the only way to get him his job back was to keep people from buying cars they preferred to buy elsewhere and force up the prices of those cars and have him share in that. It’s a form of charity, you just don’t see it. That’s the problem with protectionism as a way of helping those out of work workers. It’s a form of charity. And it destroys the expansion of opportunities that trade and innovation create.
Pointer from Mark Thoma. Read the entire piece.
The one element that I think that Roberts could have added is what I might call “Protectionism for me but not for thee.” Many white-collar professionals have protection in the form of occupational licensing. That’s a lot of charity for people who think of themselves as elite.
For non professionals, if there is going to be distortionary and redistributive welfare / charity / protection / subsidies anyway, I think it’s arguable that jobs are better than checks, and hidden or subtle subsidies through trade and price manipulations are preferable to explicit dole. It’s a shame perhaps, but one can’t get around certain features of human nature.
Licensed professionals certainly feel they ‘earned’ all their rents, and go through the usual automatic psychological self-manipulations to convince themselves of it, but while false, that perception is important.
This will get tougher to do as tech continues to advance, and thus for every country, so expect politicians everywhere to pick all this low hanging policy fruit first.
We may already be past peak globalism.
This is a nice essay on the secondary benefits of free trade, but it misses a crucial point, which is that the secondary benefits Robert’s discusses (greater opportunities for “creation” as cheap imports reduce prices and boost aggregate purchasing power) only apply to those imports that are balanced by exports. When incremental imports aren’t balanced by exports (as the trade deficit increases), you’re not likely to see any increase in aggregate purchasing power.
Why?
Because the earnings benefits of (unbalanced) incremental imports are diverted to foreign producers without an offsetting increase in domestic earnings via incremental exports. So, aggregate earnings fall alongside prices and there’s no boost to aggregate purchasing power and none of the “hidden” benefits Roberts discusses.
That’s a mouth full and can surely be written better than I have, but imo it’s a crucial piece that economists often overlook. In other words, Roberts is right to point out these “hidden” benefits of free trade, but neglects to mention that the benefits only apply to the portion of the import bill that’s balanced by exports. Of course, other issues arise as to how foreigner’s U.S. dollar earnings circulate back through our financial economy, but that’s another discussion.
You make an excellent additional point. If I may be so bold as to offer another, Russ and others in the unregulated opinion-mongering industry would do well to consider their employers’ status as tax-exempt organizations. People with real jobs have to pay even more in taxes to support all the tax expenditures on the tax-exempt sermonizing, teacher-employment, and disguised lobbyists industries. It’s all well and good to show the world how thoroughly you have mastered basic econ 101 text books, but it always makes me throw up a little whenever the likes of Russ Roberts, Tyler Cowen, and Alex Tabarrok deign to lecture the little people about how wonderful free trade is in the abstract without considering the wretched impact of the details. The so-called free trade agreements are larded up with enviro-whackadoodlist and labor restrictions that disproportionately negatively impact a US workforce that is already disadvantaged by our crappy corporate tax, labor regulation, and out-of-control bizarro-world products liability lawyer-enrichment system. They would do well to consider your observations on how government tends to encourage demand while restricting supply, which is a more apposite model than balance-of-trade theorizing. On a positive note, it appears that Trump understands this intuitively and is not nearly the one-dimensional trade opponent that his mindless detractors would have us believe.
Putting aside the fact that there isn’t much protectionism going on (foreign-made cars, Roberts’s example, are not exactly hard to find the US), libertarians reject what has been the unspoken assumption of most Americans until recently – that the whole point of government is to protect and enhance the life of a particular society. You can deride this as “charity” if you want, but that is not an argument for why increasing an abstract statistic of “global utility” is a more appropriate goal for a government. Not every question is an economic question.
You don’t need to consider the well-being of foreigners to support world trade (though it is a nice bonus).
If a foreign company offers a product for $15 that used to cost $20 from a domestic producer, then two things can happen:
1. The domestic company lowers their price to $15 (or slightly below). They’re $5/widget worse off and the consumer is $5/widget better off (in terms of economic efficiency — I’m not getting into utility arguments here).
2. The domestic company’s reserve price is higher than $15, say $18. So they’re $2 worse off and the consumer is $5 better off.
Case 2 is a clear win for *domestic* efficiency. But even though case 1 looks like a wash, it’s even better than that: Since the price is lower, more people can buy the product for $15 who wouldn’t want it for $20. So it’s a win for those consumers as well.
In both cases, the result is an increase in efficiency even if you just look domestically.
You missed my point entirely. It was that, for many of us, efficiency is not the supreme consideration. Some of us would think it a bargain to pay a bit more for consumer goods if in return we had a healthy society.
Hmmm, I think you may have missed my point entirely.
You’re only looking at people’s interest as consumers. And you still miss my point.
“You’re only looking at people’s interest as consumers.”
Wrong. Their interests as producers are accounted for in the reservation prices.
I really don’t think I’m missing your point. You’re the one who brought up “global utility” and I’m saying that it’s irrelevant.
“Many white-collar professionals have protection in the form of occupational licensing. That’s a lot of charity for people who think of themselves as elite.”
Really, Arnold, do you think we shouldn’t have any occupational licensing? How about for physicians? Do you really think harping on this notion helps get your other ideas a hearing?
No, we should not have any licensing that serves as protectionism. What do you think not getting this gets you?
You realize doctors kill more people than drug dealers now all while they are bankrupting us and themselves in student debt? Either it doesn’t work at all, or it keeps the supply of experts too low, either way, yes, of course even doctors need less protectionism.
So you think fewer people would die from medical malpractice if the states stopped licensing doctors? Based on what?
I agree there isn’t any realistic way to undo what has allowed to have been done, but that doesn’t mean we should have allowed it to have been done. Better than free trade would have been a uniform tariff equal to the trade imbalance, growing and shrinking with it and limiting the damage of imbalances.
Probably better than that would be no tariff at all, but having someone willing to make out-of-proportion threats to keep tariffs at zero or tilt the balance just slightly in our favor.