Quotulatiousness

June 12, 2018

G7 minus one

Filed under: Economics, Europe, Germany, Russia, USA — Tags: , , , , , , — Nicholas @ 05:00

Justin Raimondo on the well-shared image of Angela Merkel and her associates apparently trying to browbeat Donald Trump at the G-7 meeting (this version from Raimondo’s article):

All the Very Serious People are tweeting and retweeting this “iconic” photo of Trump surrounded by the Euro-weenies, with Angela Merkel seeming to lecture the President while the rest of our faithless “allies” look on. It’s “America Alone” – the visual representation of the internationalist worldview: Trump’s policy of “America First” is “isolating” us, and, according to clueless leftists like Michael Moore, Merkel is now the “leader” of the “free world.”

This last is good news indeed, for if Merkel is the new leader of the “free world” then the stationing of 35,000 US troops in Germany – at a cost of billions annually – is no longer required and we can bring them home. This also means Germany, rather than the US, will be sending troops all over the world to fight “terrorism” – a move that is sure to cause consternation in certain regions with a history of German intervention, but hey, somebody has to do it!

The political class is screaming bloody murder over Trump’s performance at the G-7 meeting in Canada, where he reportedly spent most of the time detailing how much the US was paying for the defense of our vaunted “allies,” not to mention the high tariffs imposed on American goods. He then proposed a “free trade zone” in which member countries would drop all tariffs, subsidies, and other barriers to trade: the “allies” didn’t like that much, either. Nor did the alleged advocates of free trade here in the US give him any credit for ostensibly coming around to their point of view. Which reminds me of something Murray Rothbard said about this issue: “If authentic free trade ever looms on the policy horizon, there’ll be one sure way to tell. The government/media/big-business complex will oppose it tooth and nail.”

Of course the Euro-weenies don’t want real free trade: after all, they practically invented protectionism. What they want is a free ride, at Uncle Sam’s expense, and the reason they hate Trump is because they know the freebies are over. However, what really got the Usual Suspects frothing at the mouth was Trump’s insistence that Russia be readmitted to the G-8:

    “I think it would be good for the world, I think it would be good for Russia, I think it would be good for the United States, I think it would be good for all of the countries in the G-7. I think having Russia back in would be a positive thing. We’re looking to have peace in the world. We’re not looking to play games.”

The “experts” went crazy when he said this: our “allies” are being insulted, they wailed, while our “enemies” are being “appeased.” It’s sedition! Russia! Russia! Russia!

Eric Boehm says that the White House’s justification for imposing tariffs on national security grounds may have been undermined through Trump’s tweets hitting back after what he clearly felt was Justin Trudeau’s hissy fit (although Trudeau didn’t exactly break new ground or say anything radically different in his comments):

The Trump administration has spent months trying to construct a rather flimsy argument that steel and aluminum imports from Canada and other close American allies constitute a national security threat. More than a handy way to drum up public support for trade barriers, the “national security” claim is a crucial bit of the legal rationale for letting the president impose tariffs on those goods without congressional approval.

Then, as he was departing this past weekend’s G7 summit, Trump took to Twitter to air some grievences with Canadian Prime Minister Justin Trudeau. In doing so, the president may have significantly kneecapped that legal argument.

The last sentence of Trump’s tweet is the one that really matters.

The White House slapped a 25 percent tariff on imported steel and a 10 percent tariff on imported aluminum by invoking Section 232 of the Trade Expansion Act of 1962, which gives the president legal authority to impose tariffs without congressional approval when it’s for the sake of national security. That line of argument, outlined by Commerce Secretary Wilbur Ross in a February report, says that America needs aluminum and steel to make weapons of war, and that protecting the domestic steel and aluminum industries is the only way to ensure the country will be able to defend itself if attacked.

That is pretty weak, as I (and others) have written before. But as long as Trump makes that claim — no matter how strained the logic might be — the law seems to be on his side. Invoke “national security” and the president can do what he wants with trade.

Except now Trump seems to have admitted that it’s not about national security at all. His tweet plainly states that “our Tariffs [sic] are in response to his of 270% on dairy!”

Chris Selley points out that up until this eruption, Canadian politicians were still carrying on as if nothing was really at stake (especially Conservative leader Andrew Scheer, who re-swore his allegiance to ultra-protectionist supply management at all costs, and damn actual free trade):

So utterly obsessed are Canadian politicians by the small differences between them that federal Conservative leader Andrew Scheer recently demanded Prime Minister Justin Trudeau explain what he meant when he suggested Canada might be “flexible” on the issue of supply management in the dairy industry, in the face of new demands from Washington. It’s preposterous: you can’t fit a processed cheese slice between the three major party’s total devotion to the dairy cartel.

Because, as we all know, what unites Canadians from coast-to-coast is our universally shared determination to pay significantly higher prices for dairy products, to ensure that Quebec farmers are not overly bothered by pesky competition from uppity foreigners who don’t even speak Joual…

June 5, 2018

QotD: Protectionism is a form of bullying

Filed under: Economics, Quotations — Tags: , , — Nicholas @ 01:00

Bullying and protectionism have a lot in common. They both use force (either directly or through the power of the law) to enrich someone else at your involuntary expense. If you’re forced to pay a $20-an-hour American for goods you could have bought from a $5-an-hour Mexican, you’re being extorted. When a free-trade agreement allows you to buy from the Mexican after all, rejoice in your liberation. To compensate your former exploiters is to succumb to Stockholm syndrome.

Steven Landsburg, The Big Questions, 2009.

June 4, 2018

The economic damage of tariffs

Filed under: Economics, History, Politics, USA — Tags: , , , , — Nicholas @ 05:00

Tim Worstall fisks a recent Pat Buchanan brain fart article on the glories of erecting tariff walls against foreign trade:

Pat Buchanan has been going on for decades about how wondrous tariffs are and if only they were brought back then things would be just peachy. Sadly, this all seems to be based on his not understanding trade, tariffs, nor apparently even history. That’s not a good set of recommendations for a policy about trade and tariffs, one that has been tried many a time in history.

Now, it is entirely true that if we returned to a more Hamiltonian policy era then we’d all be richer. But that wouldn’t be because we had tariffs which paid for government rather than an income or corporate tax. It’s because government would be confiscating a very much smaller portion of what we all produce to pay for itself. If the Feds took 3% of everything we do instead of the current 18% or so then sure, we’d all be richer. But that’s true however that tax is raised.

[…]

His argument is that, protected from foreign competition, American business was able to develop and grow into being world beaters. No, I don’t think this is true – I insist that behind tariff barriers companies stagnate. Indeed it’s standard economics that the medium to long term effects of trade are that the competition from foreigners is what makes the domestic companies stronger and more productive. But put that argument to one side. Assume that Buchanan is correct.

For his conclusion to be correct then it must have been true that the total costs of trade were rising in that time period. Total costs being tariffs plus transport. Only if the total costs were rising was protection rising. The tariffs are only part of the story. And as it happens total protection was falling over this time period. The falls in the costs of transport – for the US externally primarily the steam ship – were greater than the rises in the tariffs. Thus the US was becoming more open to trade at this time when industry was booming and growing to world class levels.

That’s not an argument in favour of trade protection now, is it?

    The U.S. relied on tariffs to convert from an agricultural economy in 1800 to the mightiest manufacturing power on earth by 1900.

Well, it’s also true that what the US was inside those tariff barriers was the largest free trade area in the world. I’m the guy insisting that free trade makes places grow, Pat the opposite. And the place with more free trade among more people than anywhere else grows fastest? That’s a point in my favour, no, not Pat’s? Remember, the US Constitution expressly forbids the individual states from having tariffs between them…..that regulation is left to the Feds who have never imposed them.

    How have EU nations run up endless trade surpluses with America? By imposing a value-added tax, or VAT, on imports from the U.S., while rebating the VAT on exports to the USA. Works just like a tariff.

No, a VAT does not work like a tariff. In no manner at all does it do so in fact. As every economist keeps trying to point out. Within the EU all goods and services, no matter where they’re made, pay the exact same rate of VAT. Well, OK, ladies unmentionables pay a lower rate than motor cars, that’s true, but all unmentionables pay the same rate, all cars. There is no difference made between domestic and foreign production. It’s entirely unlike a tariff therefore, the crucial component of which is that distinction made between home and foreign production.

Stuff made in the EU and sold in the US pays no VAT. Stuff made in the US and sold in the US pays no VAT. Again, we’ve no distinction by source or origin, this is entirely and completely unlike a tariff.

May 22, 2018

Feature History – Opium Wars

Filed under: Britain, China, History, India — Tags: , , — Nicholas @ 02:00

Feature History
Published on 19 Oct 2016

Welcome to Feature History, featuring the Opium Wars, western imperialism, and this fancy new intro and vignette.

The super sexy stuff like animation, voice, and script are all by the super sexy me.
The music is Anamalie and Clash Defiant, both by Kevin MacLeod
Twitter: https://twitter.com/Feature_History

May 11, 2018

QotD: Protectionism is by nature, zero-sum

Filed under: Economics, Quotations — Tags: , — Nicholas @ 01:00

A Protectionist is Someone Who… is so hopelessly – indeed, comically – confused about trade that he assumes that Americans who support free trade do so only out of a willingness to sacrifice the welfare of fellow Americans in order to improve the welfare of people in poorer countries. The protectionist does not grasp the fact that voluntary trade occurs only when each party to each trade believes that he or she will be made better off by the trade. The protectionist, unable to escape from the antediluvian superstition that trade is a zero-sum exercise, self-righteously – if ridiculously – accuses free-traders in rich countries of discounting or disregarding the economic well-being of their fellow citizens. The protectionist is an intellectual prisoner of his silly presumption that if people in poor countries gain from freer trade, people in the rich countries must thereby lose.

In short, a protectionist is someone who denies the reality of gains from trade.

Don Boudreaux, “A Protectionist is Someone Who…”, Café Hayek, 2018-04-09.

April 22, 2018

The balance-of-trade hobbyhorse

Filed under: Economics, Government, Media — Tags: , , , , — Nicholas @ 03:00

Don Boudreaux doesn’t have much sympathy with people who agonize over or — worse — set their national economic policies based on the balance of trade:

No concept in economics is responsible for more confusion and policy mischief than is the so-called “balance of trade.” The many fallacious beliefs about a trade deficit include the notion that –

– aggregate demand drains from each economy that runs a trade (or current-account) deficit, thus causing overall employment to fall in each country that runs a trade deficit;

– the GDP of a country that runs a trade deficit is lowered by that trade deficit;

– the denizens of a country that runs a trade deficit spend too much on consumption and save too little;

– a trade deficit is evidence of poor policy in any country that runs such a deficit;

– a country’s trade deficit would be ‘cured’ if only the people of that country were to save more or to buy fewer imports;

– a trade deficit in the home economy is evidence of ‘unfair’ trade practices by that country’s trading partners;

– a trade deficit means that each country that runs one is “losing,” and that to “win” at trade means running a trade surplus (or, at least, to not run a trade deficit);

– a trade deficit run by the home economy means that that economy’s trading partners who have trade surpluses are being enriched at the expense of the people in the home economy;

– a trade deficit necessarily makes the citizens of any country that runs one more indebted to foreigners;

– a trade deficit involves a net transfer of capital or asset ownership from citizens of each country that runs a trade deficit to citizens of countries that run trade surpluses;

– each dollar (or each yen, or each euro, or each peso, or each pound, or each you-name-the-currency) of a country’s trade deficit today means that the people of that country must sacrifice that much consumption sometime in the future;

– bilateral trade deficits have economic meaning and relevance;

– a trade deficit is something that should be “fixed” – that is, reduced or eliminated – through government policy, including especially through trade restrictions.

None of the above-listed beliefs about trade deficits is supportable. None. Not one. Not in the least. Each and every one of these beliefs is easily refuted with either basic economics or, in many cases, with simply a clarification of the definitions of terms and concepts used in national-income accounting. And yet these – and no doubt other – false beliefs about trade deficits (and about the so-called “balance-of-payments” generally) are widespread and spill daily from the mouths and keyboards of politicians, pundits, professors, and propagandists.

The belief that trade deficits cause economic problems in countries that run them – and that trade deficits necessarily reflect poor policies or profligacy by the people of those countries – is the economic equivalent of, say, the belief that the world is ruled by sorcerers who ride fire-breathing dragons and who marry their daughters off to centaurs. Both sets of beliefs are pure madness, yet one of them serves as the basis for real-world policies.

April 9, 2018

Portrait of a protectionist

Filed under: China, Economics, USA — Tags: , — Nicholas @ 03:00

The latest of a long-running series by Don Boudreaux, all entitled “A Protectionist is Someone Who…”:

… if he is among the many protectionists (such as Donald Trump or Peter Navarro) who, finding meaning in bilateral trade accounts, detects danger for country A if country A has a trade deficit with country B, should also find danger for each private producer that has a trade deficit with another private producer. That is, if this protectionist were consistent in his views, the same reasoning that leads him to worry about America’s trade deficit with China should also lead him to worry about, say, The Trump Organization, Inc.’s trade deficit with each of its many suppliers, including with each of any janitors that The Trump Organization, Inc. has on its payroll or otherwise contracts to hire. (After all, I’m quite certain that no janitor hired by The Trump Organization, Inc., buys as much from The Trump Organization, Inc., and The Trump Organization, Inc., buys from any janitor.)

So why does the allegedly genius businessman who is now president of the United States – and whose many fans believe him to “tell it like it is” – not judge his own private company by the same standards that he so confidently insists are appropriate for judging Americans’ trade with non-Americans? After all, if China’s trade surplus with America really is evidence either of Chinese chicanery or of the incompetence of American leaders (or both), then it must also be true that a Trump Organization janitor’s trade surplus with The Trump Organization, Inc. is evidence either of that janitor’s chicanery or of the incompetence of Trump Organization leaders (or both).

April 8, 2018

QotD: Just and unjust profits

Filed under: Business, Economics, Quotations — Tags: , , , — Nicholas @ 01:00

“Progressives’” hostility to free trade would be amusing were its consequences less baneful: deeply distrustful of the motives of business people, and convinced that profits are ethically suspect, Sandersnistas and many other “Progressives” are in the front lines of the troops who are intent on using trade restrictions to protect business people from competition and, thus, to enhance business people’s prospects of earning excess profits – profits that truly are ethically unjust because they are the fruits of the forced removal from consumers of choices on how they, consumers, may spend their own money. (Of course, the very same economically damaging and ethically unjust consequences spring from trade restrictions supported by Trumpkins and many other conservatives. The tales that each of these economically ignorant groups tell to each other to justify their mercantilist policies differ, but the policies and the harmful results are identical.)

Don Boudreaux, “Quotation of the Day…”, Café Hayek, 2016-07-30.

April 3, 2018

QotD: How to win a trade war

Filed under: Australia, Economics, Humour, Quotations — Tags: , — Nicholas @ 01:00

Spartacus has had enough. He has been taken advantage of for too many years and he has suffered trade deficits for far too long. Complaints to the regulators have fallen on deaf ears so now time has come to take the necessary action to put this to an end.

For far too long, Spartacus has run a significant trade deficit with Woolworths and Coles; not only for groceries but for petrol also.

Spartacus keeps buying things from Woolworths and Coles but they never buy anything from him. Those bastards even occasionally “dump” products in their stores meaning that Spartacus can buy groceries for less than he would normally. This is completely unsatisfactory.

Effective immediately, pursuant to SEO 1 (Spartacus Executive Order 1), Spartacus has declared a trade war on Woolworths and Coles. Hence forth, rather than buying quality and (relatively) well priced groceries from these trade cheaters, Spartacus will grow his own fruit, vegetables and meat. And rather than buying petrol, Spartacus will walk or otherwise ride his 2 wheeled chariot. Importantly also, when it comes to paper products, particularly of the toilet paper variety, well, the Fairfax papers will be used for their natural purpose.

Yes. Spartacus will have less leisure time, less disposable income and less grocery choice, but he will no longer have a trade deficit with Woolworths and Coles. This is a trade war Spartacus can win.

And if a sore “butt” comes to pass, what would be colonic damage. Sorry. Collateral damage.

“Spartacus”, “Spartacus’ Trade War”, Catallaxy Files, 2018-03-11.

March 20, 2018

QotD: “Trade-adjustment assistance”

Filed under: Business, Economics, Quotations — Tags: , — Nicholas @ 01:00

So-called “trade-adjustment assistance” sounds lovely, but this sound is deceptive. Such ‘assistance’ is a policy of socializing losses while keeping gains privatized – which means, therefore, that it is a policy that creates moral-hazard problems. More generally […] the economic and ethical case against trade-adjustment assistance is fraudulent because there is nothing unique about international trade in destroying particular jobs, businesses, and industries. Why should the worker who loses his job in the steel factory to increased imports of steel receive government assistance while the worker who loses her job in the aluminum factory to increased domestic production of carbon-fiber materials be denied such assistance? There is no good reason to treat the two cases differently.

Neither worker is entitled, economically or ethically, to any such ‘assistance.’

Of course, someone might argue that both of these workers should receive government assistance. Apart from such a policy intensifying moral-hazard problems (“Is your firm’s bankruptcy really due to changing patterns of economic activity rather than to your own incompetence as a business owner?”) – and also apart from the need to give such assistance now to the many people who will lose businesses and jobs because of the resulting increase in taxes that must be raised to pay all of this ‘assistance’ (Why should workers and businesses who suffer as a result of changes in government polices be treated differently than those who suffer as a result of changes in private economic activities?) – such a policy of assistance is premised on the false and economically calamitous assumption that the ultimate goal of economic activity is to ensure the well-being of existing producers rather than to satisfy as many consumer desires as possible. The serious pursuit of any such policy would grind the economy to a standstill, and all but the powerful elite into crushing poverty.

Don Boudreaux, “Quotation of the day…”, Café Hayek, 2016-07-14.

March 15, 2018

QotD: The self-harming reality of tariffs

Filed under: Business, Economics, Quotations, USA — Tags: , , , — Nicholas @ 01:00

Unintended harm to American companies is a recurring problem with tariffs, even those meant to protect American jobs from competition that our government deems unfair. After Bush imposed steel tariffs, steel-consuming industries pointed out that they employed far more Americans than the steel industry itself, and argued that the net effect of the policy on jobs was negative.

Anti-dumping laws, which put tariffs on foreign imports that are supposedly being sold at too low a price, usually target intermediate goods and therefore make the downstream American producers that use them less competitive. Daniel Ikenson, a trade-policy analyst at the Cato Institute, notes that the government, perversely, is forbidden by law from considering the impact of tariffs on these producers before levying the tariffs.

Then there’s the question of costs. Gary Hufbauer and Sean Lowry, a senior fellow and research associate, respectively, at the Peterson Institute for International Economics, calculated [PDF] that Obama’s tariffs on Chinese tires cost American consumers at least $900,000 for every job they saved for one year. That’s before taking account of job losses caused by lower spending by consumers on other products and by retaliatory Chinese tariffs. This very high cost per job, they point out, is consistent with research on other instances of trade protection.

In an interview, Hufbauer notes that our efforts to protect industries from competition have typically not resulted in their revival and impose extremely high costs for any jobs they save. He cites the textile and maritime industries, both of which have been protected for decades, as examples of these disappointing results.

Ramesh Ponnuru, “The High Cost of U.S. Protectionism”, Bloomberg View, 2016-07-01.

March 6, 2018

Winning a Trade War Isn’t “Easy”… It’s Impossible!

Filed under: Business, Economics, Politics, USA — Tags: , , , — Nicholas @ 04:00

Foundation for Economic Education
Published on 5 Mar 2018

Trump wants to impose tariffs on steel and aluminum? Bad idea. We’ve been down this road before. Trade wars are short-sighted and economically destructive.

Ever wondered what caused the Great Depression? Check out this free eBook (available in mobi, epub, PDF, and audiobook formats!) by Larry Reed, “Great Myths of the Great Depression:”

https://fee.org/resources/great-myths-of-the-great-depression/

March 5, 2018

QotD: Mercantilism

Filed under: Economics, Quotations — Tags: , , , — Nicholas @ 01:00

According to the mercantilist dogma held by nearly all politicians and pundits (and, yes, also by the People), the best possible outcome for any country – call it country A – whose government is negotiating a trade deal is the following: the government of A arranges for the maximum possible number of citizens of A to work the maximum possible number of hours producing goods and services of maximum possible value to be exported to the maximum possible number of foreigners whose governments agree to prevent those foreigners from ever sending in return to the people of country A even as much as a single wooden toothpick.

The optimal trade deal for country A – according to mercantilist dogma – is one that commits the people of A to work for foreigners without compensation. This optimal trade deal, in effect, turns the workers of country A into slaves for foreigners. (Such a deal would have country A workers paid, in real goods and services, absolutely nothing – which is a wage well below the minimum wage that many of the mercantilist leaders, in other contexts, support!)

According to mercantilist dogma, were the diplomats and ‘leaders’ of country A able to negotiate such an outcome, those diplomats and ‘leaders’ would be hailed has having secured a huge and unconditional trade victory of the sort that history has never before witnessed. Country A would be renowned worldwide as the greatest “winner” ever in matters of international trade.

According to mercantilist dogma, it is therefore unfortunate for the people of country A that the diplomats and ‘leaders’ of countries B through X are unwilling to grant such splendid terms to A. The diplomats and ‘leaders’ of countries B through X each would also like to secure such an ideal outcome, as described above, for their countries. But the necessity of compromise prevents any country from winning such an unalloyed and stupendous victory. The result of the compromise for all countries is an imperfect trade deal under which each country reluctantly agrees to receive valuable goods and services from foreigners as the price that must be paid for the privilege of sending domestically produced good and services to foreigners.

Don Boudreaux, “The Idiocy of Mercantilism”, Café Hayek, 2016-06-25.

February 8, 2018

QotD: Minimum prices for wine, a thought experiment

Filed under: Economics, Quotations, Wine — Tags: , , — Nicholas @ 01:00

Consider this hypothetical (which, given the poor quality of today’s punditry and publicly discussed economics, is not as far-fetched as it might at first seem): Ostensibly to help raise the incomes of hard-working vintners of low-quality wines – vintners many of whom have children to feed and sick parents to care for, and many of whom also are stuck in their jobs as owners of low-quality vineyards – Congress passes minimum-wine-price legislation: no wine may sell for any price less than $1.00 per fluid ounce. Roughly, that means that the minimum price of a standard-sized – 750ml – bottle of wine becomes $25.00. Armed officers of the state will use deadly force against anyone and everyone who insists on disobeying this diktat.

If proponents of the minimum wage are correct in their economics, then the only effect of this minimum-wine-price diktat will be distributional. Consumers – including retailers and restaurants buying from wholesalers – will continue to buy as much wine, and the same qualities of wine, that they bought before the diktat took effect. The only difference is that, with the diktat in place, owners of low-quality vineyards earn higher incomes, all of which are paid for by consumers who dip further into their own incomes and wealth to fund this transfer. Easy-peasy! Problem solved!

But who in their right mind would suppose that a minimum-wine-price diktat would play out in the manner described above? Who would not see that a wine buyer, obliged to pay at least $25 for a standard-size bottle of wine, will buy only higher-quality wines – wines that before the diktat took effect were fetching at least $25 per bottle (or some price close to that)? Many wine buyers who before the diktat were confronted with the choice of paying either $8.99 for a bottle of indifferent but drinkable chardonnay and $25.00 for a bottle of much more elegant and enjoyable chardonnay opted for the less-pricey bottles. They did so not because they prefer to drink chardonnay that is indifferent to chardonnay that is elegant – they in fact do not have this preference. Rather, they did so because the greater elegance of the pricier chardonnay was not to them worth its higher price. So the low-quality chardonnay found many willing buyers.

Don Boudreaux, “Quotation of the Day…”, Café Hayek, 2016-06-02.

February 6, 2018

QotD: The original goal of the minimum wage

Filed under: Economics, Government, History, Quotations, USA — Tags: , , — Nicholas @ 01:00

For progressives, a legal minimum wage had the useful property of sorting the unfit, who would lose their jobs, from the deserving workers, who would retain their jobs. Royal Meeker, a Princeton economist who served as Woodrow Wilson’s U.S. Commissioner of Labor, opposed a proposal to subsidize the wages of poor workers for this reason. Meeker preferred a wage floor because it would disemploy unfit workers and thereby enable their culling from the work force.

Thomas Leonard, “Eugenics and Economics in the Progressive Era”, Journal of Economic Perspectives, 2005-09.

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