While the immediate beneficiaries of jobs via government spending are usually easily identifiable, the specific people who lose their jobs because of the indirect effects of tax collection on saving and consumption are virtually impossible to identify.
DBx: Yes. And, of course, the very same is true for the beneficiaries of jobs created by trade barriers. These beneficiaries are almost always easily seen. But those who suffer as a result of these government-granted special privileges – namely, consumers who pay higher prices and workers who are kept in lower-paying jobs – are invisible. Only (some) economists see these invisible victims, these forgotten men and women.
Politicians and economically uninformed pundits point with pride to the jobs and fake prosperity they “create” with their stimulus spending and their taxes on those who purchase goods assembled outside of the domestic economy. Only (some) economists and the small fraction of the general public who understand the economic way of thinking see the suffering, impoverishment, and injustice behind the practice of using force to ‘stimulate’ demand for existing, visible, and politically influential producers.
… is from pages 3-4 of Georgetown University philosopher Jason Brennan’s brilliant 2014 book, Why Not Capitalism? (footnotes deleted):
Consider: The United States puts the poverty line for an American living alone at about $11,500. A person living in the United States off this meager [annual] income, adjusting for the cost of living, is still among the richest 14% of people alive today, earning more than six times the income of the typical person worldwide. In contrast, the countries that tried socialism – the Soviet Union, China, Cuba, Vietnam, Cambodia, and North Korea – were hellholes. Socialist governments murdered about 100 million (and perhaps many more) of their own citizens…. In socialist countries no one got rich, except maybe a few Communist Party officials. Socialism was especially bad for poor proletariat workers, the very people the system was supposed to help the most. So, sure, capitalism has problems, as [filmmaker] Michael Moore and OWS [Occupy Wall Street] can show you, with perhaps some exaggeration here and there. But socialism was a disaster. In short, we had the debate between capitalism and socialism, and capitalism won.
In this book, Brennan defends capitalism not because capitalism is by far the best set of economic institutions and attitudes for enriching the masses, but because capitalism is also morally superior to socialism – even to ideal socialism.
Society only progresses to the degree that its members progress, and the only means a man has to measure his progress is to consider the nature of his internal governance, his conscience. He must consider that which causes him to feel pleasure and that which causes him to feel pain, that which causes him to feel pride and that which causes him to feel guilt, that which causes him joy and that which causes him sadness.
Daniel Griswold, Senior Research Fellow and Co-Director of the Program on the American Economy and Globalization at the Mercatus Center at George Mason University, discusses the seemingly invisible benefits of free trade that bolster opportunities and businesses’ bottom line. Griswold debunks common myths about the U.S. trade deficit, manufacturing decline, and the negative impact of the North American Free Trade Agreement and explains why the Trans-Pacific Partnership is a welcome 21st century agreement.
Two nuggets of wisdom and perspective from Bob Higgs: here, and here.
If the planners do not know the details, then they do not know what they need to know to justify the imposition of their choices over those who they are trying to direct.
DBx: Indeed so.
It isn’t too much of a simplification to say that those who trust state officials to ‘regulate’ do not understand how enormously complex social reality is, while those who oppose such legislation and regulation do understand that reality is so complex as to defy social engineering of any sort.
With distressing frequency, politicians, political operatives, and pundits spew out falsehoods about trade. Never in the history of the United States – not during the presidency of Jefferson, of Cleveland, of Reagan, of Obama, or of you-name-the-holder-of-such-power – has Uncle Sam been committed to anything close to a policy of “unfettered” free international trade. All the worse for Americans, of course, but the historical reality cannot be changed by the incessant repetition of falsehoods to the contrary.
Politically powerful producer groups in the United States have always been able to rely upon the combination of the failure of political ‘markets’ (akin to the failure of private markets) with widespread ignorance both of the most elementary economics and of basic facts of reality in order to get from Uncle Sam grants of unjust, monopoly privileges. I do not doubt that there are many Trumpkins out and about who believe that they and their children have been, or stand to be, victimized by free trade – but they are simply ignorant of economics and of reality.
The American right has long been telling itself a simple morality tale that goes something like this: The white Christian establishment is the original source and continuing guardian of America’s tradition of liberty, free markets and limited government and minorities are a threat to it because they don’t share the same attachments. One of the major arguments that restrictionist right-wing pundits make for clamping down on immigration is that immigrants, hailing from Big Government countries, dilute these American principles.
This has always been nonsense. But Donald Trump’s election has turned this story on its head given that whites are the ones who voted for him because they wanted economic nationalism and protectionism. And minorities voted against him because they feared the loss of their liberties.
Rivalrous competition means that one agent’s plan can succeed only at the expense of some other, incompatible plan. In such circumstances (which always exist in the real, disequilibrium world) adding together the values of the capital used by rivalrous firms has about as much meaning as adding the value of a bridge to the value of the bomb being built to blow it up.
DBx: Economic statistics have many valuable uses, but they must be approached and interpreted with uncommon care. For a number of reasons, the real-world economy is not the same entity as even the ‘best’ array of statistics that describes it. Therefore, manipulating real-world economic phenomena based upon statistics might very well produce ill-unintended consequences even if the result of such manipulation is to cause the statistics all to change in desirable ways.
This ‘best’ array of statistics that describes the economy cannot possibly capture and reveal more than an insignificant fraction of the important details – what Hayek called “knowledge of the particular circumstances of time and place” – that prompt each of the billions of individual economic agents to act in the ways that he or she acts at each moment in time. It is information and knowledge on the spot, on the ground, in the rich context of each individual’s preferences, abilities, and expectations that direct and incite the actions of these individual agents. And it is the interaction of these agents’ actions that is constantly producing economic order or disorder – economic order or disorder that is not and could not possibly be designed or intended by anyone. Understanding the logic of such human action, as well as of how these actions combine with each other to produce whatever economic patterns they produce (which patterns might be accurately enough described by statistics) is the core mission of the economist.
Yukon Huang helpfully corrects several myths about U.S.-China trade (“China Trade Realities for the Trump Administration,” Nov. 16). Unfortunately, in doing so he perpetuates a myth about the U.S. trade deficit when he writes that much of the increase in the U.S. trade deficit was caused by “households consuming beyond their means … over the past several decades.”
Many fallacies infect the arguments of those who insist that sound economics requires that, when subsidies doled out by government X lower the prices of imports in country Y, the government of country Y should impose countervailing taxes on its citizens’ purchases of those subsidized foreign goods. I address some of these fallacies in this 2011 article in Economic Affairs. And Dwight Lee and I address a different yet major such fallacy here. (I say “major” because I believe this fallacy to be important, not because it is prominent. This fallacy remains largely ignored.)
Below the fold is another angle that occurred to me to highlight as I read this Wall Street Journal report on the growing reliance by Chinese firms on subsidies from the Chinese state. My remarks here are aimed chiefly at market-oriented economists who believe that foreign subsidies justify domestically imposed punitive taxes on consumers who buy subsidized imports.