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As a response to several people stating that free trade is better for everyone. I've taken economics courses, I understand how free trade is better overall. Ho

by lovich 9y ago

As a response to several people stating that free trade is better for everyone. I've taken economics courses, I understand how free trade is better overall. However, those calculations only work when both sides follow the same rules. Once you have different groups of people with different values, whether it's the EU valuing privacy, China valuing domestic production, or the US valuing intellectual property, absloute free trade seems to break down. You can't freely trade if you're using different units

Faark 9y ago
Isn't it still free trade having to comply with local regulation? As long as those regulations treats foreign companies/products the same as local ones, of cause. Import taxes or valuing domestic production/owners are not, but i don't see a problem with requiring food not to contain toxic stuff, no matter what country it comes from.
barry-cotter 9y ago
That’s not true and if you can believe that after taking several economics courses it speaks poorly of your teachers. The main benefits of free trade are in specialisation. People specialise in what they’re good in and trade for other goods and services. Specialisation leads to greater efficiency, meaning you can do the same with less, or more with the same amount. Notice the complete lack of the words domestic production or intellectual property. The case for free trade is that in the long run specialisation makes us richer. Units have nothing to do with it. Metric or imperial, services and goods are what they are.
- cgag 9y ago
  I notice that domestic production seems to be implicitly valued at zero which seems likely to be wrong to me.
  - barry-cotter 9y ago
    The case for free trade does not care about borders. It cares about consumption, which there will be more of if things can be produced most efficiently. Things can be produced most efficiently with maximum specialisation, which is likeliest with free trade. Domestic production can be consumed more easily than foreign production so it is more valued because transport costs are lower. The border between San Francisco is as relevant as that between California and Nevada, or the US and Mexico. There are certainly things where it’s good to have domestic production, vaccines for one. But the argument is grossly overused. The wool of angora goats is protected in the US as of military value. Trading for what you need has worked out well for plenty of countries. Switzerland, Luxembourg, Costa Rica, Bahrain, Singapore, Hong Kong, my native Ireland. Domestic production is overrated.
    - andosa 9y ago
      Overrating domestic value creation is how you end up being a third world country. I think you are oversimplifying free market dynamics. Free market doesn't magically create optimal results for consumers (see monopolies and the resulting lack of competition and suboptimal results for consumers as one example). Similarly it doesn't magically create optimal results for maximising the well being of a country.
    - TheAdamAndChe 9y ago
      > It cares about consumption, which there will be more of if things can be produced most efficiently. This is part of the problem. Production doesn't occur in a vacuum, and the most efficient methods of production are often either terrible for the workers, terrible for the environment, or terrible for society. Pure, unfettered globalization would be ideal if the goal was production and wealth generation maximization because it maximizes the labor pool and capital allocation efficiency, but those shouldn't be the only things that governments and economists worry about.
      - barry-cotter 9y ago
        If you look at where most of the world’s wealth is produced and how your worries may be allayed. The US and the EU are almost half of the world economy by themselves. Add Canada and Japanand you’re comfortably above half. If there are problems caused by economic growth the products of said growth can buy solutions to them. https://en.m.wikipedia.org/wiki/Kuznets_curve#Environmental_Kuznets_curve https://en.m.wikipedia.org/wiki/Kuznets_curve#Environmental_...
- asdfaoeu 9y ago
  He is admitting those benefits. His point is that with different tax rates and regulations the market is distorted and if anything imposing tariffs / revenue taxes is just equalising the market. I don't think he's talking literally about units.
  - barry-cotter 9y ago
    If other people do stupid things you don’t have to do stupid things too. Market distortions, different tax rates and regulations do not change how returns to specialisation and gains from trade work. Anti-dumping tariffs are stupid because it not notnto your benefit to punish people for giving you cheap stuff that should be expensive. Being able to have different tax rates is part of the power to tax, which is part of being sovereign. Equalising the market is a fool’s game. The market is what it is. If you want to help some people or groups by all means do it, but tariffs are a very inefficient way to do it. Transfer payments ftw!
    - danbruc 9y ago
      Anti-dumping tariffs are stupid because it not notnto your benefit to punish people for giving you cheap stuff that should be expensive. That is only true in a very simplistic model. If a country sells for example cheap subsidized steel you may lose your steel production capability because you are not able to compete with that price. But once you lost that capability it may become prohibitively expensive to regain it because the initial costs to rebuild the knowledge and infrastructure is going to be much higher than the marginal costs for an established industry and you would have to accept, at least to some extend, which ever price they ask for. The other country may also be able to offer a lower price due to externalities, for example exploitation of their workers or environmental destruction, and you may want to compensate for that.
      - barry-cotter 9y ago
        If you’re not able to compete with a price that’s the market saying you’d be better off doing something else with those resources. If you suspect that the price is due to subsidy, great, free money. If you want to maintain domestic production capacity subsidise it. If you want to reduce startup costs pay to mothball a plant. If you want to maintain expertise subsidise the salaries of citizens who go abroad to learn about or work in those industries. As far as externalities go you certainly have a point but if you feel you have a right to tell other people and countries what to do, go ahead. I don’t think there’s any reason to stop anywhere between sovereignty and colonialism. Those positions are coherent, the ones in between aren’t.
wallace_f 9y ago
Also an education in econ. Unfortunately with econ, our tools are maths, stats, logic and reasoning. We can almost never do actual experiments, which is fundamentally necessary for science. In my opinion, an unpopular but correct description of the state of economics is that the best economists are the ones who are able to make the arguments which others value the most.
- bulatb 9y ago
  Goodhart's law in action.
marcosdumay 9y ago
The more diverse are the people trading, the better trade works for improving everybody's life. Where it fails is when there are market failures. Like when you have a naturally the winner takes all dynamic, asymmetric information, and some shady government intervention. And, of course, the communications market is full of all of those.
whb07 9y ago
No it never breaks down. Milton Friedman commented some 30 years back to the typical "we should have higher tariffs on steel, because its unfair that the japanese are subsidizing their exports". His response? "Well that benefits the American consumer tremendously... we are sending them pieces of paper(dollar) and we are getting hard goods in return at a significant discount". If you think in in the absolute terms, wouldn't you want to trade a silly paper for steeel/cars/whatever? Also, where does the Chinese go with these dollars? Definitely not the Chinese store, they take Yuan. How about Japan? Nope, they take Yen. So...who takes dollars? At some point they have to come back and spend it either directly(investing/purchasing american goods) or indirectly(trading dollars -> random currency) which then leads the other party holding dollars to go out and buy American goods.
- dahdum 9y ago
  It breaks down when near monopoly is established, which is often the goal of these government subsidization programs. Whether that is acceptable depends on your opinion on global interdependence and national security. If the USA is dependent on Chinese and Russian steel to survive, it’s that much harder to defend against provocation. See EU and Russian gas for a great example.
  - whb07 9y ago
    ooh way late response! That is actually the opposite. Friedman also addressed that point. The case you are presenting is essentially "we shouldn't rely on foreign XYZ too much, we should have our own manufacturing". Well sure we should have our own if its able to compete freely. But its never been the case that if we go to war with China, the Japanese/India/whomever couldn't start producing more steel and selling it to us. Sure it might be slightly more expensive but it wouldn't paint the picture that you are proposing. If anything MORE producers of steel would pop up willing to sell at a higher price. Crazy theres this thing called supply/demand. As for the EU/Russian gas example, Russia isn't the biggest producer of gas in the world. According to wiki[0] its the U.S, there are other non-Russian actors in the top 10 list who I'm sure would be willing to provide gas at a higher price. As to why you mentioned EU/Russia is that Russia so happens to have a nice giant pipeline ready to provide gas into the EU. Well...last I checked there were millions of barrels of oil being shipped globally by ship. Would you have to pay a bit more for energy ? Sure. Is national security critically dependent on Russia ? No, because I guarantee you if Germany started paying $200/barrel of oil(or natural gas/whatever) all the oil ships around the world would reorient themselves to deliver to Germany. Crazy world called supply/demand. You now have near infinite suppliers. [0]https://en.wikipedia.org/wiki/List_of_countries_by_natural_gas_production https://en.wikipedia.org/wiki/List_of_countries_by_natural_g...
tracker1 9y ago
Exactly... I'm in favor of free trade, but only when it's reciprocal. I'm also in favor of breaking down regional locks or limits in sales... if you as a company are allowed to produce in a cheaper country, then I should be able to buy/import at the price you sell in those countries.

by lovich 9y ago

Faark 9y ago

Isn't it still free trade having to comply with local regulation? As long as those regulations treats foreign companies/products the same as local ones, of cause. Import taxes or valuing domestic production/owners are not, but i don't see a problem with requiring food not to contain toxic stuff, no matter what country it comes from.

barry-cotter 9y ago

That’s not true and if you can believe that after taking several economics courses it speaks poorly of your teachers. The main benefits of free trade are in specialisation. People specialise in what they’re good in and trade for other goods and services. Specialisation leads to greater efficiency, meaning you can do the same with less, or more with the same amount. Notice the complete lack of the words domestic production or intellectual property. The case for free trade is that in the long run specialisation makes us richer. Units have nothing to do with it. Metric or imperial, services and goods are what they are.

cgag 9y ago
I notice that domestic production seems to be implicitly valued at zero which seems likely to be wrong to me.
- barry-cotter 9y ago
  The case for free trade does not care about borders. It cares about consumption, which there will be more of if things can be produced most efficiently. Things can be produced most efficiently with maximum specialisation, which is likeliest with free trade. Domestic production can be consumed more easily than foreign production so it is more valued because transport costs are lower. The border between San Francisco is as relevant as that between California and Nevada, or the US and Mexico. There are certainly things where it’s good to have domestic production, vaccines for one. But the argument is grossly overused. The wool of angora goats is protected in the US as of military value. Trading for what you need has worked out well for plenty of countries. Switzerland, Luxembourg, Costa Rica, Bahrain, Singapore, Hong Kong, my native Ireland. Domestic production is overrated.
  - andosa 9y ago
    Overrating domestic value creation is how you end up being a third world country. I think you are oversimplifying free market dynamics. Free market doesn't magically create optimal results for consumers (see monopolies and the resulting lack of competition and suboptimal results for consumers as one example). Similarly it doesn't magically create optimal results for maximising the well being of a country.
  - TheAdamAndChe 9y ago
    > It cares about consumption, which there will be more of if things can be produced most efficiently. This is part of the problem. Production doesn't occur in a vacuum, and the most efficient methods of production are often either terrible for the workers, terrible for the environment, or terrible for society. Pure, unfettered globalization would be ideal if the goal was production and wealth generation maximization because it maximizes the labor pool and capital allocation efficiency, but those shouldn't be the only things that governments and economists worry about.
    - barry-cotter 9y ago
      If you look at where most of the world’s wealth is produced and how your worries may be allayed. The US and the EU are almost half of the world economy by themselves. Add Canada and Japanand you’re comfortably above half. If there are problems caused by economic growth the products of said growth can buy solutions to them. https://en.m.wikipedia.org/wiki/Kuznets_curve#Environmental_Kuznets_curve https://en.m.wikipedia.org/wiki/Kuznets_curve#Environmental_...
asdfaoeu 9y ago
He is admitting those benefits. His point is that with different tax rates and regulations the market is distorted and if anything imposing tariffs / revenue taxes is just equalising the market. I don't think he's talking literally about units.
- barry-cotter 9y ago
  If other people do stupid things you don’t have to do stupid things too. Market distortions, different tax rates and regulations do not change how returns to specialisation and gains from trade work. Anti-dumping tariffs are stupid because it not notnto your benefit to punish people for giving you cheap stuff that should be expensive. Being able to have different tax rates is part of the power to tax, which is part of being sovereign. Equalising the market is a fool’s game. The market is what it is. If you want to help some people or groups by all means do it, but tariffs are a very inefficient way to do it. Transfer payments ftw!
  - danbruc 9y ago
    Anti-dumping tariffs are stupid because it not notnto your benefit to punish people for giving you cheap stuff that should be expensive. That is only true in a very simplistic model. If a country sells for example cheap subsidized steel you may lose your steel production capability because you are not able to compete with that price. But once you lost that capability it may become prohibitively expensive to regain it because the initial costs to rebuild the knowledge and infrastructure is going to be much higher than the marginal costs for an established industry and you would have to accept, at least to some extend, which ever price they ask for. The other country may also be able to offer a lower price due to externalities, for example exploitation of their workers or environmental destruction, and you may want to compensate for that.
    - barry-cotter 9y ago
      If you’re not able to compete with a price that’s the market saying you’d be better off doing something else with those resources. If you suspect that the price is due to subsidy, great, free money. If you want to maintain domestic production capacity subsidise it. If you want to reduce startup costs pay to mothball a plant. If you want to maintain expertise subsidise the salaries of citizens who go abroad to learn about or work in those industries. As far as externalities go you certainly have a point but if you feel you have a right to tell other people and countries what to do, go ahead. I don’t think there’s any reason to stop anywhere between sovereignty and colonialism. Those positions are coherent, the ones in between aren’t.

wallace_f 9y ago

Also an education in econ. Unfortunately with econ, our tools are maths, stats, logic and reasoning. We can almost never do actual experiments, which is fundamentally necessary for science. In my opinion, an unpopular but correct description of the state of economics is that the best economists are the ones who are able to make the arguments which others value the most.

bulatb 9y ago
Goodhart's law in action.

marcosdumay 9y ago

The more diverse are the people trading, the better trade works for improving everybody's life. Where it fails is when there are market failures. Like when you have a naturally the winner takes all dynamic, asymmetric information, and some shady government intervention. And, of course, the communications market is full of all of those.

whb07 9y ago

No it never breaks down. Milton Friedman commented some 30 years back to the typical "we should have higher tariffs on steel, because its unfair that the japanese are subsidizing their exports". His response? "Well that benefits the American consumer tremendously... we are sending them pieces of paper(dollar) and we are getting hard goods in return at a significant discount". If you think in in the absolute terms, wouldn't you want to trade a silly paper for steeel/cars/whatever? Also, where does the Chinese go with these dollars? Definitely not the Chinese store, they take Yuan. How about Japan? Nope, they take Yen. So...who takes dollars? At some point they have to come back and spend it either directly(investing/purchasing american goods) or indirectly(trading dollars -> random currency) which then leads the other party holding dollars to go out and buy American goods.

dahdum 9y ago
It breaks down when near monopoly is established, which is often the goal of these government subsidization programs. Whether that is acceptable depends on your opinion on global interdependence and national security. If the USA is dependent on Chinese and Russian steel to survive, it’s that much harder to defend against provocation. See EU and Russian gas for a great example.
- whb07 9y ago
  ooh way late response! That is actually the opposite. Friedman also addressed that point. The case you are presenting is essentially "we shouldn't rely on foreign XYZ too much, we should have our own manufacturing". Well sure we should have our own if its able to compete freely. But its never been the case that if we go to war with China, the Japanese/India/whomever couldn't start producing more steel and selling it to us. Sure it might be slightly more expensive but it wouldn't paint the picture that you are proposing. If anything MORE producers of steel would pop up willing to sell at a higher price. Crazy theres this thing called supply/demand. As for the EU/Russian gas example, Russia isn't the biggest producer of gas in the world. According to wiki[0] its the U.S, there are other non-Russian actors in the top 10 list who I'm sure would be willing to provide gas at a higher price. As to why you mentioned EU/Russia is that Russia so happens to have a nice giant pipeline ready to provide gas into the EU. Well...last I checked there were millions of barrels of oil being shipped globally by ship. Would you have to pay a bit more for energy ? Sure. Is national security critically dependent on Russia ? No, because I guarantee you if Germany started paying $200/barrel of oil(or natural gas/whatever) all the oil ships around the world would reorient themselves to deliver to Germany. Crazy world called supply/demand. You now have near infinite suppliers. [0]https://en.wikipedia.org/wiki/List_of_countries_by_natural_gas_production https://en.wikipedia.org/wiki/List_of_countries_by_natural_g...

tracker1 9y ago

Exactly... I'm in favor of free trade, but only when it's reciprocal. I'm also in favor of breaking down regional locks or limits in sales... if you as a company are allowed to produce in a cheaper country, then I should be able to buy/import at the price you sell in those countries.