12 Jun 2019

Tucker Carlson Wants Affirmative Action for American Workers

Bob Murphy Show, Trade 9 Comments

Others beat me to the punch on this one, but I make some points I haven’t heard elsewhere.

9 Responses to “Tucker Carlson Wants Affirmative Action for American Workers”

  1. Reply
    Harold says:
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    When he says it is pure, old fashioned economics he means really old fashioned.

  2. Reply
    scineram says:
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    Who else would the american government affirmatively act for? The money changers?

  3. Reply
    Tel says:
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    Oh yeah, weed smoking … gosh, could turn you into a blithering idiot … before long you would believe anything.

    And yet that candidate is the opposite of pretty much everyone currently serving in our Congress. Our leadership class remains resolutely libertarian, committed to the rhetoric of markets when it serves them, utterly libertine on questions of culture. Republicans will lecture you about how payday loan scams are a critical part of our market economy. Then they’ll work to make it easier for your kids to smoke weed because hey, freedom! Democrats will nod in total agreement. They’re on the same page.

    No wait! Maybe Fox News turns you into an idiot, and the weed is OK. Easy to get those mixed up. If you want to know how deep the crack pipe goes, consider that only a few years back Tucker Carlson was supporting cuts to government spending because the budget was out of control and America was living beyond its means.

    Hapless Republican leaders exacerbated this crisis, but they didn’t cause it. A radically progressive tax code did. Ever wonder why government has grown larger even during periods when tax rates have gone down? Maybe it’s because the average person has no real idea what government costs. As of today, the top one percent of earners pay nearly 40 percent of all federal income taxes. The richest 10 percent pay more than 70 percent of all federal income taxes. In other words, most people have very little skin in the game.

    A system like this is popular with the majority — why wouldn’t it be? — but it is unsustainable. When the bulk of the country has no stake in fiscal restraint, expectations become unmoored from reality and spending explodes.

    All of which leads inevitably to our current condition. Here’s one measure: In famously bankrupt Greece, the national debt amounts to about $39,000 per Greek. In the United States, federal debt runs to over $53,000 per American. America is now the most indebted nation in the history of the world, a country about to post its fourth consecutive trillion-dollar budget deficit, a place that owes more to creditors than the sum total of its entire economy. We are going under, for real.

    https://dailycaller.com/2012/11/30/tucker-carlson-and-neil-patel-congress-should-dive-headlong-off-fiscal-cliff/

    You got that right: in 2012 Tucker Carlson was railing about how government had violated some principle of Austrian economics.

  4. Reply
    Tel says:
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    Slightly off topic but this one came up.

    https://www.breitbart.com/economy/2019/06/13/fed-tariff-study/

    This can be illustrated with a simplified example. Imagine a world with three countries, two large developed nations and one small developing nation.

    Let’s say it costs $100 to make a widget in Oceana, $110 to make it in Great Plains, and $90 in country New Delta. In a free-market, the widget will be manufactured in New Delta. For the sake of simplicity, assume that all of the widgets get exported to Oceana and Great Plains and that manufacturers face frictions and management costs that mean they must choose one country and only one country to produce goods.

    If you are in a free market environment and you notice that widgets are made in a New Delta, it’s safe to assume that it is the low-cost manufacturer.

    But that assumption doesn’t work if you introduce tariffs. If Oceana imposes a 15 percent tariff on imported widgets, it no longer makes sense to manufacture them in New Delta for export to Oceana and Great Plains. Those products will now cost $103.50 in tariffed Oceana. So production shifts to Oceana to avoid the tariff.

    This means that in the presence of tariffs, it is no longer safe to assume that widget production in one country signals that country is the low-cost manufacturer. Oceana’s tariffs have imposed a $10 deadweight cost on the rest of the world.

    So what happens when Great Plains puts a 25 percent tariff on imports from Oceana? Production shifts back to New Delta to avoid the higher tariff. In other words, the retaliatory tariff imposed by Great Plains has shifted production to the lower-cost manufacturer. The price of the widgets made in New Delta is actually lower. Instead of raising prices, tariffs have lowered prices.

    Tariffs have eliminated a deadweight cost instead of imposing them.

    It’s an interesting question … I think it falls into the same category as government investment: it is possible for government to come up with a bunch of projects to spend money on that turn out to be very useful … but the incentives do not generally lead to that outcome.

    Consider the above situation if Oceana goes ahead to match the 25% tariff and so on so on until all trade between the developed nations comes to a stop. The outcome is production stays in New Delta which is kind of where it all started at anyhow. I dunno … it’s an alternative perspective on the whole comparative advantage thing.

  5. Reply
    Harold says:
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    ” they must choose one country and only one country to produce goods.”
    That is not just for simplicity but essentially removes the idea of a market. You have a free market, but there must only be one monopoly supplier. It is an oxymoron.

    The stipulation was that manufacturers face the frictions, so each manufacturer must choose one country to supply it.

    Oceana imposes a 15% tariff. Manufacturers in Oceana no longer buy widgets from new Delta.

    Great Plains has no such tariff so continues to buy from New Delta.

    The article is nonsense.

    • Reply
      Tel says:
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      It presumes you can accurately and selectively apply tariffs to particular types of trade, rather than across the board flat rate tariff.

      Division of Labour always implies specialization and monopoly is the ultimate manifestation of specialization. For example, Apple is the only supplier of iPhones in the world, and they are almost all assembled in China (except for a small number made locally in Brazil, because of tariffs). However a generic component that goes into an iPhone (such as a Tantalum capacitor) could come from many possible suppliers. Whether that’s a “natural” monopoly or the artificial consequence of Intellectual Property laws is arguable … but that’s where we are at. It’s also arguable which jobs are “most important” in terms of the many bits and pieces that go into an iPhone … as well as after market support and service. Tariffs tend to have winners and losers.

      There’s a big difference between commodities like soybeans for example, and finished products like a Harley Davidson bike. China has attempted to use “trade war” tactics on soybeans which just shows they have no idea what they are doing in this game. Soybeans come from many places, and can be easily substituted and the farmland that produces those beans is established farmland, it’s NEVER going to move country. The farmers might be tempted to produce different commodities, perhaps corn or wheat depending on prices, but in all cases it will simply flow into global commodity markets.

      The EU were a lot smarter, targeting their tariffs against Harley Davidson and American bourbon which are not commodity items, but which can be substituted for different brands if the customers can be pressured to abandon loyalty. No buyer gets a feeling of loyalty towards a soybean, but the Apple fanbois would be highly reluctant to switch to Samsung for example, and I’m sure that Harley Davidson customers wouldn’t feel right astride a BMW.

      Economic theory with a presumption of competitive markets works well in the commodities, not so well once we get to more specialized products.

      • Reply
        Harold says:
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        “It presumes you can accurately and selectively apply tariffs to particular types of trade, rather than across the board flat rate tariff.”

        No it does not. It does not mention that at all and that does not make sense either. We are talking about something that is made in all three countries with relatively little difference in cost and the only thing mentioned is price. There are no brands in their simple model. They say “If you are in a free market environment and you notice that widgets are made in a New Delta, it’s safe to assume that it is the low-cost manufacturer.” The widget is the same from each country and they are competing only on price.

        String the argument together
        ” manufacturers face frictions and management costs that mean they must choose one country and only one country to produce goods.”

        Then
        “If Oceana imposes a 15 percent tariff on imported widgets, it no longer makes sense to manufacture them in New Delta for export to Oceana and Great Plains.”

        How can that be true????? It no longer makes sense to export them to Oceana but it makes perfect sense to manufacture them in New Delta and export them to Great Plains. Why should Oceana’s choice to impose a tariff change the choice of Great Plains to buy from where it likes?

        It has taken the condition that manufacturers can only buy from one country and used that to claim that only one country can manufacture the items.

        We can see it does not work for a commodity, say soybeans. We have 3 blocks, in order of costs, USA, China and Europe. China imposes a tariff on USA beans. China now has more expensive beans because it costs more to grow in China than to buy from the USA. USA is damaged because it sells fewer beans overall and has to switch production to a less efficient crop. However, Europe does not have to switch to buying Chinese beans. That makes no sense at all, yet it is the scenario described in the article.

        So lets try another scenario. We have three countries, each producing phones. It is universally agreed that USA has the best, China the next best and Europe the least good. All cost the same to produce. In a free market, all phones would be American. China imposes a tariff on imported phones that makes Chinese phones better value than USA ones. All phones in China will then be Chinese, all phones in USA and Europe will be from the USA. Yet the article says that all phones in Europe will become Chinese.

        “Tariffs tend to have winners and losers.” On a first-order simple model tariffs just have losers and losers.

        I have described this in some detail because when something seems so obviously and absolutely wrong it is sometimes because I have misunderstood something. I cannot see what that could be here, but if it is the case I would be grateful if you could explain how that article makes any sense at all.

  6. Reply
    Harold says:
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    Having read it again I get what they mean now.
    By manufacturer they mean manufacturer of the widget. Economies of scale and friction mean they must have only one location to manufacture. We are already not talking about a “free market” but a very distorted one with no competition.

    With these conditions, there will be a tariff that results in production switching from ND to O. It is higher than 15% unless O has a significantly larger share of the market for widgets than GP. That is because at 15% tariff, you are only $3.50 cheaper in O but $10 more expensive in GP (compared to manufacturing in ND). Production would remain in ND. A 25% tariff would do it, if O and GP had 50% of the market each.

    They then say that GP imposes an even higher tariff on widgets from Oceana. That cannot usually happen under WTO rules. Principle 1 in the WTO book is that you must treat all nations as well as the nation you favor most. If you have low tariff on widgets from ND you must also have low tariff on widgets from O. The exception is for specific trade deals and for developing nations. So as ND is a developing nation, you could possibly have lower tariffs on widgets from ND.

    https://www.wto.org/english/thewto_e/whatis_e/tif_e/fact2_e.htm

    So in these very special circumstances with a particularly un-free market to begin with, it does seem possible for the scenario to work. We should understand that this scenario represents only a tiny fraction of, if any, real trade and has little bearing on how we should do things.

    We can construct a similar model to justify a minimum wage. We just say for the sake of simplicity there is only one employer. Anyone not working will starve.

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