Russell Roberts's Blog, page 1484

Ask the Protectionist

Protectionists are out in e-droves today!  My e-mail box is full of too many missives to reply to individually.  (I suspect that I should thank Ian Fletcher for bringing notice of my support for free trade to the attention of readers of the Huffington Post.  Judging from some – although certainly not all – of their e-mails, many of these persons seem never before to have encountered any arguments for free trade beyond [1] the mistaken one that free trade increases the overall number of jobs in the domestic economy, and [2] the nutty one that free trade is a policy pushed by oligarchs to enable multinational corporations to dominate the world and enslave the masses.)

Anyway, as these – what shall we call them? Huffers? – apparently come to the Cafe to find free-trade arguments that they enjoy attacking, I here offer a link to my April 25, 2009, column in the Pittsburgh Tribune-Review entitled "Ask the Protectionist."

There are other questions that I will likely will soon add to the list of questions for protectionists that I pose in that column.

Open Letter to an Anonymous E-Mail Correspondent

Mr. or Ms. Americafirst

Dear Sir or Madam:

You accuse me of "treason" to America.  My offense?  Encouraging Uncle Sam not to tax or to otherwise obstruct Americans who wish to trade with Chinese producers on terms that these Americans find attractive.

You argue that "China is a communist dictatorship and so is advantaged by its subsidies and slave labor to out-compete democracies to steal world markets.  American businesses and workers can not compete against this."

So you apparently believe that communism – or, at least, dictatorship – is a form of economic organization superior to capitalism.  I have some questions for you.

Why has China's share of global export markets increased only after that country's liberalization began in the late 1970s?  Because Mao was far more communist and dictatorial than was Deng and his successors, shouldn't China under Mao have been an even more potent global economic juggernaut than is China today?

Why are Cuba and North Korea not gobbling up world markets, "stealing" American jobs, and "threatening America's very survival"?

Why is Hong Kong – which has a robust free-market economy, and still uses its own currency – continuing to grow?

Finally, you somewhat inconsistently list "high taxes" and "cumbersome regulations" as causes of America's alleged inability to compete against the Chinese.  But is not slavery (which you – wrongly – allege to exist in China) a huge tax upon workers, discouraging them from producing efficiently?  Is not communism itself a high tax on productive individual efforts – on the efforts of entrepreneurs, managers, and workers – as well as an unmatched font of "cumbersome regulations"?

In short, why do you presume that China's economic success springs from its remaining vestiges of communism rather than from its increasing economic liberalization?  And why do you presume that taxes and regulations that weaken America's economy strengthen China's economy?

Sincerely,

Donald J. Boudreaux

Open Letter to an Anonymous E-Mail Correspondet

Mr. or Ms. Americafirst

Dear Sir or Madam:

You accuse me of "treason" to America.  My offense?  Encouraging Uncle Sam not to tax or to otherwise obstruct Americans who wish to trade with Chinese producers on terms that these Americans find attractive.

You argue that "China is a communist dictatorship and so is advantaged by its subsidies and slave labor to out-compete democracies to steal world markets.  American businesses and workers can not compete against this."

So you apparently believe that communism – or, at least, dictatorship – is a form of economic organization superior to capitalism.  I have some questions for you.

Why has China's share of global export markets increased only after that country's liberalization began in the late 1970s?  Because Mao was far more communist and dictatorial than was Deng and his successors, shouldn't China under Mao have been an even more potent global economic juggernaut than is China today?

Why are Cuba and North Korea not gobbling up world markets, "stealing" American jobs, and "threatening America's very survival"?

Why is Hong Kong – which has a robust free-market economy, and still uses its own currency – continuing to grow?

Finally, you somewhat inconsistently list "high taxes" and "cumbersome regulations" as causes of America's alleged inability to compete against the Chinese.  But is not slavery (which you – wrongly – allege to exist in China) a huge tax upon workers, discouraging them from producing efficiently?  Is not communism itself a high tax on productive individual efforts – on the efforts of entrepreneurs, managers, and workers – as well as an unmatched font of "cumbersome regulations"?

In short, why do you presume that China's economic success springs from its remaining vestiges of communism rather than from its increasing economic liberalization?  And why do you presume that taxes and regulations that weaken America's economy strengthen China's economy?

Sincerely,

Donald J. Boudreaux

Some "No"s and "Yes"es of Health-Care

Here's a letter to the New York Times:

Objecting to efforts by 'the party of No' to repeal Obamacare, you ask "What Comes After No?" (Jan. 25).

I have no idea how GOP politicians will answer your question.  But I have a good idea of how they should answer it.  They should say to the American people, "Yes, each of you is responsible for your own health-care.  Yes, each of you has different circumstances, preferences, and tolerances for risk that are inevitably ignored by government intrusion into health-care markets.

"Yes, we understand that each of you would like to get all of your health-care for free, but reality won't cooperate; someone must pay for it.  So, yes, we understand that a policy of forcing A to pay for B's health care and forcing B to pay for A's – while it might fool A and B into thinking that their health-care is free – only encourages both A and B to overspend on health-care.  Yes, one result is unnecessarily high health-care costs.

"Yes, we understand that any collectivized system of health-care provision and financing unavoidably involves government bureaucrats allocating many health-care dollars according to their whims, according to the social status of patients, or according to some arbitrary criteria that satisfies no one.

"Most importantly, yes, the government will step aside to let each of you make your own choices, and to let entrepreneurs experiment creatively and competitively with different ways of supplying and financing health-care.

"No, the result won't be unlimited health-care for anyone.  But, yes, it will be more, better, and less costly health-care for everyone.  Oh – and, yes, America will also be a freer society."

Sincerely,

Donald J. Boudreaux

Dr. Krugman Would Understand What Mr. Krugman Doesn't

Here's a letter to the New York Times:

Paul Krugman claims that "we'd have more jobs if we exported more and imported less" ("The Competition Myth," Jan. 24).

Mr. Krugman forgets that the more we import the more we either export or receive as investments from foreigners: foreigners don't ship valuable imports to us in exchange for dollars because these foreigners wish to horde tiny monochrome portraits of dead American statesmen.

And consider that the Bureau of Economic Analysis reports that 55.2 percent of U.S. imports in 2010 were either industrial supplies or capital goods [HT Mark Perry].  That is, well over half of U.S. imports last year were inputs used to produce American-made outputs.  Put differently, 55.2 percent of American imports in 2010 were used by American workers to produce American outputs.

Clearly, it's too simplistic to assert that reducing imports would create more jobs in America.

Sincerely,

Donald J. Boudreaux

Fortunately Familiar with Higgs's Work

Here's Bob Higgs – always worth reading.  A key 'graf:

Misunderstanding the Great Depression has caused much mischief in modern macroeconomics and, more important, in government fiscal and monetary policies based on or influenced by this faulty understanding. If we are ever to arrive at a sound understanding of the Depression, we will have to persuade the economics profession to take Austrian economics seriously, as most economists did before the publication of Keynes's magnum opus in 1936. Keynesianism in particular has proven itself to be a fundamentally flawed mode of analysis, yet one that has survived, evolved, and – like the zombies in the film "Night of the Living Dead" – keeps coming back, no matter how many times anti-Keynesians credit themselves with having dealt it a fatal blow. Monetarist, New Classical, and other recent critiques have themselves been inadequate or indefensible in various ways, as well.

Transferring Jobs

Usually sure-footed, Washington Post columnist Robert Samuelson stumbles when it comes to U.S. trade with China.  In today's column – "China's new world order demands stronger U.S. response" – he writes that Beijing's policy of subsidizing exporters harms America because it "transfers American jobs" to China.

While these subsidies undoubtedly harm the Chinese people, they no more harm Americans than would the invention of a dirt-cheap miracle pill that cures all ailments in everyone under the age of 90.

The invention of such a pill, of course, would 'harm' health-care workers.  And it would "transfer jobs" in the same way that subsidized products from China "transfer jobs" – namely, to other productive uses in America.  By enabling people worldwide to satisfy all health-care needs using almost no labor, this pill would release American workers from health-care industries, making them available to produce other goods and services that would otherwise be too costly to produce.

Subsidized Chinese exports have exactly the same effect in America as would the invention of this pill.

Unless Samuelson believes that the invention of such a pill would harm Americans over the long run, he should quit worrying that Americans are harmed by Chinese export subsidies.

Protectionism truly is dopey strange.

Is Libertarianism Anti-American?

The always-eloquent Scott Lincicome defends libertarianism against Ian Fletcher's misconstrual of it.

Fazzari on Keynesian stimulus

The latest EconTalk is a conversation with Steve Fazzari on the economics of government spending to improve the economy. We talk about the intuition of the Keynesian argument on behalf of government spending and whether it's possible to evaluate whether it made things better or worse.

Perry Edits Fletcher Again

Mark Perry again edits Ian Fletcher to good effect ….  an editing achievement that reminds me – again my vanity – of a post that I had back in July 2007 on Dani Rodrik's unreasonable call for more 'reasonableness' in discussions of trade policy.