In this short video, Nick Gillespie and some of his Reason colleagues further expose the ugliness and destructiveness of Trump’s economic nationalism – a notion rooted in the soil of economic ignorance, fertilized by nativism and xenophobia, and watered with rent-seeking.  (One small correction: contrary to a claim in this otherwise excellent video, protectionism does not reduce, over the long run, total employment.  Rather, protectionism changes employment: on the whole, protectionism guarantees that better jobs are reduced while worse jobs are maintained.)

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The great Bruce Yandle warns of the risks of demanding ever-more government protection from terrorism.

Richard Ebeling explains what the left gets wrong about Trump and what the right gets wrong about Trump.

Bill Lane, writing in the Wall Street Journal, is rightly critical of business people who refuse to criticize Trump’s protectionist agenda and policies.  A slice:

While some Americans say they are willing to pay more for the benefits of protectionism—more jobs sewing clothes and assembling machinery and electronics—their enthusiasm may wane when the negatives on the export side of the ledger kick in. First to be hit would be American farmers and ranchers, who often export a third of their harvest and herds. Then it cascades down. Smaller crops mean fewer tractors, which mean less steel and so on. Then the folks who make big-ticket export items like jets and bulldozers are targeted for retaliation.

Mark Perry ponders Trump’s proposed scheme to cook the trade-account books.

George Will documents government’s stealthy growth.

Brittany Hunter is appalled – rightly so – at the Wisconsin government’s cronyism.

Matt Ridley exposes a sinister assault on free speech.

In this short video, Johan Norberg busts some myths about pornography.

Here’s George Selgin on shrinking the Fed’s balance sheet.

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Quotation of the Day…

by Don Boudreaux on February 25, 2017

in Trade

… is from page 267 of the 1991 Robert Schalkenbach Foundation edition of Henry George‘s 1886 volume, Protection or Free Trade:

Unknown-2In itself the abolition of protection is like the driving off of a robber.

DBx: Indeed so.  And yet the current president of the United States proudly boasts of his schemes to flood the land with larger hordes of even greedier robbers.  The truly sad reality is that so many people fall for the head-robber’s assurances that all this robbing and looting of the masses will make the masses richer.

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Another Open Letter to Trump

by Don Boudreaux on February 24, 2017

in Hubris and humility, Trade

Pres. Donald J. Trump
White House

Mr. Trump:

You said at today’s CPAC meeting that “we’re going to make trade deals.  But we’re going to do one on one – one on one – and if they misbehave, we terminate the deal.”*

By “we” you mean you.  By “misbehave,” you mean act in ways that you find objectionable (which surely includes offering to sell goods to Americans at especially low prices).  And by “terminate the deal” you mean use threats of coercion to prevent Americans from buying as many imports as Americans would otherwise choose to buy.

Now I do support the idea of one-on-one trade deals, but I have a radically different proposal for implementing them – namely, that you mind your own business and let each of us Americans make whatever trade deals each of us likes, one-on-one, with whichever suppliers each of us chooses to deal with.

I am far better positioned than you are, sir, to determine if deals offered to me by foreign sellers are good for me or not.  Such offers that I judge will harm me I will reject and such offers that I judge will help me I will accept.  I neither need nor want your help in screening such offers, for what your ‘help’ means in practice is that you will frequently prevent me from buying and selling in ways that I judge to be best for me and my family.  Your ‘help’ will hurt me.  And what is true for me is true for most other Americans.

So mind your own business and let the rest of us mind ours.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

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Some Links

by Don Boudreaux on February 24, 2017

in Balance of Payments, Immigration, Seen and Unseen, Trade, Work

T. Norman Van Cott makes visible what is invisible to protectionists such as (to name only a few) Donald Trump, Peter Navarro, Lindsey Graham, and Bernie Sanders.  A slice:

Giving up less to achieve the same objective means having more of other things.

Here’s the closing paragraph of my Mercatus Center colleague Nita Ghei’s latest essay in Investor’s Business Daily:

While the TPP was far from perfect, overall it enhanced freedom to trade. There is little reason to believe that bilateral treaties, if they emerge, will be superior to the TPP. In the interim, neither American consumers and businesses, nor our those of our trading partners will benefit at all.

Phil Levy weighs in on the Trump administration’s proposed scheme to cook the trade-account books.

Poetry from Bob Higgs.

Dillon Tauzin explains how minimum wages hamper learning and the acquisition of skills.

David Boaz reflects on the economic calamity for Brazilians of the 2016 Rio Olympics.

Scott Sumner celebrates the benefits to Americans of immigrants from Syria.

Speaking of the benefits to Americans of immigrants, here’s Douglas French.

“Your papers please” comes to America.

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Physicalism Is Fallacious

by Don Boudreaux on February 24, 2017

in Balance of Payments, Myths and Fallacies, Trade

Here’s a letter to the Washington Post:

Charles Lane deserves applause.  Not only does he expose the radical-left-wing origins of the Trump administration’s proposal to change the way that goods transshipped through the U.S. are accounted for in trade statistics, Mr. Lane also reveals the utter meaninglessness of bilateral trade ‘imbalances’ – such as America’s trade ‘deficit’ with Mexico (“Trump’s attempt to massage economic data isn’t new. But there’s a better way.” February 24th).

But I fear that a third valid point made by Mr. Lane will go unnoticed – namely, that the Trump administration is mistaken to insist that no value is added in the U.S. to goods transshipped through the U.S. to other countries.  We can see the administration’s error clearly if we ask ‘Why do foreign producers first ship their goods to the U.S. rather than directly to these goods’ ultimate destinations?’  The answer must be that there is value to foreign producers in transshipping their goods through the U.S. Therefore, supplying transshipping services is a valuable American contribution to the global economy.

Such transshipments require the specialized services of American ports and warehouses – specialized services for which foreign merchants pay.  To conclude that, because transshipment services don’t alter the physical shape or contents of goods, these services aren’t a valuable economic contribution makes no more sense than to conclude that, because the services of truck drivers don’t alter the physical shape or content of goods, the services of truck drivers aren’t a valuable economic contribution.

Just as farmers do not deliver their produce directly to the homes of final consumers but, instead, to warehouses and shippers who add value (and who profit) from supplying storage and shipping services, many foreign manufacturers do not deliver their products directly to the countries of final destination but, instead, to American warehouses and shippers who add value (and who profit) from supplying storage and shipping services.  It would be deeply misleading for the trade accounts to fail to register the value of these services.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

…..

My Mercatus Center colleague Dan Griswold makes, in this excellent essay, a point very similar to the one that I make in this letter.

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Quotation of the Day…

by Don Boudreaux on February 24, 2017

in Balance of Payments, Myths and Fallacies, Trade

… is from page 314 of UCLA economist William Allen’s 1989 collection of the transcripts of his insightful and still-germane radio addresses, The Midnight Economist; specifically, it’s from Allen’s April 1988 radio address titled “Untruths About the Balance of Payments” (original emphasis):

bpIt is not true that the balance of payments is unbalanced.  The [U.S.] balance of payments is a double-entry accounting record of transactions of United States residents with the rest of the world.  Since each transaction is balanced, then over any period the total of transactions necessarily balances.

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An Unfolding Mystery

by Don Boudreaux on February 24, 2017

in Balance of Payments, Data, Trade

Here’s a letter to the Wall Street Journal:

Peter Navarro, Director of the new National Trade Council, calls your report on the administration’s proposal to change the practice of accounting for goods transshipped through the U.S. “misleading” (Letters, Feb. 24).  Yet Mr. Navarro mysteriously never explains just why your report is misleading.  Instead, he only hints that the proposed change differs from your report and what we’ve all so far been led to expect.

Initial reports were that the White House wants to stop counting goods transshipped through the U.S. as U.S. exports but to continue to count them as U.S. imports.  For example, in your report that sparked Mr. Navarro’s letter, you wrote that “The Trump team wants to exclude the value of re-exports from the U.S. export total because these goods aren’t manufactured in the U.S., while keeping them on the import side of the equation.”*  Yet Mr. Navarro’s letter now implies – but only implies – that the White House wants also to stop counting transshipped goods as imports.

Counting transshipped goods as being neither exports nor imports would indeed be a far less egregious accounting change than would continuing to count these goods as imports but no longer as exports.  And so if indeed the administration’s proposal includes also a provision to stop counting such goods as imports, why, in his letter, did Mr. Navarro not explicitly say so?  It would have been easy, and should have been obvious, for him to announce explicitly that the proposal is to also stop counting transshipped goods as imports.  The fact that Mr. Navarro could easily have explicitly corrected your alleged error but failed to do so gives the plausible impression that your report is, in fact, accurate – and that, as a result of now being exposed and roundly and rightly ridiculed, the administration is now trying to back-pedal into a less egregious position or, worse, to mislead the public about what it intends to do.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

* See also this report from The Hill; it’s one that Greg Mankiw linked to.  A slice from this Hill report:

People involved in the discussions told the [Wall Street] Journal that the leading idea is to count “re-exports” — goods that are imported to the U.S., and then exported to a third country unchanged — as imports, but not exports.

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Writing at The Hill, my Mercatus Center colleague Dan Griswold weighs in on the Trump administration’s proposal to cook the trade-deficit numbers by using what the Wall Street Journal correctly calls “single-entry trade bookkeeping.”  A slice from Dan’s essay:

Counting a transshipped good as an import but not an export would make as little sense as counting it as an export but not an import. It is both or neither. Its impact on the amount of goods in the domestic economy is effectively zero, with the import and export effectively cancelling each other out. The re-export of goods should not bother mercantilists, since the good is not consumed in the U.S. and, therefore, not threatening to displace competing domestic production.

The reality of trade is that even transshipments benefit the economy by creating opportunities to add value as a hub for global distribution and logistics. Hong Kong and Singapore have grown rich in large part because of their prominent roles as re-exporting nations.

And the title of Greg Mankiw’s blog post on this proposed accounting fraud says it all.

In my latest column in the Pittsburgh Tribune-Review I ponder the claim that politics is the art of the possible.

GMU Econ alum Ed Stringham reveals how markets improve the welfare of animals.

George Will is correct that “[t]he problems of state and local pensions are cumulatively huge.

Here’s Joshua Gans on the late Kenneth Arrow.  (HT Steve Landsburg)

Marty Zupan, Katherine Mangu-Ward, and Nick Gillespie.

Alan Reynolds busts yet another Trumpian myth about trade and trade deficits.

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Quotation of the Day…

by Don Boudreaux on February 23, 2017

in Myths and Fallacies, Seen and Unseen, Trade

… is from page 491 of the 5th edition (2015) of Thomas Sowell’s Basic Economics:

UnknownInternational trade restrictions provide yet another example of the fallacy of composition, the belief that what is true for a part is true for the whole.

DBx: Yep.  A politician or a professor sees an industry or a town in economic decline today because of free trade, he or she concludes that the entire economy must therefore be in economic decline because of free trade or that this industry or town will remain in decline into the future because of free trade.  The conclusion is fallacious.  Yet it is powerful fuel for demagogues whose lust for power is gratified by stoking fears that are sparked by this fallacy.

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