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No Such Response Is a Public Good

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Here’s a letter to a frequent and always welcome correspondent, Richard Brewer:

Richard:

It’s always good to hear from you.

In response to my recent letter to Kevin Nowak [2], you write: “I’m somewhat confused about the issue whereby the China government has threatened to prevent China companies from selling antibiotics, etc. to U.S. companies. Are you suggesting that that threat is an idle threat?”

No.

I’m saying that the persons with the best knowledge and incentives to weigh the seriousness of that threat, to have anticipated it ahead of time, and to deal with it now are the owners and managers of each of the many U.S.-based firms that do business in medical supplies with Chinese companies. I do not say that this knowledge and these incentives are perfect, only that they are superior to the knowledge possessed by, and the incentives that motivate, government officials.

Of course it’s imaginable that a collective, U.S.-government-orchestrated response to such a threat from the Chinese might yield results better than those that would emerge from letting each American importer and exporter address the threat as it determines is best. Yet I see no reason to put faith in such a collective response. Any collective response today would be conducted by individuals with a long track record of revealing their unalloyed and ample ignorance about – and hostility to – trade. And further, as is true of all political actors but not of private actors, the officials who would conduct ‘our’ collective response to any (real or imagined) such Chinese threat have poor incentives to take proper account of the long-run consequences of their actions.

Sometimes there are no happy options. But in every case we should always strive to choose the option that is least-unhappy.

Sincerely,
Don

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