Deep Silliness: Half-Right vs Trump-Wrong

Economist Robert Shiller accurately describes why Trump tariffs are wrong, Then Shiller dives into deep silliness.

According to a Washington Post/Schar School poll of Americans published on July 11, only 39% of respondents approved of US President Donald Trump’s imposition of tariffs on foreign countries, while 56% were opposed. But, while it’s good news that a majority of Americans oppose their president on this key issue, Trump is plunging ahead, apparently thinking the public will like the tariffs better when they are in place.

It is a puzzle why even 39% support these policies. Ever since the Great Depression and World War II, and the 1947 General Agreement on Tariffs and Trade, the United States – both its government and its people – has been squarely in support of free trade.

In his 1776 book The Wealth of Nations, Adam Smith provided an eloquent and convincing argument for free trade, instead of trade distorted by tariffs. With free trade, the economy prospers because goods and services are sourced from the countries that are most productive in creating them.

Shiller should have stopped right there. That is all one needs to know. Instead, Shilled dove straight into government intervention of another kind.

Free Stuff

The problem today is that, with increased globalization an apparently permanent new condition, and with inequality within countries widening, people tend to feel that their long-term economic situation is getting riskier. We need to find a way to insure people against the risks of the global market without in any way demeaning them.

Fortunately, there is abundant precedent for in-kind government redistribution that does not seem like charity for society’s losers. When the government spends tax money on universal public education and health care, it does not strike many as redistribution, because the services are offered to everyone, and accepting them appears more patriotic than abject. As long as most people use the government schools and doctors, redistribution does not look like charity.

Another solution is to have the government encourage private livelihood insurance by subsidizing it to help cover the cost of jobs lost because of foreign trade.

Half-Right

Trump’s trade war is an international tragedy. But it could have a happy ending if it eventually reminds us of the risks that free trade imposes on people, and if we improve our insurance mechanisms to help them.

Yes, Trump's trade war is an international tragedy. The second sentence is ridiculous.

Deep Silliness

One who accepts Adam Smith ought not be proposing government solutions and free stuff as the solution.

Good Grief!

The price of medical care and college education are both through the roof for one reason and one reason only: government intervention in the free market.

Mike "Mish" Shedlock

Comments
Pater_Tenebrarum
Pater_Tenebrarum

Those who praise socialistic health care systems based on (suspicious) aggregate statistics often tend to overlook this. The horrible waiting times are ubiquitous in these systems, and the frequency of botched procedures is probably very high. Also, a truly insane number of unnecessary procedures is undertaken in order to milk the system, which ties up scarce resources and keeps them from being allocated to more urgent tasks.

Pater_Tenebrarum
Pater_Tenebrarum

The opposite may also be true. If the State were to abolish the market economy worldwide (such as was attempted in the Soviet Bloc of yore), economic calculation would become impossible and the division of labor would quickly fall apart. We would rapidly revert to a hand-in-mouth existence of scattered groups engaged in subsistence farming and hunting and gathering - which in turn would destroy central control by the State and lead to its downfall as well.

Pater_Tenebrarum
Pater_Tenebrarum

This may well be true - I agree we should wait and see what his real goals are before going overboard with criticism aimed at him; it should be understood by now that he employs negotiation tactics that often mask his true intentions. But that doesn't mean that this is not a good opportunity to discuss the merits of free trade. If not now, when?

Pater_Tenebrarum
Pater_Tenebrarum

Trade does not need to be "fair", it only needs to be free. It is erroneous to believe that a trade deficit is somehow a disadvantage. Countries that pursue mercantilistic policies to "protect" their domestic industries only harm their own economies and impoverish their own consumers. Even if one drops all tariffs unilaterally, one will come out ahead, as investment from all over the world will eagerly flow in, one's consumers will be getting the best deals on everything and one's industries will be among the most competitive in the world. All of this is endangered by introducing tariffs in a vain attempt to allegedly make trade more "fair". As an example, Hong Kong is right at the top of the list of the countries with the highest economic output per capita. It has no tariffs, regardless of the policies of other countries. According to protectionists, it should be impoverished, but the exact opposite is true. The US also has quite high per capita GDP - and the main reason for this is that the US itself is a giant free trade area. No-one cares whether there is a trade deficit between Los Angeles and New York or between Illinois and Nebraska - and rightly so, because there is simply nothing about it that is "bad" - despite the fact that many US states and municipalities have large differences in regulations and taxation levels. The same economic laws governing both absolute and comparative advantage that enrich the huge free trade area known as the United States do not magically disappear on account of national borders. They are universally and time-independently valid. Read Bastiat's monograph "That Which is Seen and That Which is Not Seen" - it is available for free on the internet (e.g. here: http://bastiat.org/en/twisatwins.html ). It very elegantly explains by way of simple examples why free trade is always advantageous and why those who impose tariffs only shoot themselves into the foot (trade in particular is discussed in section 7 on Restrictions, but the monograph is quite short, so I would recommend reading it in its entirety).

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