by Don Boudreaux
on March 4, 2018
… is from page 480 of the 5th edition (2015) of Thomas Sowell’s Basic Economics (original emphasis):
[B]eing able to produce anything more cheaply is not the same as being able to produce everything more cheaply. When there are scarce resources which have alternative uses, producing more of one product means producing less of some other product. The question is not simply how much it costs, in either money or resources, to produce chairs or television sets in one country, compared to another country, but how many chairs it costs to produce a television set, when resources are shifted from producing one product to producing the other.
DBx: Sowell here describes the principle of comparative advantage.
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by Don Boudreaux
on March 3, 2018
Trump has gotten lots of push-back for his recent boast that trade wars are easy to win. Yet by protectionists’ own criterion, Trump is – I choke to say it – correct. Protectionists believe, above all, that among the greatest scourges that can be visited upon the people of their nation is increasing abundance of goods and services available to those people. (Such increasing abundance, after all, destroys many existing firms and many existing jobs.) Well, trade wars, when vigorously and stubbornly fought, decrease material abundance for the peoples of all nations who prosecute such wars. Therefore, trade wars are indeed easy to win because the criterion for victory is greater scarcity at home – and the greater the scarcity, the greater and sweeter the ‘victory’!
….
On his Facebook page Steve Horwitz posts this cartoon.
It’s a clever visual, one that conveys much important truth. Yet on one front it is misleading – namely, in real trade wars, each of the belligerents points his gun at himself (or, a bit more accurately, at the citizens that that belligerent ostensibly represents) rather than at other governments or at the people’s of other nations.
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by Don Boudreaux
on March 3, 2018
… if he is an American conservative, is sure that, while his own government’s intervention into the American economy will be stupid, bungling, inept, corrupt, wasteful, and generally harmful to the American economy, is equally sure that foreign-governments’ interventions into their economies are so ingenious, masterful, well-honed, competent, efficient, and generally hyper-effective that these interventions turn all firms and workers in those foreign economies into amazingly efficient and stupendously productive machines for producing so much output that, unless Uncle Sam obstructs the ‘flooding’ into America of these oceans of foreign output, Americans will soon become third-world denizens forever without jobs, hope, and ‘greatness.’ This conservative American protectionist’s mysterious confidence in the economic-planning powers of foreign governments is stronger the closer foreign governments are to totalitarian dictatorships lording it over populations that have long been impoverished by communism.
This conservative American protectionist then – also mysteriously – trusts Uncle Sam to intervene into the U.S. economy if and only insofar as that intervention is aimed at obstructing fellow Americans’ access to the miraculous cornucopia of economic goodies that highly interventionist foreign governments alone are able to engineer through their devious schemes of impoverishing us Americans by compelling their own peoples to shower us with endless gifts of attractive goods and services.
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by Don Boudreaux
on March 3, 2018
… is from page 314 of my Mercatus Center colleague Dan Griswold’s review, in the Winter 2018 Cato Journal, of Bradley Gardner’s book China’s Great Migration: How the Poor Built a Prosperous Nation; the great Chinese migration referred to here is that of tens of millions of people, following Mao’s death, migrating from rural areas of China to Shanghai, Shenzhen, and other cities in China:
For the rest of the world, China’s great migration reminds us once again that the freedom to pick up and move from one place to another is essential for human happiness and progress. This can be the freedom to move from a poor to a rich country, or from the countryside to the city within a country. In both cases, workers can experience a sharp increase in their productivity, benefiting themselves and their families while boosting total economic output.
DBx: Far more important than Beijing’s encouragement of exports to China’s post-Mao economic growth is the internal migration of the Chinese people from the countryside to urban areas. Indeed, government subsidization of exports causes economies to grow more slowly than otherwise, for such subsidies divert resources from where they would be more productively used to where they are less productively used.
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by Don Boudreaux
on March 3, 2018
… judging from my long and deep experience at dealing with protectionists, generally and studiously ignores arguments against protectionism. A protectionist is someone who simply repeats, time after time after time, that, for example (to mention only a few of the protectionist’s cherished mantras),
- trade deficits plunge the nation further into debt or drain demand out of the country
- trade deficits lead to permanent higher rates of unemployment
- trade deficits are evidence that “we” are “losing” at trade
- it’s “unfair” for “our producers” to have to compete against producers in countries with lower wages, lower taxes, less regulation, or more subsidies
With rare exception, the protectionist doesn’t argue; the protectionist merely asserts.
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by Don Boudreaux
on March 3, 2018
… believes that if Jones disapproves of Smith’s choice of suppliers – suppliers on whose outputs Smith spends his own money – then Jones is justified in hiring Jackson to threaten violence upon Smith until and unless Smith patronizes Jones’s preferred suppliers. And to rub salt into the wound that Jones (and Jackson) inflict on Smith, Jones (and Jackson) insult Smith’s intelligence by assuring Smith that their coercion of him is for his own good – and that if he, Smith, resists, or even protests, he is a greedy cad, an enemy of the people, or (prepare for even greater irony) a corporate shill.
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by Don Boudreaux
on March 3, 2018
Colin Grabow argues that Trump’s tariffs are a wanton act of economic self-destruction. A slice:
On the steel front, domestic production is little changed from that of 20 or 30 years ago, and the U.S. military requires a mere 3 percent of this to meet its needs. Of the top 10 foreign suppliers of steel, meanwhile, China does not feature and six are countries with whom the United States has mutual defense arrangements.
Regarding aluminum, the Commerce Department admits that “defense-related products” require only 10 percent of U.S. domestic production. The No. 1 source of imports in 2016, meanwhile, was NATO-ally Canada, which accounted for more aluminum imports than the next 11 biggest sources combined.
Little wonder that Secretary of Defense James Mattis is said to be among those in the administration opposed to these tariffs and recently authored a memo expressing concern about the impact of their broad use on key allies.
Mark Perry offers a history lesson on trade.
The editors at the Wall Street Journal are correct that Trump has no comparative advantage at understanding trade. A slice:
Some of our more sanguine friends see the tariffs and tweets as Mr. Trump’s familiar negotiating bluster, but we wouldn’t be too sure. Protectionism may be his only real policy conviction, and his tweet confirms he doesn’t know what he’s talking about. This is what the equity markets are saying as they discount trade-dependent companies.
GMU Econ alum Roy Cordato rightly laments the zombie-like nature of the pack of economic errors that constitute protectionism.
Jonah Goldberg blasts economic nationalism.
Tyler Cowen explains that the existence of a welfare state does not weaken the case for free trade.
Simon Lester argues – correctly – that protectionism scarcityism fills rather than drains the swamp.
David Henderson helpfully picks apart a recent, and especially absurd, Trump tweet on trade.
Pierre Lemieux parses the presentation of trade in the latest annual report of the Council of Economic advisors. A slice:
More generally, the ideal of a “level playing field,” often invoked in the CEA’s report, not only makes the current administration ideologically similar to the previous one, but it also negates the reason for the existence of comparative advantage and the benefits of trade–that is, the fact that relative costs differ between countries. This is quite clear and uncontroversial in the case of labor: the poor country’s relatively inexpensive labor allows them to surmount their low productivity and still be able to compete by offering better prices to American consumers. If everybody had the same relative costs, nobody would trade with anybody.
Matt Welch reveals how Trump’s trade policy is lousy economics and worrisome politics. A slice:
It is not new for a modern U.S. president to impose protectionist tariffs. Barack Obama did it with Chinese tires, costing American consumers an estimated $1.1 billion in return for preserving 1,200 jobs in the domestic tire industry. And as Steve Chapman has noted in these pages, “When George W. Bush imposed duties on foreign steel, experts concluded, he destroyed some 200,000 jobs in other sectors—exceeding the total employment of the American steel industry.”
Trump’s moves, coming on the heels of his recent tariffs on Chinese solar panels and imported washing machines, threaten to be far more ruinous, “the most significant set of U.S. import restrictions in nearly half a century,” Edward Alden concluded over at the Council on Foreign Relations. That’s in part due to the centrality of protectionism to both Trump’s presidential campaign and his lifelong economic worldview. He really, truly believes that “trade wars are good, and easy to win,” and that his commitment to this belief is part of why he won the presidency. That’s a potent combination.
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by Don Boudreaux
on March 3, 2018
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by Don Boudreaux
on March 3, 2018
… is from page 434 of Liberty Fund’s 2011 collection of Frederic Bastiat’s writings, The Man and the Statesman: The Correspondence and Articles on Politics – which is the first volume in what will eventually be six volumes of The Collected Works of Frederic Bastiat; specifically, this quotation is from Bastiat’s 1848 essay “Freedom” (original emphasis):
A people has two ways of procuring something. The first is to make it; the second is to make something else and trade it. It is certainly better to have the option than not to have it. Let us therefore have the freedom to trade.
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by Don Boudreaux
on March 2, 2018
… believes that Xi’s plunder of Li justifies Donald’s plunder of Dan.
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