The ideology of "Free trade" is Killing America's Economy

Often both. The US sugar industry for example was something farmers begged for and got from their elected officials. Same with the subsidies that still exist today, you may have even seen this unclever marketing campaign:

Or private farm owners demanding protectionist policies to protect them from competition and bureaucrats doing what bureaucrats do. Bow to the interests of their ill informed constituents.

The market corrects whatever protects it's profits, government will follow any path that .

 

I'm trying to get you to say some economics. I don't have high hopes

You weren't asked to copy and paste a review of new trade theory ideas. You were asked: Given the impact on our understanding of comparative advantage- and the limitations of the Ricardian approach- to what extent is there a support for short term protectionism? Krugman (and the focus on monopolistic competition) would suggest that we only have an additional source of trade gains. Thus, in order to explain the increasing importance of intra-industry trade, we can factor in economies of scale effects which ensure greater product choice at a lower price. That could be used to explain some trade protectionism patterns. The argument is that inter-industry trade (as illustrated in the Heckscher-Ohlin model) will generate greater redistribution effects. This will then encourage influence costs where the potential 'losers' manipulate government policy to the detriment of overall economic result. Intra-industry trade, although there will be some firm exit effects, is more neutral and therefore the incentives for corrupting policy just aren't there. We could then explain why protectionism has been lower for 'rich north' countries and higher for 'poor south' countries.

The problem is that the whole approach is reliant on a monopolistic competition approach that is inconsistent with economic reality (e.g. there is no notion of a long term where only normal profit is made). Thus, when we look at the complexities involved in 'new trade theory' (summed up in terms of differentiated product and economies of scale) we actually have a much bigger story to tell. We've seen that, for example, with the realisation that the Ricardian comparative advantage presented in the textbooks is absolute bobbins. We cannot understand opportunity costs within a static framework.

You again fail to say anything.

I've left that up to you given there are multiple sources for protectionism enabled by new trade theory. A strategic trade policy based on redirecting monopoly profits will obviously differ from an industrial policy designed to protect infant industries. That you haven't responded to my question only informs me that you don't have a clue how this analysis has impacted on our understanding of trade effects

 

This thread is blasphemy! Free trade is always good!


Oh wait, no it's not. Free trade sucks countries dry, hinders their development and can be taken pretty much as a synonym for imperialism.

 

I have been trying to get the same from you - finally this post actually has some.

The purpose of the link was twofold - to provide a definition to your buzz words, and to demonstrate how economic consepts can be expressed without them.

This is one small example where the power of government has been corrupted to the detriment of the public by pandering to those not willing to compete globally (by finding their own compariative advantage).

Tarrif protection requires a company/market sector with either enough employees to create public hue and cry (votes), or enough money to bribe politicians (or, what ever the politically correct term for bribe is).

Regulation is just as effective, and requires a a lower threshold. Also, regulation can be used to eliminate competition in country. (That may be more important in a country the size of the US.)

Ricardo, Smith, and others, were the first to put voice to those economic concepts. That they have evolved well beyond that doesn't reduce their historical importance. Who would you give credit to for the idea of "comparative advantage". Ricardo is still right in the aspect that Chile sells fruit to the US because the seasons are 180 degrees out - the land is better for growing (it isn't frozen).

For that matter, Krugman's "new trade theory" is nothing but an extension of Smith's work, applied to global market far larger that Smith's expectation.

Smith, like Ricardo, didn't "invent" anything, they just recognized what worked. Economics is like common law, is not created by government, but recognized as reality by the court.

I have gone beyond the various effects of protectionism, and focus on the cause - the size of government. Too small, or too big, and monopolies form. Small governments can't stop them, big governments aid them (for their own $elf intere$t).

As far as your question, it was too open ended. You had an answer in mind, which you described above.

 

Concentrated benefits, diffused costs.

The penny or two it costs each of us is to little to get us upset enough to vote the bum out, the millions the farmers get is enought to assure they buy ads to keep the bum in.

As government, and governmental power has grown, there has been more corruption. Unfortunately, the public reaction is to demand more government intervention. More government, more corruption.

The economic version of Cloward and Piven.

 

I've provided numerous references to the economics of trade. In contrast you've made ridiculous comment.

Another prance statement that means nothing

Protectionism occurs for numerous reasons. Optimal tariffs, for example, do not need influence costs. To deny that protectionism can be used to generate dynamic comparative advantage gains would be ignorant.

Bobbins again! It is not Krugman's NTT. He's just one of many who contributed. To suggest there wasn't a contribution (or a mere extension) is ignorant. It would be correct to say that we shouldn't just see Smith's contribution in terms of absolute advantage. However, NTT shifts the analysis to an understanding based on the firm. It is therefore necessarily a radical departure from Smith and Ricardo's analysis. That isn't surprising, given the time frame involved.

They provided an analysis that quite rightly destroyed mercantilism, but ultimately failed to explain the determinants of comparative advantage (and therefore the gains or losses that can be generated within current trade relations). Ricardian comparative advantage ultimately was based on an understanding of opportunity costs 'by mistake, not design' (e.g. Ricardo's original example was really a reference to the knock-on effects of British naval power). Heckscher-Ohlin attempts to fill the void, but its only through NTT that we have something capable of explaining how comparative advantage is formed.

It was designed to get you to make economic comment. Its failed as you have yet to make any

 

Pay per view references, convoluted and jargon filled ramblings aren't economic content. As I said long ago, when a fellow engineer communicates like that, it is because their are ignorant and insecure.

Wow.

Protectionism occurs for one reason, politicians want to stay in power.

You may be impressed by NTT, it wasn't that big a stretch.

We would still live under mercantilism, had Smith and Ricardo not existed? How niave.

According to you.

You focus on the details, and completely miss the big picture.

 

You're simply unaware of the empirical process and innocent of even Economics 101. You illustrated the latter magnificantly when you suggested hypothetical marginal cost curves are actually generated within firm planning.

An ignorant statement based purely on ideological prance rather than consideration of trade analysis (be it orthodox theory, general political economy or economic history case study)

I merely understand it. I don't just blindly copy and paste google offering and present half truths generated by a shallow reading. That NTT has had a radical impact on our understanding is just straight forward truth. The debate is over the limitation within specific economic approach provided, as I've acknowledged with an analyis based on building on the monopolistic competition platform (which is ultimately weak as it ignores firm organisation and how economies of scale are not automatically available)

That absolute and conparative advantage destroyed the understanding of trade as a zero sum game is obvious. We of course still have a variation of mercantilism raising its ugly head (i.e.economic nationalism) but that isn't based on any economic footing (except for the analysis provided by Keynesian unemployment theory)

You give cliche in order to try and hide the lack of economic content in your posts. It won't work. I don't even find it entertaining

 

higher efficiency through machinery, free trade, foreign outsourcing, our chickens are coming home to roost, and we need to change how we do things, but right now congress is so divided, I think they would argue if the other side said the sky was blue

 

It would be diFficult for a rational politician to dispute the substantial economic gains from trade liberalisation (that we all benefit from). Rational politicians may be a rare breed, but they'd be united across the political divides in stating the bleedin obvious

 

Need I say more?

Ideology, or recognizing the obvious - a point even you make, but apparently don't appreciate (would your consulting advice, pre-Thatcher, been suitable during Thatcher?)

NTT is an absolute truth? No, not any more than the transient truth of Smith and Recardo.

Monopolies require government intervention, isn't that why you say capitalism requires government?

The problem is competition isn't always from direct competitor (thus easily regulated / tarriffed into submission). The internet wasn't developed to compete with catalog printers, music stores, or encylopedias, but it did so quite effectively. A monopoly, with it's artifically high profit margin, is more susceptable to alternative approaches because government protection reduces attentiveness, and more people are looking for alternatives.

Is that the answer to my question? My point is if not Smith and Ricardo, someone else would have recognized those natural laws of economics, it may have even had to wait for Krugman. But, it would happen.

You disagree?

 

Some economic comment would be nice

I wouldn't mind if you were just guilty choosing an unfortunately marginal school of thought. Given schools are often in conflict, there is still value in the debate and means to test specific hypothesis. You're not in a position to participat, preferring instead to make crass error as long as its consistent with your ideological bent.

The origins of much of NTT was straight-forward: finding a means to explain the increased dominance of intra-industry trade. The repercussions, however, have been immense. Whilst Ricardo wouldn't be able to explain the determinants of comparative advantage, NTT provides several explanatory factors whilst also showing the limitations in the factor proportions approach provided by Heckscher-Ohlin. NTT will naturally be inconvenient for the non-economic right winger. The notion of multiple equilibria will necessarily generate dissonance as it shows the stupidity within the standard trade cliches.

Another crass sub-Econ 101 error. I referred to monopolistic competition. That merely requires product differentiation; the norm in manufacturing. Teach yourself some basics as I can't be bothered with holding your hand over such simple matters.

You don't have a point. Your argument is on a par with 'thousands of randomly typing monkeys would eventually write a Shakesperian play'. Smith and Ricardo destroyed mercantilism. Realising that trade is not zero sum, however, will not be enough to explain trade patterns (and the impact of protectionism or trade liberalisation)

 

You ignored my question. Would your consulting advice, pre-Thatcher, been suitable during Thatcher?

Then tell me that my focus on government is ideological.

NTT, like relativity, is based on the shoulder of the giants before them. Ricardo, like Newton, did pretty well considering the world they lived in.

Would NTT exist if we remained in mercantilism?

What is your point? No one but Smith and Ricardo could have destroyed mercantilism? Their "secret" would have followed them to the grave?

 

I find your nonsensical questions, designed only to hide from economic comment, just a little tedious

More fluff! NTT originally focuses on an issue that cannot be understood through the traditional comparative advantage analysis (ie the increasng dominance of intra-industry trade). Despite that separate approach to trade analysis, it still radically shifts our understanding of comparative advantage. A result that guarantees its significance

The elimination of ignorance ensured the dismissal of mercantilism and then the dismissal of static comparative advantage as a means to understand exchange exhaustion

I'm but referring to the reality in the history of economic thought. We have approaches vital in dismissing a basic fallacy (ie trade as a zero sum game). But we then have analysis that shows the comprehension into comparative advantage was itself wonky. That analysis is beyond you and you've merely presented fluff just for the hell of it

 

You get upset if I don't answer your question, yet refuse to answer mine - how one way of you.

Why are you so surprised about intra-industy trade? The only difference between importing a product already made in a country, and an in country competitor, is a border.

Prior to every shock to the system (the ag revolution, the industrial revolution), comparative advantage was primarily static. We are in the midst of a shock, which is why economics isn't a just math class.

What is your point? Have I ever said trade is a zero sum game? Was the comprehension into comparative advantage wonky, or was it appropriate at the time? Or was it a big leap, just not the complete leap we know today? If the latter, that means we fully understand comparative advantage today, which would be wrong?

 

You constantly have been saying that "an economic comment would be nice." It's almost like you're trying to steer the debate to a precise position. Do you work in economics? You must. I'll admit that you're a smart person, but if you're policies were enacted in the governing of an entire country, that country would be Greece.

 

Nonsensical questions aren't much cop!

I'm not surprised about intra-industry trade. We didn't have an explanation for its increasing dominance, however, until NTT

A most ignorant comment. Static comparative advantage is obviously based on the premise that time is irrelevant (the neoclassical approach, prior to NTT, would simply make a distinction according to whether factors of production were variable and therefore impacted on cost minimisation output decisions). Except in the most ad hoc and artificial cases (as used to teach comparative advantage to those clueless about its nature; which would include most of the fellows on this thread), comparative advantage must be understood within a dynamic context. Its that which ensures the complexities in optimal policy. Dynamic comparative advantage can provide an economic rationale for protectionism, but only in very specific circumstances (as illustrated by a distinction between product life-cycle analysis and the infant industry hypothesis)

I'm but able to refer to the history of economic thought with accuracy. I've summed up the gains from the Smith/Ricardo contributions. I've also summed up, however, that the resulting economic theory was simply incapable of explaining trade patterns. In terms of empirical understanding, NTT is crucial

 

Utter crap!

That is like saying we knew fire was hot, but were suprised it burned us.

Yet for the last 25 years we had the great moderation, economists and governments thought they had mastered the business cycle. They considered conditions "static". Better economists than you or me were fooled into the complacancy that allowed the drift into collapse.

They probably figured they could use stimulus to recover. Unfortunately, a bust resulting from an unsustainable boom cannot be fixed by direct stimulation, and indirect stimulation is far less effective.

Believe what you like. To me NTT is nothing but added understanding to existing knowledge, not some breakthrough.

 

You think nonsensical questions are useful? Golly, each to their own!

No. We had a knowledge deficiency and now we don't. The important aspect, however, is that is also changes our understanding of optimal policy.

Aimless chatter that isn't applied at all to the quote provided.

The difference is that I know what I'm talking about and you do not. Your views on the subject are therefore uninteresting

 

You refuse to answer questions, refuse to provide accessable links, and berate anyone you interact with, and I don't know what I'm talking about. ROTFL.

Bye.

 

Just a thought.. maybe a stupid question about NTT.

How do we decide which infant industries to protect? Is it based on natural resource availability? Geography? How can we know we're protecting the right industry from competition? The tale doesn't seem all that different from the story of US auto manufacturing, protected for decades from foreign competition, then some short years after trade barriers are lowered GM/Chrysler et al tank.

Why? Well one reasonable explanation might be that they were sheltered from competition and didn't have to adapt to current standard as a result faltered in the face of that competition.

Given how technical NTT is I'm sure there's plenty I'm not understanding. Just as an aside, the more technical a theory has the be, the less confident I am in it.

 

That you don't understand trade theory icannot be questioned. I can't be blamed foir that. Try and use your time more effectively and ensure that you actually respond with knowkedge.

 

There certainly is a level of trial and error (and also possible 'its infant industry orientated' fibbing). There is no blueprint for success and error should be the norm.

Good ole protectionism will certainly be related to increased x-inefficiencies and reductions in technical progress. The important aspect is the nature of the economies of scale. Can they be shown to be related to accumulated output? Can we refer to reductions in competition leading to a more stable environment consistent with growth?

Its not particularly technical. The approaches that are typically just feed off the standard neoclassical analysis into production and market structure. In general the focus is shifted to the firm and therefore we get linkages with more general institutionalist analysis into the firm

 

Those errors could be very costly to consumers caught in the middle of a state run guessing game trying to sort out which pandering company is actually deserving of a competition shelter, since it'd be in every industries interest to lobby for these protections.

I assume it'd be easy to find examples of industries void of competition that have experience growth, but is the growth real and organic, or simply bloat made possible by policy decisions. I don't know if there's literature to support this, but competition seems more likely to encourage innovations, whereas a lack of it can lead to firm growth... I'm just not sure that the latter translates so well for the rest of the economy.

It's all relative of course.

 

Not really. We're talking about the creation of markets after all. Don't confuse it with general strategic trade policy (which will typically be focused on specific company in already advanced or maturing economy).

Competition is of course typically most splendid. We don't have that here though. Such competition destroys economic activity. Its closer to predatory pricing (at least in terms of the undesirable end result