4 ms·

I'd say the Nobel Prize winning trade theorist explains it better than I can, but feel free to read the NYT editorial by the (non-prize-winning) economist if yo

I'd say the Nobel Prize winning trade theorist explains it better than I can, but feel free to read the NYT editorial by the (non-prize-winning) economist if you prefer html to pdf.

frgtpsswrdlame 8y ago
I ask people to make their own arguments because I think it's lazy to post things that even you don't understand. But if you want to me talk Krugman then okay: Here’s an easy one: suppose that an industry generates negative environmental externalities that are not properly priced, and that international trade leads to an expansion of that industry in your country. Then that trade may indeed reduce national welfare Okay so he admits that externalities can outweigh our more traditional views of gains from trade and then he moves on to state and refute a different argument. The case for these tariffs is best going to be made through the externality argument though and tariffs/trade restrictions are an example where we believe externalities are outweighing our benefits. Seen through this lens common economic reasoning would tell us that a large improperly priced externality requires a tax to bring the item up to the proper price. In trade this tax is called a tariff and it's common sense to use it if you believe your country is being indirectly harmed by free trade. Trump (but more probably his advisors) believe there are large external effects to having a strong technology industry at home in the 21st Century. Accordingly they are using tariffs and trade restrictions to maintain that.
- rory096 8y ago
  >I ask people to make their own arguments because I think it's lazy to post things that even you don't understand. My degree happens to be in economics, but okay. The argument is that trade barriers, both unilateral and bilateral, cause economic losses and are therefore bad. The belief that asymmetric trade barriers result in the unrestricted country "losing" is wrong - removal of trade barriers results in a reduction of deadweight losses even without symmetry. This is well-supported economic consensus with acceptance among economists comparable to that of climate change among climatologists. >Okay so he admits that externalities can outweigh our more traditional views of gains from trade and then he moves on to state and refute a different argument. No, he really doesn't. His point is that the proper solution to externalities is to price them in domestically, and tariffs in lieu of environmental policy harmonization are "second best" with unconvincing arguments in favor. However, this discussion is about using tariffs as a tool to combat externalities unrelated to trade and is tangential at best to our discussion. >The case for these tariffs is best going to be made through the externality argument though and tariffs/trade restrictions are an example where we believe externalities are outweighing our benefits. Seen through this lens common economic reasoning would tell us that a large improperly priced externality requires a tax to bring the item up to the proper price. In trade this tax is called a tariff and it's common sense to use it if you believe your country is being indirectly harmed by free trade. This is precisely where Trump is wrong. Removal of trade barriers has positive externalities, not negative. It is a Kaldor-Hicks improvement. >Trump (but more probably his advisors) believe there are large external effects to having a strong technology industry at home in the 21st Century. Accordingly they are using tariffs and trade restrictions to maintain that. This is not in line with their stated reasoning. They believe tariffs are necessary because trade deficits are losses.
  - rayiner 8y ago
    > No, he really doesn't. His point is that the proper solution to externalities is to price them in domestically, and tariffs in lieu of environmental policy harmonization are "second best" with unconvincing arguments in favor. How does that help? Isn’t the country that has lax environmental laws and can sell cheaply going to win over the country that has tough environmental laws? (Genuinely asking, my degree is in engineering not economics.) And do these models account for changes in dynamic equillibrium? E.g. a foreign country engaging in dumping ends up killing the domestic industry? It seems odd that exercise of monopoly power can lead to deadweight losses in a closed domestic market, but a country engaging in anti-competitive measures overseas is best handled by doing nothing. Do these theories account for the interactions between economics and government. (E.g. the ability of foreign governments to exercise power over companies in their jurisdiction?) I’m not trying to argue with you by speculating, I’m trying to figure out the metes and bounds of your assertion.
    - frgtpsswrdlame 8y ago
      >How does that help? Isn’t the country that has lax environmental laws and can sell cheaply going to win over the country that has tough environmental laws? (Genuinely asking, my degree is in engineering not economics.) You're correct it doesn't help. Either you raise the price of the foreign good through a tariff or other sneaky measure or consumers will buy it and amplify the externality. >And do these models account for changes in dynamic equillibrium? E.g. a foreign country engaging in dumping ends up killing the domestic industry? It seems odd that exercise of monopoly power can lead to deadweight losses in a closed domestic market, but a country engaging in anti-competitive measures overseas is best handled by doing nothing. They don't and even Krugman would admit to this now. It's actually funny that we're using Krugman from 1998 because if we take his trade talk from just four years earlier it's clear he thinks distribution could be a problem: The truth, however, is that fears about the economic impact of Third World competition are almost entirely unjustified. Economic growth in low-wage nations is in principle as likely to raise as to lower per capita income in high-wage countries; the actual effects have been negligible. In theory, there are some reasons for concern about the possible impact of Third World competition on the distribution (as opposed to the level) of income in the West, but there are few signs that such concern is justified in practice, at least so far. https://hbr.org/1994/07/does-third-world-growth-hurt-first-world-prosperity https://hbr.org/1994/07/does-third-world-growth-hurt-first-w... And then if we zip past 1998 back to the present day he's once again walking back on the pro trade rhetoric here: But it’s also true that much of the elite defense of globalization is basically dishonest: false claims of inevitability, scare tactics (protectionism causes depressions!), vastly exaggerated claims for the benefits of trade liberalization and the costs of protection, hand-waving away the large distributional effects that are what standard models actually predict. https://krugman.blogs.nytimes.com/2016/03/09/a-protectionist-moment/ https://krugman.blogs.nytimes.com/2016/03/09/a-protectionist... and here: That said, not all free-trade advocates are paragons of intellectual honesty. In fact, the elite case for ever-freer trade, the one that the public hears, is largely a scam. That’s true even if you exclude the most egregious nonsense, like Mitt Romney’s claim that protectionism causes recessions. What you hear, all too often, are claims that trade is an engine of job creation, that trade agreements will have big payoffs in terms of economic growth and that they are good for everyone. Yet what the models of international trade used by real experts say is that, in general, agreements that lead to more trade neither create nor destroy jobs; that they usually make countries more efficient and richer, but that the numbers aren’t huge; and that they can easily produce losers as well as winners. In principle the overall gains mean that the winners could compensate the losers, so that everyone gains. In practice, especially given the scorched-earth obstructionism of the G.O.P., that’s not going to happen. https://www.nytimes.com/2016/03/11/opinion/trade-and-tribulation.html https://www.nytimes.com/2016/03/11/opinion/trade-and-tribula... The answer to your questions are all basically no and I would blame it on the blurring between economics and folk economics. I also hold an econ degree and I see this almost everywhere - someone holds up a simplified model, claims it proves free trade is good or minimum wages are bad or whatever political issue is hot and then they close the book. There's tons and tons of relevant literature on all these theories and once you dig into it and the models become more sophisticated then many of the standard things we expect the model to say morph and change. But this academic economics is usually crowded out in public debate by the simple models and easy free market talking points.

I'd say the Nobel Prize winning trade theorist explains it better than I can, but feel free to read the NYT editorial by the (non-prize-winning) economist if you prefer html to pdf.

frgtpsswrdlame 8y ago

I ask people to make their own arguments because I think it's lazy to post things that even you don't understand. But if you want to me talk Krugman then okay: Here’s an easy one: suppose that an industry generates negative environmental externalities that are not properly priced, and that international trade leads to an expansion of that industry in your country. Then that trade may indeed reduce national welfare Okay so he admits that externalities can outweigh our more traditional views of gains from trade and then he moves on to state and refute a different argument. The case for these tariffs is best going to be made through the externality argument though and tariffs/trade restrictions are an example where we believe externalities are outweighing our benefits. Seen through this lens common economic reasoning would tell us that a large improperly priced externality requires a tax to bring the item up to the proper price. In trade this tax is called a tariff and it's common sense to use it if you believe your country is being indirectly harmed by free trade. Trump (but more probably his advisors) believe there are large external effects to having a strong technology industry at home in the 21st Century. Accordingly they are using tariffs and trade restrictions to maintain that.

rory096 8y ago
>I ask people to make their own arguments because I think it's lazy to post things that even you don't understand. My degree happens to be in economics, but okay. The argument is that trade barriers, both unilateral and bilateral, cause economic losses and are therefore bad. The belief that asymmetric trade barriers result in the unrestricted country "losing" is wrong - removal of trade barriers results in a reduction of deadweight losses even without symmetry. This is well-supported economic consensus with acceptance among economists comparable to that of climate change among climatologists. >Okay so he admits that externalities can outweigh our more traditional views of gains from trade and then he moves on to state and refute a different argument. No, he really doesn't. His point is that the proper solution to externalities is to price them in domestically, and tariffs in lieu of environmental policy harmonization are "second best" with unconvincing arguments in favor. However, this discussion is about using tariffs as a tool to combat externalities unrelated to trade and is tangential at best to our discussion. >The case for these tariffs is best going to be made through the externality argument though and tariffs/trade restrictions are an example where we believe externalities are outweighing our benefits. Seen through this lens common economic reasoning would tell us that a large improperly priced externality requires a tax to bring the item up to the proper price. In trade this tax is called a tariff and it's common sense to use it if you believe your country is being indirectly harmed by free trade. This is precisely where Trump is wrong. Removal of trade barriers has positive externalities, not negative. It is a Kaldor-Hicks improvement. >Trump (but more probably his advisors) believe there are large external effects to having a strong technology industry at home in the 21st Century. Accordingly they are using tariffs and trade restrictions to maintain that. This is not in line with their stated reasoning. They believe tariffs are necessary because trade deficits are losses.
- rayiner 8y ago
  > No, he really doesn't. His point is that the proper solution to externalities is to price them in domestically, and tariffs in lieu of environmental policy harmonization are "second best" with unconvincing arguments in favor. How does that help? Isn’t the country that has lax environmental laws and can sell cheaply going to win over the country that has tough environmental laws? (Genuinely asking, my degree is in engineering not economics.) And do these models account for changes in dynamic equillibrium? E.g. a foreign country engaging in dumping ends up killing the domestic industry? It seems odd that exercise of monopoly power can lead to deadweight losses in a closed domestic market, but a country engaging in anti-competitive measures overseas is best handled by doing nothing. Do these theories account for the interactions between economics and government. (E.g. the ability of foreign governments to exercise power over companies in their jurisdiction?) I’m not trying to argue with you by speculating, I’m trying to figure out the metes and bounds of your assertion.
  - frgtpsswrdlame 8y ago
    >How does that help? Isn’t the country that has lax environmental laws and can sell cheaply going to win over the country that has tough environmental laws? (Genuinely asking, my degree is in engineering not economics.) You're correct it doesn't help. Either you raise the price of the foreign good through a tariff or other sneaky measure or consumers will buy it and amplify the externality. >And do these models account for changes in dynamic equillibrium? E.g. a foreign country engaging in dumping ends up killing the domestic industry? It seems odd that exercise of monopoly power can lead to deadweight losses in a closed domestic market, but a country engaging in anti-competitive measures overseas is best handled by doing nothing. They don't and even Krugman would admit to this now. It's actually funny that we're using Krugman from 1998 because if we take his trade talk from just four years earlier it's clear he thinks distribution could be a problem: The truth, however, is that fears about the economic impact of Third World competition are almost entirely unjustified. Economic growth in low-wage nations is in principle as likely to raise as to lower per capita income in high-wage countries; the actual effects have been negligible. In theory, there are some reasons for concern about the possible impact of Third World competition on the distribution (as opposed to the level) of income in the West, but there are few signs that such concern is justified in practice, at least so far. https://hbr.org/1994/07/does-third-world-growth-hurt-first-world-prosperity https://hbr.org/1994/07/does-third-world-growth-hurt-first-w... And then if we zip past 1998 back to the present day he's once again walking back on the pro trade rhetoric here: But it’s also true that much of the elite defense of globalization is basically dishonest: false claims of inevitability, scare tactics (protectionism causes depressions!), vastly exaggerated claims for the benefits of trade liberalization and the costs of protection, hand-waving away the large distributional effects that are what standard models actually predict. https://krugman.blogs.nytimes.com/2016/03/09/a-protectionist-moment/ https://krugman.blogs.nytimes.com/2016/03/09/a-protectionist... and here: That said, not all free-trade advocates are paragons of intellectual honesty. In fact, the elite case for ever-freer trade, the one that the public hears, is largely a scam. That’s true even if you exclude the most egregious nonsense, like Mitt Romney’s claim that protectionism causes recessions. What you hear, all too often, are claims that trade is an engine of job creation, that trade agreements will have big payoffs in terms of economic growth and that they are good for everyone. Yet what the models of international trade used by real experts say is that, in general, agreements that lead to more trade neither create nor destroy jobs; that they usually make countries more efficient and richer, but that the numbers aren’t huge; and that they can easily produce losers as well as winners. In principle the overall gains mean that the winners could compensate the losers, so that everyone gains. In practice, especially given the scorched-earth obstructionism of the G.O.P., that’s not going to happen. https://www.nytimes.com/2016/03/11/opinion/trade-and-tribulation.html https://www.nytimes.com/2016/03/11/opinion/trade-and-tribula... The answer to your questions are all basically no and I would blame it on the blurring between economics and folk economics. I also hold an econ degree and I see this almost everywhere - someone holds up a simplified model, claims it proves free trade is good or minimum wages are bad or whatever political issue is hot and then they close the book. There's tons and tons of relevant literature on all these theories and once you dig into it and the models become more sophisticated then many of the standard things we expect the model to say morph and change. But this academic economics is usually crowded out in public debate by the simple models and easy free market talking points.