re right of course in your response.
Two months ago, when I read they were planning this, I went out an bought new tires. I wonder what new products they want to damage before I can buy them?
Based on the current slide, which I believe will continue and worsen, I worry about the possibility of a Smoot Hawley equivalent in the next couple years. Based on the stupid, unilateral actions of the previous administration, I will never put the creation and enforcement of stupid laws past the current or future ones.
surferboy in Chile,
You wrote,
“The pollution arguement only makes sense to me if all tires were taxed so we start using stone tires because it is cheaper.”
GREAT observation! Love it.
And Viva Pinochet!
Would it be fair to say that another unintended consequence of this might be that roads will be less safe due to people trying to extend the life of their existing tires rather than buying a new set for a reasonable price?
“roads will be less safe due to people trying to extend the life of their existing tires rather than buying a new set for a reasonable price?”
You are correct sir! And it’s precisely what Obama would have said during the campaign had Bush ordered such a tariff.
Anyone who drives unsafe tyres and has a blowout which causes them to crash into someone else and kill them are knee-deep in it. Somehow I doubt “Obama made me do it” argument will hold up in court.
Yes to Name and Chilean surferdude!
Good points from both of you.
What Krugman is proposing is the pricing of externalities, the costs of production beyond the orbit of market calculation. But the impossibility of economic calculation under socialism, as explained by Mises, is the impossibility of pricing the externalities. The professors and bureaucrats charged with the task will have no rational way of carrying it out. They won’t even know what they should price. As we have seen, Prof. Krugman has overlooked the external, environmental cost of having tires made in America rather than China, and the external cost of more accidents on the road, the external cost of turning back the clock altogether, to stone wheels, and life before capitalism, and the loss of all of the “cleaning by capitalism” that Prof Boudreaux has been regaling us with. And even if they knew what all of the externalities were, they would have no means of pricing them. They could only guess at their costs. And since their haphazard pricing is bound to distort the market, it is better off without it.
That doesn’t mean that we must resign ourselves to the unbridled cost of externalities. They can be subjected to economic discipline by converting them to “internalities, bringing them within the scope of the market, and you do that not by expanding but reducing the scope of “government.”
That’s the only rational solution.
While the market is a conflict resolving process, the state is a conflict creating process. While peace is essential to business, war is the stock in trade of politicians. While it destroys private property, war, class, race, trade, and, ultimately, shooting, is the only thing that keeps politicians in business. They are warmongers by necessity, and a preference for politics over the market is for war over peace.
Separate nation-states would be less inclined to resolve supra-territorial problems, such as migrating pollution, than separate, private communities. While “the business of the public is the business of no one,” the business of a business is just that. An environment bad for life is bad for its business. But while it needs solutions to the problems, politicians need the problems. And the last thing that those with a mutual self-interest in resolving them need is interference from those living off of them and with a mutual self-interest in endless disputes over them.
The cost of migrating pollution is what economists call an externality, a cost beyond the orbit of market calculation. The impossibility of economic calculation under socialism, as explained by Mises, is the impossibility of calculating the costs of externalities. The bureaucrats charged with the task will have no rational means of carrying it out. They won’t even know what all of the externalities are.
For example, the large tariff just imposed on imported Chinese tires has been justified on environmental rather than conventional protectionist grounds. If the American consumers wish to buy Chinese tires, they should be willing to pay the full cost of them, including the cost to our environment. And since the Chinese will not exact that cost in their pricing, it is up to the Americans themselves to do so, at their borders.
But that is to overlook other externalities. There will be a greater likelihood of tires being made in America rather than China, and of the accompanying pollution occurring in America rather than China. There is the fact that, as tires become more expensive, they will be used longer, and there will be more accidents. And what could you actually accomplish for the environment unless you turned the clock back all the way to stone wheels, and the poverty and environmental squalor of life before capitalism, and the countless ways that it has made our environment cleaner?
But even if the officials took all of the externalities into account, they could only guess at their costs. And since their haphazard pricing of them is bound to distort the market, it is better off without it.
That doesn’t mean that we must resign ourselves to the unbridled cost of externalities. We can subject them to the discipline of cost accounting by bringing them within the orbit of the market, and converting them from externalities to internalities.
But there is only one way to do that: by restricting the scope of “government” and expanding that of the market.
If it was profitable for separate property owners to export their pollution to one another, to the detriment of all, it would be more profitable for one of them to buy out the others, and protect the overall environment that was now all his. There would be no need for the compulsion of the state, and the incompetence and indifference of its agents. All that was needed was to clear the way for the rational pattern of free market ownership and incentive.
How does one comment other than very well said. Thank you.