What to Expect When You’re Free Trading

New York Times ^ | January 16, 2008 | STEVEN E. LANDSBURG

[LowCountryJoe]

Rochester

IN the days before Tuesday’s Republican presidential primary in Michigan, Mitt Romney and John McCain battled over what the government owes to workers who lose their jobs because of the foreign competition unleashed by free trade. Their rhetoric differed — Mr. Romney said he would “fight for every single job,” while Mr. McCain said some jobs “are not coming back” — but their proposed policies were remarkably similar: educate and retrain the workers for new jobs.

All economists know that when American jobs are outsourced, Americans as a group are net winners. What we lose through lower wages is more than offset by what we gain through lower prices. In other words, the winners can more than afford to compensate the losers. Does that mean they ought to? Does it create a moral mandate for the taxpayer-subsidized retraining programs proposed by Mr. McCain and Mr. Romney?

Um, no. Even if you’ve just lost your job, there’s something fundamentally churlish about blaming the very phenomenon that’s elevated you above the subsistence level since the day you were born. If the world owes you compensation for enduring the downside of trade, what do you owe the world for enjoying the upside?

[Snip]

One way to think about that is to ask what your moral instincts tell you in analogous situations. Suppose, after years of buying shampoo at your local pharmacy, you discover you can order the same shampoo for less money on the Web. Do you have an obligation to compensate your pharmacist? If you move to a cheaper apartment, should you compensate your landlord? When you eat at McDonald’s, should you compensate the owners of the diner next door? Public policy should not be designed to advance moral instincts that we all reject every day of our lives.

[Toddsterpatriot]

In order to show that the money comes back, it will have to show how it comes back.

No problem

Summary National Income and Product Accounts

Look at Account 5 and Account 7

The answer is simple, if there is not equal exports to imports, the money does not come back.

The money does come back. That's why we have a capital account surplus. That money comes back. As capital.

You agreed this was record keeping and somehow you translate that someone who puts numbers down on paper and creates a report equals money coming back into our economy and you do not, or can not explain how.

No, the numbers on paper document the money coming back.

[1rudeboy]

It is not probable that Tahiti and Hawaii entered into a voluntary agreement to resolve trade disputes by establishing panels of experts chosen by both sides, yes. You’ll have to speak to a cultural anthropologist to determine just when exactly the concept of alternative dispute resolution occurred to humans.

[Louis Foxwell]

So you think we should pay those that risk more less money and those that risk less more money?

Where did I say that?? The greater the risk the greater the benefit (or loss) is closer to my philosophy. Pyramids and ponzi schemes are very different. Pyramids are not illegal. For that matter not all ponzi schemes are illegal. Social Security is a ponzi scheme.

[scarface367]

That is what every country on the face of the earth wants. The only problem in this country is that too many people think there is something good about spending more than they are earning.

You really have never actually spent the time to study economics, have you?

Your basis that having a large quantity of exports and little to no imports was one of the foundations of the mercantilist system, which was disproved over two hundred years ago by early economists Adam Smith and David Ricardo.

Simply put, a nation that exports everything and imports little is giving away its production and receiving little to nothing in return. Money itself is a medium of exchange, its value comes from what it is able to be traded for. Having large piles of money would do a country no good whatsoever if the quantity of goods that the money can buy is limited, as such a system would entail.

Why is it that countries that have gone protectionist (large export base, minimum imports) have invariably been miserable failures? India during the mid-20th Century is a prime example of this.

[scarface367]

With that wash comes self sufficiency and with self sufficiency comes a position of strength with which to bargain for our way of life in the world.

Are you self sufficient? If not, why not?

[William Terrell]

Really? Is this more "pulled out of your ass" silliness or can you actually back this up?

Have you really never heard of the techniques of monopoly? They have been illegal in this country for a long time now, but not on the international scene.

A new company moves into an area of product distribution with a cut rate price. Everybody buys from them, running the other companies the distribute that product out of business. When the new company has no more competition, it raises the price to the breaking point.

When this is done with a product necessary to the survival of human beings, it is called a "hydraulic empire".

Once we buy cheap foreign over enough time to lose the manufacturing infrastructure and know-how to produce that product, we are in danger of succumbing to that monopoly or "hydraulic empire".

Silliness? I think not.

A nation that produces what we consume doesn't have to be one company; it merely has to be ruled by those willing to close the monopoly.

More "trade is bad" nonsense.

Why the straw man? Trade is not bad. Becoming dependent on foreign production of necessities is bad.

[William Terrell]

I have worked in both those industries on the data processing end, and I do now on the sewing and fabric purchasing end.

You are wrong.

[1rudeboy]

Prove it.

[scarface367]

A new company moves into an area of product distribution with a cut rate price. Everybody buys from them, running the other companies the distribute that product out of business. When the new company has no more competition, it raises the price to the breaking point.

Once again, where is this monopoly? What is the company's name?

[William Terrell]

Do you deny that large and multinational corporations can afford, and do, lobby lawmakers to craft legislation friendly and enriching to those corporations' interests?

Do you deny that one of, if not the greatest, interest is to produce products with the cheapest labor possible, even if that results in a screwjob of the people in the very country that incorporated it as a limited liability privilege, the balance of the "limited liability" part born by those people?

[William Terrell]

Regardless, what has worked over the centuries has been domestic production and domestic trade of necessities, especially tools of defense. International trade in the way it is being done now, and called "free trade" is novel, experimental and thereby dangerous. The former is conservative by definition and the latter is liberal or "progressive" by definition.

[Toddsterpatriot]

A new company moves into an area of product distribution with a cut rate price.

A distribution monopoly? Like WalMart is a distributor? Or a manufacturing monopoly?

When the new company has no more competition, it raises the price to the breaking point.

Sounds easy. You must have hundreds of examples where that happened.

[scarface367]

Regardless, what has worked over the centuries has been domestic production and domestic trade of necessities, especially tools of defense. International trade in the way it is being done now, and called "free trade" is novel, experimental and thereby dangerous. The former is conservative by definition and the latter is liberal or "progressive" by definition.

Really? So the legion of conservative economists that support free trade are actually liberals?

[1rudeboy]

Are you familiar with a logical fallacy termed, “affirming the antecedent?”

[1rudeboy]

So easy, in fact that everyone's done it already (presumably).

I get the notion of sacrificing profit for market share, but I am aware of no game-theorist that argues it's a dominant strategy. In fact (never having attended business school), I'd imagine that people specifically teach otherwise using famous examples.

[Toddsterpatriot]

I get the notion of sacrificing profit for market share, but I am aware of no game-theorist that argues it's a dominant strategy.

The problem comes when you take that dominant (100%, LOL!) market share and artificially raise (LOL!) prices. The competition returns. Except for the hundreds of examples I'm sure our friend is compiling for us now.

[1rudeboy]

I think he's driving at the situations where a foreign government subsidizes a particular industry in order to give it an advantage over its domestic counterpart.

We could set up a mechanism to resolve the disputes that arise . . . uh, wait a minute.

[LowCountryJoe]

And that's why real wealth and GDP have gone up. It's also why there are more jobs now than ever. It's also why our standards of living keeps going up. It's also why unemployment remain historically low. All this for the reason you cite.

By the way, I pinged you to a post of mine on another thread and I'm curious as to why you never bothered to answer those questions, instead replying on this thread. were those questions too difficult for you? Did they go over your head?

[LowCountryJoe]

How can we become wealthier through trade when more and more dollars are leaving our economy and going to other economies? Your statement would add up if we had a balance of trade. We don’t. We are not becoming wealthier, we are becoming poorer. You do not get wealthier by reducing the amount of money you have to invest. You get wealthier by increasing the amount of money you have to invest.

You do not know the subject matter on the topic you are bringing up. Read this and get back with me. But only after you answer the other post that I pinged you to because I'd like to discuss those questions (and why you ducked them so far), too.

[LowCountryJoe]

You conveniently responded that the person you were referring to must be for regulations and taxes in this country, because they talked about no regulation in China. Did it ever occur to you that they were referring to the problem being caused by our regulations and taxes, not the lack of in China?

Did it ever occur to you that the person I answered may actually support our regulations and taxes and wanted the other governments' regulation and taxes to mirror our before they would consider trade a good thing amongst the individuals who engage in trade? The willingness to not address their disdain for our regulations and our taxation, first, was telling...that person went straight after the economic liberty as a bad thing first (granted, it wasn't that blatant but it was there!)

Oh, and now I know you were on that thread...TIME FOR SOME ANSWERS!!!