I’m debating Vox Day on free trade, moderated by Tom Woods. We start at 7:30pm Eastern. Details here. Tom is also going to run this on his show at some point.
Both somewhat well-known.
Both followers of Austrianism, with some unusual deviations.
Both published books.
Both widely known both for good points and incompetence.
This should be fun.
From the comments:
“> RESOLVED: Free trade is always economically beneficial in the long term, and the more free trade is practiced by a country, the higher the standard of living of its inhabitants will be.
“Okay, if they say so. But doesn’t the history of the US over the past 40 years pretty much demolish that position?”
Ronald Reagan: An Autopsy
Q&A on the S&L Mess [Rothbard, April 1989]
“Q. Why did deregulation fail in the case of the S&Ls? Doesn’t this violate the rule that free enterprise always works better than regulation?
“A. The S&L industry is no free-market industry. It was virtually created, cartelized, and subsidized by the federal government. Formerly the small “building and loan” industry in the 1920s, the thrifts were totally transformed into the government-created and cartelized S&L industry by legislation of the early New Deal.”
The Return of Supply Side
Ron Paul Predicted 9/11 a Decade Ago!!!!!!!!!!!!
Ron Paul Calls the Housing Collapse in 2003
Peter Schiff was Right (2006-2007 Edition)
Why the Meltdown Should Have Surprised No One | Peter Schiff
Peter Schiff – The Fed Unspun: The Other Side of the Story
Thought Controllers Call Ron Paul “Extreme”
Congressman Ron Paul’s Farewell Speech to Congress
Again, from the comments
RobertT: “I’m not an economist by any means, but I can’t believe anyone thinks free trade is good for a developed country. Free trade obviously sucks your standard of living down as it drives up the standard of living in undeveloped countries.”
It drives up the standard of living of producers in other countries who are satisfying the preferences of consumers in your country.
But it’s the consumers who are doing this with their own money, which they have a right to spend how they please.
Preventing imports is a violation of a consumer’s right to engage in peaceful, mutually beneficial trade with whomever he wishes.
It’s also cronyism for the producers in your country, as if producers at home have a right to the wealth of consumers in your country.
The point of economic activity is not to make producers and workers wealthy, per se, but to satisfy consumer preferences.
We can know this because you’re not supposed to produce what consumers don’t want or can’t afford. If consumers have expressed an aversion to certain producers’ goods, the economy is not helped by suppressing alternative options that consumers would have chosen absent restrictions on imports.
It’s not helped because wealth is subjectively assessed by each individual, and therefore the individual’s own perspective as to the amount of wealth he has is the only meaningful guage of economic prosperity.
Therefore there cannot logically be a central plan for the economy that is economically beneficial; It can benefit some, or even many or most (if the few rich have sufficient wealth), but since only individuals economize, this is moot – central economic planning must destroy someone’s wealth in order to make others wealthy.
I found this to be helpful:
23. The Importer [Defending the Undefendable, by Walter Block]
“Considering the Austrian School does acknowledge the validity of making economic policy for non-economic reasons, an example given in _Human Action_ is protecting a local industry of military importance, and that regardless of long term benefit, it must be admitted that unrestricted free trade at least has short term harms …”
“… Even if free trade is proven to be positive on a long enough time scale, is it morally required to accept unlimited short term pain to achieve it? How can the sort of popular governments conducive to free economies be maintained in the face of the popular unrest caused by the economic dislocations related to unrestricted free trade?”
I searched for occurances of the word “military” and was unable to find Mises supporting of centrally planned protection for local industry of military importance.
A little help, please?
As for the question of whether or not it is morally required to accept the unlimited short term pain caused by free trade in order to achieve prosperity on a long enough time scale, your question mistakenly assumes that the mark of a prosperous economy is when consumer, producer, worker, and investor (to include saver, in my view) interests are balanced.
The problem with this view is that it ignores that the values of all goods are derived from the subjective ends of the acting consumer. The short term pain to which you refer is not due to free trade, per se, but to the failure of producers to anticipate changing consumer demand.
(Aside: A consumer’s wealth belongs to him alone, so you actually do want businesses to fail when they can’t provide goods at a lower price or better quality than a different business can.
(For example: Even though Walmart has government privileges that should be removed so that it must stand or fall on its own merits, part of the reason that Walmart “destroys” Mom and Pop stores – the legitimate part – is that it is actually the consumer who prefers Walmart goods to the ones in the Mom and Pop stores.
(That is, it’s the consumer – not Walmart – who is destroying Mom and Pop stores. And that’s good, because it’s the consumer’s money, and he has the right to spend it wherever he wishes. The Mom and Pop stores failed the consumer, and must shut down.)
Producers produce *for* the consumer. Consumers set the highest nominal price for all goods, because the consumer will not pay for something he doesn’t want or can’t afford.
Competing producers will underbid each other, lowering the price that any one producer could otherwise charge (because the consumer would be willing to pay it, absent the competition), but, all other things equal, the producer will get paid the same amount for his goods regardless of his costs.
His profit comes from the spread between what the consumer will buy and the producer’s costs. Workers can not raise the highest nominal (subjective) value that consumers are willing to pay, so it’s actually a fallacy that workers “add value”.
The value of hiring workers is in a worker’s ability to lower the costs of satisfying consumer preferences.
The worker shows up to work and, no matter what he does there, everything is owned by his employer, so it is always the employer who is supplying goods to the consumer, not the worker.
So, the point of a job is not to help the worker, though voluntary trade agreements between a worker and his employer necessarily do so (otherwise, the worker wouldn’t take the job).
And the worker doesn’t bear the risks of changing consumer demand: he is paid almost immediately.
The point is that economics is not at all about the producer or the worker, but the consumer: The consumer will attempt to find ways to satisfy his preferences whether or not there’s a producer.
The producer has an opportunity to make a profit *if* he can lower the consumer’s costs of consumption at a low enough cost to himself.
The worker does the same thing to the producer.
But the whole economy (what is to be produced, and who is to be hired) is guided by consumer demand.
So the mark of a prosperous economy is not when consumer and producer (et al) interests are balanced, but when consumer preferences are satisfied.
That’s why protectionism logically makes people poorer than they otherwise would be: because it supresses higher-ranked consumer preferences that they otherwise would have pursued absent the restrictions of protectionism.
If TLDR, sorry about that. I won’t be offended.
“[Link] If Free Trade Made the US Rich, Explain This Graph”
“… The more the U.S. trades, the lower its GDP growth becomes. It’s a simple, yet profound and fundamental, relationship that is highly statistically significant and that holds over the entire post WWII period.”
The Poverty of GDP
“As expected, none of these articles discuss one main drawback of the GDP aggregate—the inclusion of government spending. In America’s Great Depression, Rothbard removed the G component to suggest the Gross Private Product (or the netted version, the Private Product Remaining) as a better gauge of the material progress of a nation. Professor Herberner has also pointed out various important economic aspects that GDP, as a rough aggregate measure, leaves out. Moreover, professor Salerno has also shown that a reduction in the GDP—as it is calculated today—via a reduction in government budgets and taxation would in fact be underlined by an increase in the capital stock, a rise in the economic welfare of producers, and a higher real standard of living for the entire population. …”
“… Ultimately, the phone in your hand—created by entrepreneurs and bought voluntarily by a consumer—says far more about growth and progress than any report on the latest GDP figures.”
Even beyond that, It’s hard for me to think of a clearer case of spurious correlation than this. Can you see the relationship in that graph when I plot the same things as time series?
Because I can’t. Near as I can figure, you’d find a negative correlation of GDP growth with any increasing variable over this time period.
“I used to be a MI member. I ended up terminating my membership because while I found myself agreeing with many of the positions espoused in the articles and books, they seemed to always ignore a few things that bothered me: …”
“… 4) Sin/Vice does not seem to factor into their thought experiments concerning a completely non-government society.”
It doesn’t factor into our economics, since the logic of human action holds for all circumstances, sinful or not.
But as far as our libertarianism, we would say that, for any given morality, a government necessarily makes people worse off.
One of the arguments for adoption of the Constitution, in the Federalist Papers, was that all of the colonies had a similar, generally Christian, background, and that would help with unity.
We would say that the more government there is, the less incentive there is to hold to such a morality since economics becomes a political issue.
“5) Human well-being is not solely predicated on material wealth.”
We never said it was:
In Defense of “Extreme Apriorism”
“From our axiom is derived this absolute truth: that every firm aims always at maximizing its psychic profit. This may or may not involve maximizing its money profit. Often it may not, and no praxeologist would deny this fact.
“When an entrepreneur deliberately accepts lower money profits in order to give a good job to a ne’er-do-well nephew, the praxeologist is not confounded. The entrepreneur simply has chosen to take a certain cut in monetary profit in order to satisfy his consumption-satisfaction of seeing his nephew well provided. The assumption that firms aim at maximizing their money profits is simply a convenience of analysis; …”
Critics Say, “You Libertarians Are Soulless Materialists”
Tom Woods lecture on Praxeology
“Have you ever been in a community afflicted by the virus of ‘the company store’? or one where the local populace does not have the power or technology to oppose corporate interests, such as in African diamond country?”
By “company store”, I’m assuming you mean one that issues its own, non-commodity currency.
We’d say the problems result from the fake currency.
As for the African diamond country:
Are Diamonds Really Forever?
“For more than a century, the powerful DeBeers Consolidated Mines, a South African corporation controlled by the Rothschild Bank in London, has managed to organize the cartel, restricting the supply of diamonds on the market and raising the price far above what would have been market levels. …”
“… But how could even this degree of cartel success occur in a free market? Economic theory and history both tell us that maintaining a cartel, for any length of time, is almost impossible on the free market, as the firms who restrict their supply are challenged by cartel members who secretly cut their prices in order to expand their share of the market as well as by new producers who enter the fray enticed by their higher profits attained by the cartelists. So, how could DeBeers maintain such a flourishing, century-long cartel on the free market?
“The answer is simple: the market has not been really free. In particular, in South Africa, the major center of world diamond production, there has been no free enterprise in diamond mining.
“The government long ago nationalized all diamond mines, and anyone who finds a diamond mine on his property discovers that the mine immediately becomes government property. The South African government then licenses mine operators who lease the mines from the government and, it so happened, that Io and behold!, the only licensees turned out to be either DeBeers itself or other firms who were willing to play ball with the DeBeers cartel. In short: the international diamond cartel was only maintained and has only prospered because it was enforced by the South African government.“
Any chance we will be able to see/hear this after the fact?
Hey kids, get clicking on that download button.
Fascinating debate, and I am going to stand up and declare that both the content and presentation of these Austrian debates is so far above anything the government sponsored Keynesian economists are delivering (go listen to LSE podcasts) that we have a living example of the benefits of voluntary interaction.
BTW: Vox Day threw much tougher arguments at Bob than I expected and I kind of agree with where he is coming from. I don’t think Bob fully handled those arguments, but then it opened up so many key points that it will take a lot more debate to explore the details properly. The Tom Woods show already ended up a lot longer (hour and a half) than it normally is.
One of the central threads was about the long term debilitating effects of getting free handouts, and I think I’ve linked to this before: Michael Matheson Miller talking about “Poverty, Inc” which explains how disruptive it can be in a society when free stuff comes streaming over the border. Bob thought this was a knock down point (argument by the bleeding obvious) but there’s unexpected subtlety to it.
I remember that Tom Woods also interviewed Michael Matheson Miller on the same topic (see Episode 644) and covered very similar points. Personal taste I suppose whether you prefer Tom or Russ when it comes to interview style… the question at hand remains though, free stuff doesn’t always make you wealthy.
I admit I’m a sucker for Sonnie Johnson, who has covered the perspective from many angles as to how the “Welfare State” has done more to hold back African Americans than anything “White Privilege” has ever done. I think you have to at least stop and take a deep breath and review your assumptions on the idea that free stuff is automatically a good thing. Yes, I do see Murphy’s point it’s more complex because there were strings attached, but I could point out that in the case of international trade there have also been strings attached. Take a look at who the US government owes a lot of money to: China, Japan, etc. That must at least influence the options of said US government to make policy, right?
You know there’s also arguments about government schools dumbing down the kiddies. The government school is another kind of a “free stuff” example. Sure, there’s the moral question of where did the money come from to pay for those schools; but for argument’s sake let’s ignore that issue, the schools themselves are doing damage… and yes I totally accept it’s a example of free stuff plus strings attached, but again, there’s kind of a principle of the universe that free stuff always ends up with strings attached.
Possibly I’m spamming this thread but I’m kind of disappointed that Vox Day didn’t try the question about definitions in terms of, “What does it mean to say economically beneficial for a country as a whole? How do you construct an aggregate of ordinal preferences?”
This is a fundamental limitation of Austrian theory. The question of what is best for a group is undefined unless that group might be unanimous about their decision (never happens for large groups). Mathematically there just is no solution to this, summation of ordinal values is undefined, you can’t do it. The very action of taking an average automatically implies you believe in cardinality.
Speaking of groups, there’s also the question of why the nation should be given any particular privilege over any other group of people that might exist as a trading bloc. Consider for example that Tom Woods recently discussed the question of how ethnic groups composed of recent immigrants establish a trading base in a new country.
The conclusion was that they form a semi-closed group that gives preference to trade within the group itself (or “in group preference” if you like that phrase). Thus, they are more likely to buy and sell to each other than to outsiders (although outsiders are not strictly excluded) and very significantly they are more likely to offer finance to each other rather than outsiders (the whole question of trust, etc).
Certainly this happens within minority religious communities, as well as ethnic communities.
Which opens the whole question: if free trade is so good for all concerned, why do these isolated communities voluntarily maintain a certain element of autarky, and use this as a strategy which ultimately helps them establish themselves in the larger community? It simply doesn’t fit the standard theory, but we do see this in practice.
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