The always-wise and insightful Arnold Kling ponders commercial exchange. (HT Kaushal Desai) A slice:
Is it bad to trade with people whose cultural or political views you dislike? A lot of people feel that way, but the opposite might well be true. Suppose that you choose to trade solely on the basis of profit. Clearly, that makes you better off. Also, by not discriminating against others on the basis of ethnicity or culture or politics, you are probably helping to make the world a better place.
Walter Olson explains that cops abuse their special legal privileges. (What, after all, are special privileges if not licenses to abuse others?)
Derek Scissors re-writes an ad that ran in Monday’s Washington Post – an ad that, playing on Americans’ economic ignorance, attempted to stir up fears about foreign-governments’ (here, especially Japan’s) alleged currency manipulation. Speaking of currency manipulation, here’s an essay of mine from January 2010 in which I try to get at the heart of the problem with being concerned with another government’s currency devaluation. Here’s a sizable slice from my essay:
When I was a child my elementary school—Immaculate Conception School (ICS)—held two fund-raising fairs each year. At these fairs we kids bought tickets that we could exchange for various trinkets and food. Of course, some items cost more than others. A big stuffed panda bear might have been priced at, say, 50 tickets, a hotdog at three tickets, and a pencil sporting the school logo at one ticket.
Using dollars, each of us students could buy as many or as few tickets as we pleased (or, more accurately, as many tickets as our parents could afford or would allow us to buy).
Suppose that ICS had undervalued its tickets. Suppose, if the “correct” price (by whatever calculus) was $1, ICS sold each ticket for 75 cents.
Undervaluing its currency in this way surely would have resulted in more sales at the fairs. A 25 percent discount on trinkets and junk food is a darned attractive deal for kids.
Would ICS have benefitted itself by such undervaluation of its medium of exchange? Some of its employees would have benefitted. The fairs would have required more clerks and food preparers to handle the larger demand. But it’s clear that undervaluing these tickets would have harmed ICS on net. Instead of raising money for its operations, ICS would have lost money. By underpricing its trinkets and junk food, it would have subsidized its students’ consumption of these things. Undervalued tickets would have enabled its customers (us students) to acquire valuable goods and food at prices below ICS’s cost of supplying them.
No student (including me) would have complained about undervalued fair tickets. Such undervaluation would have been to our benefit.
But the school principal (Sister Quentin, if I recall)—who we can imagine was the architect of this self-destructive scheme—would have realized, on coming to her senses, that artificially stimulating the school’s exports of trinkets and food on fair days is no path to long-run and widespread prosperity for ICS.
The situation with the Beijing government is identical. The real costs of the resources and outputs exported by the Chinese people are not lowered simply because Beijing keeps the price of the yuan artificially low. And the resources spent to supply the extra American demand that results from an artificially low price of yuan—even though they are unseen by the untrained eye—represent a huge cost that harms the Chinese economy.